Boeing’s Struggles
There is no denying that Boeing’s reputation has taken severe hits over the last few years. It started in 2018 & 2019, with the two very high-profile crashes of the Lion Air Flight 610 and the Ethiopian Airlines Flight 302, which killed 346 people. Later investigations proved that the crashes were avoidable and resulted from a string of bad design decisions and safety procedures from Boeing.
This was then followed by multiple other incidents in 2024, notably losing a panel of the fuselage mid-flight and two separate incidents of losing a landing gear wheel/tire.
This opened further investigation by US Federal authorities, and more than 10 whistleblowers are potentially ready to discuss the company’s mistakes.
“I have serious concerns about the safety of the 787 and 777 aircraft and I’m willing to take on professional risk to talk about them,” he said in his opening statement. He said when he raised concerns, “I was ignored. I was told not to create delays. I was told, frankly, to shut up.”
Sam Salehpour – Boeing engineer on CNN
The untimely death of 2 of these whistleblowers also gave a very bad optic to the whole situation. (If you want to read a more detailed account of Boeing’s problems with quality control and airplanes, you can read our dedicated article “Boeing’s Reputation is in Shambles – How Has it Survived?”).
Lastly, the problems are not limited to older planes, with the very recent announcement on 20th of August that “Boeing grounds 777X test fleet after failure of key engine mounting structure” (the 777x is the upcoming flagship model for commercial jets by Boeing).
The troubles at Boeing seemed mostly confined to the airplane division, with the airspace/military reputation only indirectly affected.
However, more bad news came soon regarding Boeing’s space division. At the forefront is the very public and embarrassing failure of the Starliner capsule on its first crewed mission to the ISS.
A Brief History Of Starliner
Starliner is Boeing’s partially reusable (up to 10 missions) space capsule, designed to transport astronauts and equipment into orbit – primarly to the International Space Station (ISS).
Source: Boeing
For followers of the new space race, this is pretty much the equivalent of SpaceX’s Dragon capsule and Elon Musk’s SpaceX.
Starliner was selected by NASA in 2010, together with Dragon, to supply and ferry personnel to the ISS. This was a crucial mission, as it would replace the space shuttle retired in 2011. In the meantime, NASA was dependent on equipment from the Russian space program.
Dragon would perform its first flight at the end of 2020. It would start carrying astronauts to the ISS in 2021, in retrospect just in time before the onset of the war in Ukraine souring relations with Russia and making NASA unwilling to depend on Soyuz anymore. In total, Dragon performed 13 successful crewed flights thus far.
In contrast, Starliner’s first successful test flight, initially scheduled for 2017, would only be performed in 2022 after a partial failure in 2019.
The first crewed test came in June 2024, initially scheduled to last just 8 days, with the 2 astronauts back soon. But its return has been regularly postponed so far, and there are serious chances it might take months before successful completion of the mission.
What Is Happening With Starliner?
Starliner Problems
The return to Earth from the ISS was initially scheduled for June 14th, 2024. However, concerning data about 5 maneuvering thrusters out of 28 failings, and a helium leak forced the departure to be postponed (the helium is used to pressurize the thrusters).
Source: BBC
This has since been an ongoing PR disaster for Boeing.
- The initial delay was first extended to several weeks.
- NASA found a total of 5 helium leaks in total.
- On July 3rd, Mark Nappi, Boeing’s vice president for its Commercial Crew Program was still claiming “We’re not stuck”.
- More than 2 months after the initial scheduled date, the return of the 2 astronauts is still uncertain with NASA deliberating what to do, so they seem to be indeed “stuck” or stranded, no matter the denials of Boeing executives.
- NASA claims Starliner could still be used in an emergency like a fire or a decompression, but seems so far unwilling to use Starliner for anything but such dire circumstances.
- Starliner was also revealed to be unable to fly without a crew onboard, due to software issues, so for now, it is stuck attached to the ISS.
- Sill, “Boeing’s confidence remains high in Starliner’s return with crew” and seems to dismiss NASA’s concerns by disclosing to the public the tests it has conducted since the Starliner launch.
- A final decision on using Starliner or waiting up to 8 more months to use a SpaceX’s Dragon instead is expected by the end of August.
Why Did Starliner Fail?
Helium Leaks
A central issue is the multiple helium leaks. Faulty seals are being blamed for the problem.
This could be somewhat good news in itself, as these leaks would then be not too dramatic and probably would not endanger the capsule on re-entry.
But of course, “probably” is a very uncomfortable adjective to add to the topic of astronaut survival for NASA, an organization built around a strong culture of safety, especially for crewed flights.
Software & Autonomous Flight
Then there is the issue that even if NASA wanted to kick out Starliner back to Earth without a crew, its software is not able to do so.
It is unclear why the issue occurred, as Starliner’s previous test in 2022 was unmanned, and its software could then autonomously dock and return to Earth.
Sources described the process to update the software on Starliner as “non-trivial” and “significant,” and that it could take up to four weeks. This is what is driving the delay to launch Crew 9 (handled by SpaceX) later next month.
Ars Technica
This ongoing debacle is reflecting rather poorly on Boeing after a re-read of the “5 ways the Boeing Starliner wows” in a press release by the company from April 4th, 2024:
- #1: The spacecraft can fly and course-correct on its own.
- #2: Astronauts and ground crews choose their level of control.
- #3: Starliner is software driven.
- #4: Astronauts “fly” hundreds of missions before they leave Earth.
- #5. Behind the technology, there’s dedication.
At the very least, it seems that #1 & #3 points are not wowing anybody at the moment.
“It seems that there are decision-makers at NASA who are unconvinced that a safe return can be guaranteed. We are heading inexorably towards a return on Space X’s” crafts.”
Simeon Barber – space scientist on BBC News – 14th of August 2024
Consequences
Crew
The first and more publicized consequence is the overly extended mission duration for the 2 astronauts who were initially supposed to stay just a week on the ISS.
Luckily, they are both extremely professional and experienced astronauts, with Ms Williams, a retired Navy helicopter pilot, on her 3rd trip to the ISS, and Mr Wilmore is a former fighter jet pilot who has been to space twice before.
Source: NASA
To make space for more urgently needed supply to the ISS, especially the space station’s urine-into-drinking-water recycling system, the two astronauts’ suitcases were removed from the Starliner.
They now have received their spare clothes, as well as extra food from a supply ship, from a Russian launch. This removes any risks of their extended stay causing serious problems.
Other life support systems like air recycling are also fine, as these are designed with plenty of spare capacity just in case. So no danger to life, even with the other 4 Americans and 3 Russians are making the ISS crowded and its systems probably a little bit more strained than normal.
Inability To Use Dragon
Something else the Starliner troubles revealed is that Williams & Wilmore’s Starliner space suits are not compatible with Dragon systems. So in order to get back to Earth with it, they would have to do it without a space suit.
This would be a very serious breach of safety protocols and, overall, an extremely dangerous procedure.
It is not very clear who is at fault here, with probably in the future a need for NASA to require every space suit to be made compatible with all capsules.
Blocked Ports
The ISS has only a limited amount of docking ports, and with Starliner unable to be handled without a crew, this docking port is locked out of the ISS for now.
However, with 5 docking ports in total on the ISS, it is not a crucial issue, even an expected problem to have.
In more detail, the ISS has two docking ports for crew vehicles compatible with NASA systems (on top of the Russian ones). Still, the safety procedure is to always have enough capsules ready for an emergency evacuation of all crew, which makes NASA somewhat nervous to have a stuck Starliner on one of its 2 docking ports.
What Does Starliner Reveal About Boeing?
An Isolated Incident?
Space exploration is difficult, and in isolation, Starliner’s problems are nothing spectacular. After all, the still well-respected space shuttle had many important issues, including problems leading to catastrophic failures and loss of lives.
It is important to recognize that the Starliner flight was a test flight, ultimately designed to detect such problems before relying on the capsule for sending larger crews. However, considering the recent issues of Boeing as a whole, this raises some questions about the company.
Moving From An Engineering-Centric Approach
Boeing was built from the early planes in WW1 to the aerospace & defense giant of today on the back of engineering excellence.
However, the company has been progressively moving away from this engineer-focused culture to one more focused on financial targets and pleasing markets & shareholders.
This seems to manifest in problems not only in the airplane division but also in the company as a whole. For example, Starliner is not the only space program experiencing significant issues.
On the 8th of August 2024, a new report criticized the development of Boeing’s SLS rocket launcher, a key part of NASA’s plans to go back to the Moon.
Source: NASA
The SLS program is now 7 years late, and its upper-stage development costs swelled from $962M to $2.8B.
Meanwhile, the Starliner project already caused Boeing to lose more than $1.5B in budget overruns.
Another major criticism from the recent report was an inadequately skilled and/or trained workforce:
“The lack of a trained and qualified workforce increases the risk that the contractor will continue to manufacture parts and components that do not adhere to NASA requirements and industry standards.”
Ars Technica
Resistance To Change
Maybe more concerning for all parties involved, including NASA and taxpayers, is the apparent unwillingness of Boeing to admit there is a problem.
“Boeing remains confident in the Starliner spacecraft and its ability to return safely with crew.
We continue to support NASA’s requests for additional testing, data, analysis, and reviews to affirm the spacecraft’s safe undocking and landing capabilities. Our confidence is based on this abundance of valuable testing from Boeing and NASA.”
Public Institutions’ Relation To Boeing
In the recent report regarding the SLS, it also appeared that NASA’s leadership was somewhat reluctant to approach head-on the issues with Boeing.
Notably by imposing further penalties:
“NASA interprets this recommendation to be directing NASA to institute penalties outside the bounds of the contract.
There are already authorities in the contract, such as award fee provisions, which enable financial ramifications for noncompliance with quality control standards.”
Catherine Koerner – Associate Administrator for Exploration Systems Development – On Ars Technica
This is reminiscent of similar criticisms leveraged against the FAA (Federal Aviation Administration) regarding Boeing’s plane crashes and other safety issues.
“After the 2018-19 737 Max accidents killed the 346 people, Boeing announced a litany of safety innovations or safety initiatives and here we are five years later still doing more safety initiatives.
“I’ve got to wonder what happened to the outcome or the success or the ignoring of those initiatives that were announced five years ago?” The FAA has some answers to provide because they too were involved in trying to make sure that Boeing became safer after the first Max crisis”.
Scott Hamilton – managing director of aviation consultancy Leeham Company on BBC
How To Fix Boeing
Supplier Integration
A key issue that is discussed on the topic of “what happened to Boeing” is a recent tendency to prefer short-term cost-cutting and outsourcing to the lowest bidder, instead of in-house vertical integration.
One step in the right direction would be to re-integrate facilities and companies that were previously part of Boeing.
This is already happening with a key plane fuselage producer sold in 2005, as we discussed in our article “Can Re-Acquiring Spirit AeroSpace Get Boeing Back on Track?”
Simply put, more direct control over suppliers can help smoothen the design and manufacturing process, and give Boeing more control over the whole process.
Culture Change
Another factor is to bring back the engineer-focused culture to Boeing. Historically, Boeing’s success was built on the excellence not only of its technology and design but also of its manufacturing and quality control.
With revealed issues in software and manufacturing quality for planes and spaceships, Boeing’s problems seem deep-rooted and require a move away from the management method of the last decade, at least.
A new CEO & president, Robert Ortberg has been announced in July 2024 to take the helm of the company.
Investing In Boeing?
Looking at Boeing’s stock price chart, it is not very clear that it has serious issues, even if the stock has been trading below its 2018 peak.
Source: Yahoo Finance
The recent stock price resilience is, however less impressive when put into perspective of the industry as a whole, which is moving higher on geopolitical concerns and growing aerospace and defense spending, as illustrated for example, by the iShares U.S. Aerospace & Defense ETF (ITA)
Source: Yahoo Finance
How relevant Starliner will be to Boeing’s future is debatable. For example, Ron Epstein, an analyst at Bank of America said on NPR:
“Boeing management has been clear, I think, to the investment community that Starliner and certain aspects of space are just not core to them. I wouldn’t be surprised if the company wouldn’t want to continue.”
Meanwhile, the ISS is scheduled to be retired by 2030, so further delays in Starliner approval could further reduce its overall profitability.
So, it is possible that Boeing will just walk away from the program, even if Mark Nappi, Boeing’s vice president for its Commercial Crew Program, strongly denies it for now: “No, we’re not going to back out. “This is our job.”
Currently, the defense & space segment reported a $900M loss driven in part by an issue on the KC-46A program, aiming to rebuild the US Air Force tanker fleet.
In the long run, it is likely that Boeing’s fate will not depend so much on its space program than its civilian airplane and defense revenues.
Besides reducing losses from its military and space programs, Boeing (and its stock) will benefit greatly from restoring its reputation for building high-quality & safe civilian airplanes.
Investing In Boeing’s Competitors
As the saying goes, “One man’s joy is another man’s sorrow“. Boeing’s problems can be other companies’ opportunity to shine, and grab market shares and opportunities.
So, maybe investing in Boeing’s competitors can be an option as well, in addition to assessing whether or when Boeing will recover, especially with a new space race and growing geopolitical tensions.
You can invest in aerospace companies through many brokers, and you can find here, on securities.io, our recommendations for the best brokers in the USA, Canada, Australia, the UK, as well as many other countries.
If you are not interested in picking specific aerospace companies, you can also look into ETFs like ARK Space Exploration & Innovation ETF (ARKX), iShares U.S. Aerospace & Defense ETF (ITA), or SPDR S&P Aerospace & Defense ETF, which will provide a more diversified exposure to capitalize on the aerospace industry.
Or you can read our article about the “Top 10 Aerospace and Defense Stocks”.
1. Airbus (EADSY)
As the dominant commercial jet manufacturer beside Boeing, Airbus is already benefiting from the struggle of its main competitor.
“What used to be a duopoly has become two-thirds Airbus, one-third Boeing.
With quality control essential, Airbus gains in the rivalry between the world’s biggest plane makers by being seen as “competent.”
The New York Times
By far, Airbus is more focused on commercial airplanes than any other sector, with its space and helicopter segment making only a quarter of its overall revenues.
In helicopters, half of its revenues are from defense contracts. In space & defense, only 18% of its revenues are from space systems, with the rest made of airpower (defense) and connected intelligence.
Source: H1 2024 Airbus
Overall, Airbus is likely to benefit long-term from the damage to Boeing’s reputation. It might however have to contend with new competitors.
Most importantly, the launch of the C919, the first Chinese homegrown commercial jet, could bring new pressure in an already very competitive market.
The C919 already saw a few large orders, including 100 planes by China Southern and another 100 planes ordered by Air China.
It might still take a while, as non-Chinese airlines might prefer to wait a few years and observe the overall reliability & costs associated with the C919, before committing to an entirely new and unfamiliar airplane design.
For example, it took 7 years from its first flight in 2017 for the C919 to register these large orders, and it is still only by the Civil Aviation Administration of China.
2. Lockheed Martin Corporation
Lockheed is behind some of the most powerful (and expensive) weapon programs in the USA, like the F-35. The stealth plane developed together with Northrop Grumman and BAE Systems suffered a troubled development but is now “debugged” and getting built in large quantities, with demand outpacing production.
While it is active in all branches of the military, the company is mostly active in advanced technologies and aerospace, with aeronautics representing $6.2B of revenues in Q1 2023, missiles & fire control $2.3B (including the HIMARS, now famous in Ukraine), rotary (helicopters) $3.5B, and space $2.9B, for total sales of $15.1B total sales.
Lockheed is also active in cyber defense and naval systems (AEGIS anti-air systems and long-range anti-ship missiles).
Source: Lockheed Martin
It is present in the most advanced segment of the defense industry, including AI & autonomous weapons, electronic warfare, hypersonic missiles, laser weapons,
Ever since the massive military build-up of World War 2, Lockheed Martin has been a central part of the US defense industry. This is unlikely to change any time soon. Air superiority is the central tenet of NATO military doctrine, after all.
The company is also likely to be a prime recipient of increasing military spending from the US allies, as illustrated by the recent sales of F-35 to Finland, Switzerland, and Germany, or the 486 HIMARS artillery systems ordered by Poland (more than the USA itself operates).
When it comes to space programs, Lockheed is leading the development of the Orion, expected to carry the first American astronauts back to the Moon in more than 50 years.
Overall, besides private companies like SpaceX and Blue Origin, Lockheed is among the rare companies with the experience and capacity to develop crewed modules, including for deep-space missions like the Artemis mission.
So Lockheed could be a likely candidate to take over Boeing’s position with NASA, would Boeing decide to exit this sector or fail to adequately fix Starliner.