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  • Boeing's been making headlines lately and not for the right reasons.

  • Boeing's Dave Calhoun says he'll leave by year's end after five years of crisis and groundings involving two MAX 8 crashes, the MAX 9 door plug blowout and quality control breakdowns across Boeing.

  • Amid the turmoil with its commercial airlines business, Boeing's space arm could have been a bright spot for the company, but it too has faced issues.

  • NASA again delaying Boeing's debut of its Starliner capsule.

  • Disappointing day at Cape Canaveral in Florida as NASA was forced to again scrub the first launch of Boeing's Starliner spaceship with astronauts on board.

  • Boeing's Starliner is a human-grade space capsule designed to take astronauts to and from the International Space Station under NASA's commercial crew contract.

  • The latest delayed mission was yet another setback for a program that's been in the works for a decade and cost Boeing $1.5 billion in overruns.

  • In 2011, when the space shuttle retired, NASA was beholden to the only other entity that could fly crew to low Earth orbit and back safely, and that was Russia.

  • Between 2011 and 2020, NASA relied on Russia's Soyuz rockets to fly U.S.

  • astronauts to the ISS, paying Russia as much as $90 million per seat in 2020.

  • NASA decided it needed other options.

  • The idea of Starliner was one of two capsules that NASA wanted to develop competitively in an effort to return the capability to the U.S.

  • of being able to fly our own astronauts.

  • That capability was returned to NASA in May of 2020.

  • When SpaceX, the second company NASA tapped for its commercial crew contract alongside Boeing, successfully flew two astronauts to the International Space Station.

  • Since then, SpaceX has completed over a dozen crewed missions to space, launching both NASA astronauts and private citizens on its Dragon capsule.

  • Boeing, meanwhile, has yet to fly a single operational mission with Starliner and just recently launched its last test, which must be completed before NASA certifies the spacecraft for regular launches.

  • Boeing is stepping into a much more competitive environment today than it did 10 to 12 years ago when this program began.

  • At the start, Boeing was viewed as the incumbent, the player with the most experience and the most ability to get to and from space.

  • Now, SpaceX is in that position.

  • SpaceX CEO Elon Musk has criticized Boeing over the company's constant delays with commercial crew.

  • Despite getting the lion's share of the contract's awards, CNBC wanted to explore why Boeing, a legacy space company, has struggled to build a vehicle to take people to space.

  • Space is part of Boeing's defense, space and securities business unit.

  • If you look at on a revenue basis what BDS makes up as a total of the rest of Boeing, it's somewhere around 30 percent of the company's revenue at nearly $25 billion for last year in 2023.

  • It's important to note that this $25 billion is also made up of non-space related projects, including contracts for military helicopters, fighter jets and munitions.

  • Although Boeing doesn't break out its space business, we believe it's several billion dollars across NASA and satellite programs.

  • The company's financial juggernaut is its commercial airplanes business, which brought in nearly $33 billion in 2023.

  • Still, Boeing's space arm does carry a lot of prestige for the company.

  • Boeing's heritage in space actually dates back to the earliest days of the U.S.

  • venturing into space.

  • You can see their fingerprints all over major aspects of the Apollo missions, for example, and pretty much every major U.S.

  • space program since.

  • Following the Apollo Moon program, NASA chose Boeing as the prime contractor to build the International Space Station.

  • Today, Boeing is still in charge of managing operations on the ISS.

  • The company is also the maker of the X-37B.

  • A mysterious space plane that the Space Force uses to perform classified tests.

  • Satellites and rockets are also part of Boeing's portfolio.

  • The space launch system, which is the massive rocket that NASA is planning to use to deliver astronauts to the moon as a part of its broader Artemis program.

  • Boeing's the lead contractor on building that rocket as well.

  • You also have another key piece of the rocketeering business, if you will, which is the United Launch Alliance.

  • That's a joint venture between Boeing and Lockheed Martin, and that joint venture represents a 50 percent interest of each in flying ULA's rockets, such as its Atlas V and now its upcoming Vulcan-class rocket.

  • With its identity deeply rooted in America's space ventures, Boeing was the clear choice to win NASA's Commercial Crew Program contract in 2014.

  • But not wanting to put all its eggs in one basket, NASA also tapped SpaceX, then a relative newcomer, for the job.

  • The entirety of the Commercial Crew Program was very much a new venture.

  • Prior to that, NASA relied on the space shuttle and on a lot of its own engineering talent to get humans to the space station.

  • With the Commercial Crew Program, it was offloading some of those responsibilities to the private sector.

  • And actually, there was some reticence in Congress towards this type of approach.

  • And it was only because Boeing threw its hat in the ring that Congress, and by extension NASA, was confident enough to actually go forward with this program.

  • To date, Boeing has received nearly $5 billion to build the Starliner capsule, while SpaceX has gotten around $3 billion to build Crew Dragon.

  • But development has not always gone as planned.

  • So the engineering team has evaluated the vehicle is not in a configuration where we can proceed with flight today.

  • Initially, SpaceX and Boeing were neck and neck in development of their crewed vehicles.

  • That really started to change in about 2018 when we first got an idea that there were some propellant issues with the Starliner capsule.

  • And then during Boeing's first uncrewed flight test in 2019, there was an onboard computer issue that really caused a major failure during the flight and meant it actually couldn't even reach the International Space Station because it was in the wrong orbit.

  • The mission had to be ended early.

  • And what that meant was that Boeing had to redo the uncrewed flight test entirely.

  • NASA launched an investigation into the incident and recommended that Boeing make 80 changes to its spacecraft before attempting the test again.

  • The agency also admitted that it hadn't monitored Boeing as closely as it should have because of Boeing's long legacy of working on space programs.

  • I would say in the software area, from a NASA perspective, we may have been focused a little more on SpaceX because they use a bit of a non-traditional approach to their software development.

  • We had maybe more familiarity with the Boeing process from those that had worked on International Space Station.

  • Many of the team that did the software for International Space Station was actually working on the Starliner.

  • And so we maybe just didn't quite take the time that we needed to.

  • Further issues with valves failing to open in the Starliner propulsion system meant that Boeing was not able to carry out a successful uncrewed test until 2022.

  • More recently, they've identified issues with the design of the parachute system, as well as flammable tape that was throughout the interior of the capsule.

  • And then as they've been moving towards this final big milestone, which is flying actual people, there was a valve issue first identified with the United Launch Alliance Atlas V rocket that was resolved.

  • But then they also identified further propulsion issues with the valve system on the Starliner capsule.

  • This crew flight test is something that was really looked at to be happening in 2019, 2020.

  • And now we're five years later and it's only just now happening.

  • Three, two, one, ignition.

  • And liftoff of Starliner and Atlas V carrying two American heroes.

  • The two-person test flight launch in early June is the last step before NASA can certify Starliner for operational missions to the ISS.

  • But all these delays have cost Boeing years of extra work and over a billion dollars in cash.

  • Unlike the cost-plus contracts that Boeing was used to working on, the commercial crew contract was set up as a fixed price structure.

  • NASA basically said, hey, we're going to fund up to this amount to develop your space capsule.

  • After that, you know, the costs are your own.

  • Boeing has blamed these types of contracts for hurting the company's bottom line and said it would steer away from them in the future.

  • Here's Boeing's CFO on the company's Q3 2023 earnings call.

  • As you know, part of the challenge we're dealing with are legacy contracts that we need to get out from under.

  • Rest assured, we haven't signed any fixed price development contracts nor intend to.

  • Conrad says it's a pattern they're seeing across the aerospace and defense sector.

  • There's been public commentary from a lot of crimes, some high profile withdrawing from certain programs.

  • We've definitely seen, you know, industry somewhat shy away from those heavy fixed price development programs just because of the risk.

  • And maybe you have an uncertain return.

  • But fixed price contracts were nothing new to SpaceX, which was used to being scrappy.

  • Prior to commercial crew, SpaceX worked on another fixed price contract for NASA that required the company to build a capsule to carry cargo to and from the ISS.

  • SpaceX's cargo program certainly helped them with developing their Dragon crew vehicle.

  • And there were a lot of similarities between the two.

  • Their cargo program had to launch on their Falcon 9 rocket.

  • It had to dock with the International Space Station and it had to deliver goods to and from orbit.

  • Those were all useful skills for the Crew Dragon program that the company could transfer over.

  • Kalturer likely also played a role in SpaceX's success.

  • In SpaceX's case, I think the biggest advantage comes from the fact that they see flying people to space safely as a key milestone in their broader goal of being able to send people to the moon and Mars and other planetary bodies.

  • Boeing doesn't have that mission.

  • You're not looking at Boeing and hearing from program executives that are saying, hey, the very future of this company, the fabric of our identity is wrapped up in whether or not we can fly astronauts to and from the International Space Station.

  • And then there's SpaceX's ability to operate independently.

  • SpaceX's level of vertical integration, which is significantly higher than most other companies in the space industry, gives it an ability to move more quickly than a company or a competitor that may have to rely on multiple suppliers in different states and in different time zones to get the same program going.

  • After completing this last test, Starliner can finally start fulfilling its NASA contract for six missions to the ISS.

  • But beyond that, the project's future is uncertain, especially since NASA plans to retire the ISS around 2030.

  • Boeing is going to be done with those missions at the same time as the International Space Station retires.

  • So then it's a question of where is Starliner flying to?

  • Why do you keep the program going?

  • Who's going to pay for it?

  • You know, who's buying those services?

  • Boeing's leadership has also been vague about the program's future.

  • We've got a commitment to NASA to deliver a certain number of crew pods today.

  • We're going to meet that commitment.

  • We'll also work with NASA and in the industry to figure out what the business model looks like going forward.

  • But all I can focus on right now is getting those astronauts to and from space safely.

  • Starliner could find a market servicing commercial space stations or NASA's Lunar Gateway.

  • But again, Boeing would face steep competition.

  • SpaceX has this long resume of both government and private missions that they've completed safely and successfully to date.

  • That huge resume then is an effective marketing tool to others.

  • CNBC reached out to Boeing, but the company did not provide us with an interview prior to the story's publication.

  • Boeing is not on the pillar that it used to be.

  • There was a time when Boeing was a space darling in the U.S.

  • Now, I think it's trying to regain territory in the midst of a very different environment from what it's used to.

  • That said, Boeing still has large teams of talented engineers, and they are proving out a capability that few companies and few nations have been able to conduct.

  • It's hard to think of a single human spaceflight program that hasn't run into some sort of challenge.

  • It's certainly an uphill climb, but that doesn't mean that they aren't a very capable company that could, in short order, prove its viability again.

  • NASA Jet Propulsion Laboratory, California Institute of Technology

Boeing's been making headlines lately and not for the right reasons.

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