Skip to comments.Shuttle Loss Another Challenge for Boeing
Posted on 02/01/2003 2:05:07 PM PST by Willie Green
For education and discussion only. Not for commercial use.
CHICAGO (Reuters) - The explosion of the space shuttle Columbia will present yet another challenge for Boeing Co., the largest NASA contractor, as it struggles through an unprecedented downturn in commercial aviation that has sharply hurt its profitability.
Chicago-based Boeing builds space shuttles after acquiring the space business of Rockwell International in 1996. It also maintains the orbiter as part of a 50/50 joint venture with fellow defense contractor Lockheed Martin Corp. called United Space Alliance, based in Houston.
Boeing also builds, tests and maintains the shuttle's main reusable liquid-fueled rocket engines.
With the cause of the explosion unknown, several analysts said it is too early too determine the precise effect the tragedy will have on Boeing and other contractors. But the watchword across the industry will certainly be one of caution.
John Rogers, aerospace analyst for investment firm D.A. Davidson & Co. in Portland, Oregon, said the impact will be broadly felt among contractors.
"There's a lot that's not known, but it seems to me that there won't be a lot of spending on space programs at least until we figure out what happened. Anyone involved in supplying space programs will be impacted."
Boeing, which is both the world's largest commercial airplane manufacturer and the No. 2 U.S. defense contractor, has laid off about 30,000 workers since the Sept. 11, 2001, attacks when hijackers used four of its airliners to attack America.
The company draws in more than $50 billion in annual revenues from the government, airlines and other customers, but that figure has been declining.
On Thursday, Boeing reported a big drop in 2002 profits, to $2.3 billion from $2.8 billion in 2001. Revenue fell to $54.1 billion from $58.2 billion in 2001.
The space and communications division, which includes the shuttle operations, reported earnings from operations of $357 million on revenue of $11.0 billion, down from $619 million on revenues of $10.4 billion in 2001. NASA revenues were down.
MILITARY SIDE HAS BEEN ON UPSWING
Gains in the military side of its business have helped offset to some degree the lack of airplane orders from carriers around the globe as demand for air travel remains slack.
Revenues from its military and space business, now known as Integrated Defense Systems, will soon surpass that of commercial airplanes.
A spokeswoman for Boeing could not immediately comment on what the crash meant for the space shuttle program and Boeing's participation.
On its Web site, Boeing said the space shuttle program was just hitting its prime. "For the foreseeable future, the shuttle will remain the nation's primary human-related launch vehicle."
Whether that will change in the near future is an open question, analysts said.
Peter Gottlieb, senior fund manager for First Albany Asset Management, said there will be questions surrounding the entire defense and commercial aviation group.
"There's going to be some time here, a gap, where all areas of the program are going to be scrutinized and spending will be impacted. We're going to see a lot more scrutiny, especially (on) the suppliers."
Lockheed Martin is the largest U.S. defense contractor, with revenues of $26.6 billion.
--Additional reporting by Chelsea Emery in New York