Boeing's Starliner Program Continues to Bleed Money, NASA May Delay Operational Service

Boeing's Starliner Program Continues to Bleed Money, NASA May Delay Operational ServiceOn August 2nd, Boeing released its latest quarterly earnings report, revealing that the losses for its Starliner commercial crew program continued to mount, with the total project losses nearing $1.6 billion

Boeing's Starliner Program Continues to Bleed Money, NASA May Delay Operational Service

On August 2nd, Boeing released its latest quarterly earnings report, revealing that the losses for its Starliner commercial crew program continued to mount, with the total project losses nearing $1.6 billion. This figure reflects the cumulative losses incurred since 2016, primarily driven by project delays and the extra work required to address issues with the spacecraft.

Project Delays and Financial Losses

A decade ago, NASA awarded Boeing a $4.2 billion contract to complete the development of the Starliner spacecraft, with the expectation that it would be ready for crewed flights by the end of 2017. However, the first crewed flight test did not occur until June 5th, 2024, a significant departure from the initial plan.

The issues Boeing experienced with the Starliner program have resulted in mounting losses. The company disclosed in this quarter's earnings report that the Starliner project alone lost $125 million this quarter. Since 2016, the project's cumulative losses have reached nearly $1.6 billion. These losses are mainly attributed to the project's delays and the additional work needed to resolve spacecraft issues.

The Risks of Fixed-Price Contracts

Boeing entered into a fixed-price contract with NASA, meaning that any costs exceeding the budget are borne by the contractor. This contract structure exposes Boeing to significant financial risks in the event of delays or issues.

Boeing CEO, Kelly Ortberg, acknowledged that the losses on the Starliner project stemmed from the fixed-price contract structure. He stated, "We have similar contracts with the U.S. military for the development of the new Air Force One, tankers, and others, and those have also experienced losses."

Contrasting with SpaceX's Success

In stark contrast to Boeing's Starliner program, SpaceX's Crew Dragon project has excelled in executing a fixed-price contract. NASA awarded SpaceX a contract worth over $3.1 billion, and crewed flights commenced in 2020. SpaceX has successfully completed six crewed missions as per the original contract, while Boeing is estimated to be at least a year away from initiating operational services with the Starliner spacecraft.

SpaceX's success is attributed to its exceptional capabilities in space technology and project management, coupled with its effective control of the fixed-price contract.

Issues During Starliner Test Flight

The first crewed flight test of the Boeing Starliner spacecraft is expected to conclude this August, with NASA astronauts Butch Wilmore and Sunita Williams returning to Earth from the International Space Station. The successful completion of this test flight would pave the way for Boeing to commence its six crewed missions.

However, the situation is not straightforward. The initial plan was for the spacecraft to remain at the space station for at least eight days, but due to malfunctions in the spacecraft's propulsion system, the mission duration was extended to over 50 days.

Helium leaks from the service module and overheating of the spacecraft's small maneuvering thrusters during docking were the primary problems encountered. NASA, as the overseer of Boeing's commercial crew program, is on the verge of approving the Starliner's return to Earth, potentially as early as next week.

NASA May Delay Operational Services

In light of the issues encountered during the Starliner test flight, NASA announced last week that it would delay the Starliner-1 mission by six months to allow more time to address these issues. This means that Boeing might find it difficult to launch its first operational flight by February 2025.

Conclusion

The escalating losses on Boeing's Starliner program reflect the challenges encountered during the development and testing phases. The fixed-price contract structure exposes Boeing to immense financial risk. Compared to SpaceX's Crew Dragon project, Boeing's Starliner program exhibits significant deficiencies in schedule and cost control capabilities. NASA's potential delay of Starliner's operational services could result in substantial financial losses for Boeing.

Looking Forward

Boeing needs to address the propulsion system issues with the Starliner spacecraft and ensure the safety and reliability of future crewed missions. Overcoming these challenges could still allow Boeing to achieve success in the commercial crewed space sector. However, the company needs to carefully reflect on past lessons learned, enhance project management processes, control costs, and prevent similar financial losses.