A test flight of Boeing’s new Starliner—a space capsule designed to ferry astronauts to the International Space Station—is delayed again. It’s another setback for the company, although shares aren’t reacting much to the reports.
Still, investors shouldn’t ignore problems in Boeing’s space business. Engineering woes could affect the company down the road, especially as competition in the space industry continues to heat up.
(ticker:BA) stock is up about 0.1% in premarket trading Wednesday.
Dow Jones Industrial Average
futures are both down slightly.
Boeing, on Tuesday, told reporters an uncrewed flight, testing the capsule, is now likely to happen in the first half of 2022. That test flight was first scheduled for this past summer. Meanwhile a crewed test flight is likely to take place near the end of 2022. Boeing wasn’t immediately available for additional comment.
Starliner testing was already delayed a couple of times this past summer—once because the International Space Station wasn’t ready to receive the capsule and, after that, because of a fuel valve issue. The valve sticking is still being worked on by Boeing engineers.
Investors are brushing off the news, however, partly because Boeing is first and foremost a commercial aerospace company. Investors are more concerned with global air travel in a postpandemic world and with seeing Boeing deliver 737 MAX jets and 787 Dreamliners.
The MAX was grounded worldwide between March 2019 and November 2020 after two deadly crashes inside of five months. And 787 jet deliveries have been paused while Boeing fixes some quality issues.
Getting the Starliner back on track, however, might be a bigger deal than investors expect. The delays can affect talent recruitment.
Bank of America analyst Ron Epstein, who has a PhD in aerospace engineering, pointed out in a recent conversation with Barron’s that Boeing has more competition for aerospace engineering talent than ever before: “How do you attract talent in a world where some of the smartest, youngest engineers have a whole plethora of companies they can go work for?”
He’s referring not only to space companies such as privately held SpaceX and publicly traded
Rocket Lab USA
(RKLB), but also to companies working on urban air taxis, electric planes, and hypersonic jets.
Recruitment and training are longer-term issues, and the company has time to fix it. CEO Dave Calhoun believes Boeing is still attractive.
“It’s really the mission,” said Calhoun on Boeing’s second-quarter earnings conference call back in July, responding to a question from Epstein. Engineers “like what we do. They want to go to deep space, right? They want to help protect the country. These are meaningful things.”
What’s more, Boeing is still big. It’s one of the most valuable aerospace franchises out there with a market capitalization of almost $130 billion.
(LMT) are also worth more than $100 billion, worth about $140 billion and $100 billion, respectively.
SpaceX is the only other aerospace and defense franchise in the Western world worth more than $100 billion. It hit that valuation in private markets in October. Upstarts represent a big challenge to existing players.