Boeing logo.
Credit: Reuters Photo
By Thomas Black
A true win-win-win situation doesn’t come along often. One could be brewing with a Boeing Co. decision to look at a potential sale — or perhaps more realistically a spinoff — of its space business. The Wall Street Journal reported on Friday that Boeing is considering a sale of the business, though a deal is not guaranteed. Bloomberg News reported that the company is weighing options for its Starliner space capsule program.
Boeing should exit the entire business. The company would win because it would cleave off an operation that has become a drag during a critical time when the planemaker must concentrate on healing its commercial aircraft business; it can’t afford more headwinds or distractions. NASA would be a winner after it has lost some confidence in Boeing after several stumbles with the Starliner. Investors would win if Boeing were to raise cash by selling the unit or from ownership in the spinoff of an established space operation in an era when the commercial space market is in its infancy.
To make the space business work as a carve-out, an infusion of energy and vision is required. Boeing’s space group has a storied past of helping NASA send astronauts to the moon under the Apollo program, which cemented US space dominance. Space activity is now entering an unprecedented phase in which a permanent moon base will be established and companies are spending more for satellites and space services.
“It’s been exciting for those of us who work in this field because we kind of dreamed about this,” said Glenn Lightsey, an aerospace engineering professor at Georgia Tech. “The cost of access to space has gone down dramatically. This has opened up who can participate in space.”
While Boeing is a contractor for NASA’s moon aspirations under the Artemis program, it has stumbled the most on the space agency’s commercial crew program. NASA signed an initial $4.2 billion contract with Boeing in 2014 and a $2.6 billion deal with SpaceX to build systems to launch astronauts to and from the International Space Station and break the dependence on Russian rockets.
SpaceX is now ferrying crews to space and back and just brought back four astronauts on Oct. 25, including a Russian. In a well-publicized stumble, Boeing’s Starliner spacecraft took two astronauts to the space station, but complications with helium leaks and failing thrusters caused NASA to pull the plug on bringing them back home in it.
Boeing’s space group is now behind schedule and over budget on its Space Launch System, the rocket that will blast people to the moon under the Artemis program. Chief Executive Officer Kelly Ortberg dropped a hint that his company might not want to participate in more phases of money-losing programs at the defense, space and security unit. Could that include NASA work?
“There are some areas, where we may be at one contract phase and do we want to go to the next contract phase, that we’ll sit and evaluate,” he said vaguely when asked during an Oct. 23 conference call with analysts about walking away from money-losing contracts at the defense, space and security business group.
Ortberg has enough on his plate with a festering strike of 33,000 machinists that has shut factories in the Seattle area and is contributing to a cash drain. Similar to how a cultural breakdown at its aircraft factories has led to quality issues and serious safety problems, something is awry at the space group.
As a standalone company, new leadership would be focused solely on fixing the space group’s ailments. The task would be monumental and require fresh talent with the vision to catch up with SpaceX, which has raised the bar with the successful reuse of rockets.
Boeing, along with its rocket-launching partner Lockheed Martin Corp., built its space business on the back of government contracts. This meant that the cadence of work depended on NASA and defense budgets. Government work also lends itself to over-engineering products and doesn’t provide much incentive for bold ideas.
The space industry is changing. Governments still play an outsized role, but the commercial market is heating up as satellite launches increase and there are discussions of returning to the moon. With the declining cost of space launches, more countries and companies will be tapping this market, which is creating its own economy, Lightsey said.
While the United Nations’ Space Services Department coordinates slots for space systems, the moon is an open area that will likely be governed more by first-come, first-served squatters rights. Satellites can be shifted around and removed when obsolete. Infrastructure on the moon will likely be permanent. It’s crucial that the US and its close allies remain ahead in this second space race.
Boeing’s space group needs to play an important role in this race. It’s not a good idea for the US to depend on only one privately held company to carry the day. A sale or a spinoff of the space business would allow it to reset its vision. Boeing has been around for more than a hundred years and just doesn’t elicit excitement among young engineers, Lightsey said.
“It’s just harder to recruit at the same level as companies that have all this exciting buzz about them,” he said.
Most people know that billionaire Jeff Bezos owns Blue Origin, and they may have even read that Bezos hired longtime Amazon.com Inc. executive Dave Limp as CEO to move things along a bit faster. Everyone knows that Elon Musk founded SpaceX and is CEO. Boeing’s space group is tucked under the leadership of Kay Sears, vice president and general manager of space, intelligence and weapon systems. The company mixes launches, satellites and NASA work in with munitions, missiles, weapon systems and maritime undersea operations, and it would have to untangle those activities to cleave off its space operations.
Boeing should move forward with selling or spinning off its space unit. It should be a household name for all the right reasons. A reinvigorated business with a visionary leader would be a victory for everyone involved.