Boeing CEO must weigh debt to NASA against strained cash reserves

The decision on the future of the troubled Starliner program now rests with newly installed Boeing Chief Executive Kelly Ortberg after NASA announced Saturday that it will not send astronauts home from the space station on the malfunctioning spacecraft. After weeks of testing and heated debate, the space agency decided it was safer to use Elon Musk’s SpaceX.

The specter of NASA astronauts stranded in space is just one of the embarrassing moments for Boeing in an epically bad year that has included a near-catastrophic explosion of a 737 Max airliner, federal investigations and a shakeup in the executive suite.

That leaves Ortberg, who took over the top job earlier this month, and the senior board known internally as the “exco” to face thorny questions about the company’s commitment to human spaceflight and Starliner.

Before Ortberg joined Boeing, executives promised to honor the company’s contract to carry astronauts to the International Space Station for NASA. Bill Nelson, the agency’s top leader, said Ortberg recently expressed support for continuing the Starliner program after the craft is sent back from the space station without humans on board.

“He expressed to me that they will continue to fix the issues once Starliner is safely back and that we will have redundancy and access for our crew to the space station,” the NASA administrator told reporters on Saturday.

But as the new leader brought in to get Boeing back on track after years of turmoil, Ortberg has free reign to make sweeping changes and unpopular calls, including the potential to derail the human spaceflight initiative.

“They end up leaving the program because it’s too complicated,” Boeing can’t recoup its investment, “and because the other guy can do it better?” said Robert Spingarn, analyst at Melius Research. “It can happen.”

Much will depend on how the Starliner performs during its return flight to Earth without astronauts on board next month. NASA has not ruled out certifying the Boeing aircraft, although it may require another test flight before the capsule is allowed to carry astronauts again. That could cost Boeing about $400 million, based on fees the company booked to redo a previous test flight. Agency experts are still unsure why the thrusters suddenly stopped working.

Boeing’s strained balance sheet and an expected cash burn of at least $5 billion this year are considerations the company must weigh against its legacy in space, which dates back to the Apollo moon landing program. After experiencing cost overruns of about $1.6 billion, the struggling aerospace giant appears unlikely to ever make money on the Starliner.

In a July filing, the company disclosed new losses of $125 million as a result of delayed manned flight tests and testing of faulty Starliner propulsion systems. “For Boeing, the losses are significant and would call into question the viability of such a business if you look at it over the long term,” said Clayton Swope, deputy director of the Aerospace Security Project with the Center for Strategic and International Studies.

The Starliner is one of several fixed-price contracts weighing on profits at Boeing’s defense and space division, which posted an operating loss of $762 million in the first six months of 2024, slightly worse than a year earlier . Stumbling on a once-profitable business is likely a pressing concern for Boeing’s new CEO.

“I think it’s very important for him to come in and have an assessment of this,” said Douglas Harned, an aerospace analyst at Bernstein. “He comes with a clean slate.”

Boeing declined to comment on its internal deliberations on the fate of the Starliner. In an internal message shared by the company on Saturday, Mark Nappi, Boeing vice president and program manager, said staff would meet on Monday to reflect on next steps.

“I know this is not the decision we were hoping for, but we are prepared to take the necessary actions to support NASA’s decision. The focus remains primarily on ensuring the safety of the crew and the spacecraft,” Nappi said.

Even before this weekend’s failure, there were signs that Boeing’s long-term commitment to the Starliner was in question. Late last year, CFO Brian West told a small gathering of investors that the company must make a decision about future investments in the program after meeting its obligations to NASA for half a dozen flights to the ISS.

NASA faces critical trade-offs as it crafts the future of the commercial crew program.

The agency designed the program from the start to have more than one US spacecraft carrying its astronauts and cargo into orbit. While Starliner has been delayed by seven years, SpaceX has launched nine separate crews to the space station for NASA since 2020.

For all its failures, Boeing remains the agency’s best hope for pursuing a multiplayer strategy, Swope said. If Boeing were to pull out of the contract, “That’s not a good outcome for NASA either. They would have to start over with commercial crew,” Swope said.

The agency could work with Sierra Space to ramp up plans for a manned version of its Dream Chaser vehicle, which lost out to Boeing and SpaceX in the initial bid a decade ago. But a few years away given the delays for a cargo version of the craft.

Given the stakes, Swope believes NASA will try to find a way forward that keeps Boeing in the commercial crew program while addressing some of its financial pain. If the aerospace giant needs to send the Starliner into space autonomously to test its failure-prone thrusters, perhaps the agency could turn that into a cargo mission, he said.

Space is far from the only issue facing Ortberg, a veteran aerospace leader who came out of retirement to take over as Boeing CEO. He is expected to get his executive team in place and then tackle tougher issues such as quality lapses and poor execution across the Boeing enterprise.

“If Boeing can fix its commercial jet business, what happens in space is much less relevant,” said Melius Research’s Spingarn.