Starliner Delays Weigh On Boeing's Space Segment, Company Reports $1B Loss On Fixed-Price Programs In Q2

Boeing Co‘s BA defense, space, and security segment recorded an increased loss from operations of $913 million in the second quarter and revenue of $6 billion, marking a drop of 2% year-on-year, owing to multiple factors including delays associated with its Starliner spacecraft.

What Happened: The company said on Wednesday that it incurred losses of $1.04 billion on certain fixed-price development programs in the quarter, including NASA’s commercial crew program.

“Long-term contracts that are contracted on a fixed-price basis could result in losses in future periods,” Boeing said while adding that risk remains of recording additional losses in future periods for the commercial crew program.

NASA contracted both Boeing and Elon Musk‘s SpaceX in 2014 to develop spacecraft to enable taking astronauts to the International Space Station (ISS) and back under the agency’s commercial crew program. While SpaceX’s Crew Dragon spacecraft has been shuttling astronauts to and from the ISS since 2020, Boeing’s Starliner had its first crewed flight to the ISS only on June 5 earlier this year.

Though the astronauts were supposed to return in about eight days after launch, they have been at the station for over 50 days now owing to technical issues identified with the spacecraft. The date of return of the astronauts has not been ascertained yet.

During the first half of 2024, Boeing incurred losses on five major fixed-price development programs totaling $1.27 billion, including $125 million on the commercial crew one owing to several delays with the Starliner, it said.

The additional losses, Boeing CFO Brian West said, are primarily related to higher estimated engineering and manufacturing costs and inefficiencies associated with meeting certain technical requirements.

Why It Matters: Company CEO David Calhoun also acknowledged that the results of the defense, space, and security segment during the quarter were “disappointing.”

“Based on the lessons that we’ve learned in taking on these fixed-price development programs, we have maintained contracting discipline for all future opportunities,” Calhoun said.

Overall, for the second quarter, Boeing’s revenues dipped 15% to $16.87 billion while core loss per share widened to $2.90 from $0.82 in the corresponding quarter of 2023. The company’s loss from operations widened to $715 million in its most important commercial airplanes segment, following safety concerns.

Price Action: Boeing shares closed up 2% at $190.6 on Wednesday. The stock, however, is down nearly 24.3% year-to-date, according to data from Benzinga Pro.

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Photo courtesy: NASA