Boeing can’t catch a break. Regulators twice grounded the company’s workhorse 737 Max airliner following two horrific accidents in 2018 and 2019. Over the next few years, whistleblowers blew whistles and investigators uncovered a host of sketchy business practices relating to aircraft safety. When an improperly sealed plug blew out of an Alaska Airlines 737 Max earlier this year, more problems came to light, including alarmingly sloppy manufacturing practices. Not surprisingly, international orders for Boeing aircraft have plunged, as has the company’s stock price. The business press now uses words like “beleaguered” and “besieged”—the language of medieval warfare—to describe the embattled giant.
And then came Starliner. During the worst of the 737 Max debacle, Boeing could still take pride in its legacy as America’s—indeed, the world’s—most storied aerospace manufacturer. After all, Boeing constructed the rocket that carried Apollo astronauts to the moon and built most of the International Space Station (ISS). But today, NASA is taking a new approach: The agency wants to outsource routine space flight to private businesses. Under its Commercial Crew program, NASA will pay companies a set fee to launch astronauts into orbit on their own space vehicles (assuming these spacecraft meet the agency’s safety standards).
In 2014, NASA gave Boeing a $4.2 billion contract to design a new space capsule able to ferry astronauts to the International Space Station. Almost as an afterthought, the agency awarded a similar, though much smaller, contract to SpaceX. At the time, many NASA insiders regarded SpaceX as a somewhat flaky start-up, whereas Boeing had been the agency’s go-to partner for decades. But over the next few years, Boeing’s new spacecraft—now dubbed Starliner—hit one development snag after another. In contrast, SpaceX rapidly upgraded its Dragon capsule and began delivering astronauts to the ISS in 2020.
That success solved a major headache for NASA. Since retiring the space shuttle in 2011, the agency has lacked its own human-rated spacecraft; it was forced to fly American astronauts to the station on Russia’s Soyuz rockets. By providing an alternative to those humiliating Soyuz flights, SpaceX “saved NASA’s bacon,” veteran space reporter Eric Berger recently said. This past summer, Boeing’s Starliner was finally ready for its first crewed flight, a trial mission carrying two astronauts to the ISS. After that, everyone hoped, NASA would approve Starliner for routine human missions, and SpaceX would finally have some competition in the commercial space business. And then…
Well, it’s almost time to start putting up the holiday decorations on the ISS. When astronauts Suni Williams and Butch Wilmore arrived in June, after a notably rocky test flight, they were supposed to hang around for only a week or so. But Starliner’s malfunctions—mysterious leaks and glitchy thrusters—turned out to be more serious than they first appeared. The months dragged by while NASA and Boeing tried to determine whether the new spacecraft was safe enough to carry the test pilots back to Earth. In September, the space agency decided to send Starliner home empty, leaving Williams and Wilmore stranded in orbit long enough to look forward to freeze-dried fruitcake in zero gravity. With luck, they’ll be home around Valentine’s Day.
The whole fiasco is a huge embarrassment for Boeing and for NASA, too. How did a company that once defined America’s global engineering dominance become so bogged down in bureaucracy and technical screwups? Whatever became of NASA’s steely-eyed missile men? Are Starliner’s woes a metaphor for a nation in decline?
I don’t think Boeing’s problems signal the end of America’s innovation culture. In fact, they might reveal the opposite. Look at the contrast between Boeing and its upstart rival SpaceX. Elon Musk was a little-known tech entrepreneur when he launched the company in 2001. With no experience in the rocket business, Musk created a fast-moving, risk-taking company that teetered on the edge of bankruptcy for years. When their rockets blew up, SpaceX engineers just built them again—better. Eventually, after countless failed attempts, the company learned to land and reuse rocket boosters instead of watching them fall into the sea. The resulting cost savings revolutionized the space business. Less than two decades after its first successful launch, Musk’s company is now the world leader in spaceflight, launching missions at a pace and price no other company—or country—can match.
Boeing, America’s leading aerospace company since at least World War II, today seems a lumbering giant by comparison. What happened? Well, success for one thing. In the 20th century, Boeing’s groundbreaking engineering helped it dominate the commercial aviation industry and made it a key supplier of military and space hardware. The company built up unmatched clout in Washington, D.C., and benefited from crony-capitalist programs such as the federal Export-Import Bank—known to critics as “the Bank of Boeing”—which subsidizes overseas aircraft sales. Boeing also grew fat on NASA and Pentagon contracts, many of which were awarded on a “cost-plus” basis, meaning that any cost overruns are passed along to the government.
This is not an environment that rewards quality or efficiency. Indeed, rarely has a major corporation been so well insulated from the harsh winds of competition. Boeing’s 1997 merger with its struggling rival McDonnell Douglas made things worse. Boeing allowed McDonnell Douglas’s cautious management style to dominate the new company, while letting its own more engineering-driven culture whither. A series of GE-trained CEOs focused on short-term financial value, outsourcing delicate manufacturing operations, and cutting back on R&D. Executives stopped walking the shop floor, and skilled workers no longer felt connected to the company’s mission. Boeing’s stock soared for a time, but the company was coasting.
Now, times are changing. Unlike previous cost-plus contracts, NASA’s Commercial Crew program works on a fixed-price basis: The contractor, not the taxpayer, is on the hook if costs run over. Boeing couldn’t adjust to this rigorous new regime. The company has lost $1.6 billion on the Starliner project, with more losses likely to come. Boeing recently announced it will not be accepting any new fixed-price contracts. In fact, today it’s not even clear if Starliner will ever fly again—or whether Boeing will play a leading role in future NASA ventures.
NASA recently put out a request for contractors to design a mission to “deorbit” the ISS when the station is retired in six years. It’s a delicate operation, requiring a rocket to nudge the sprawling complex on a reentry plunge toward an empty patch of ocean. The competition “was a total stomp,” in Berger’s words. No other contractor came close to matching SpaceX’s price or engineering sophistication. So, come 2030, we will likely see a modified SpaceX Dragon dock with the grand old space station. Then the Dragon, built by Musk’s once-scrappy start-up, will fire its thrusters and start pushing the ISS, one of Boeing’s last crown jewels in space, toward its fiery demise.
Should we feel sad about that? Sure, a little. But change is the only constant in our endlessly creative, always turbulent free-market system. Crony capitalism can work—and even get good results—for a while. In the end however, companies that are sheltered from market forces grow bloated and slow. NASA is doing the right thing in bringing competition and fiscal discipline to spaceflight. I hope it is not too late for Boeing to adapt; the company still has valuable institutional knowledge and talented people.
With their political clout, legacy companies like Boeing can lean on the government to rig rules and programs in their favor. But in the end, a lean and hungry start-up is bound to come along with a smarter approach. The U.S. is perhaps the only country in the world where an entrepreneur like Elon Musk can take on a powerful, deeply connected behemoth like Boeing—and win. Let’s keep it that way.
Photo: David Ryder/Getty Images
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