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Boeing may face problems

By STEVE HUETTEL, Times Staff Writer
© St. Petersburg Times
published February 2, 2003

Already reeling from plummeting commercial airline orders, Boeing Co. could face new problems with the explosion of the space shuttle Columbia.

Boeing, the world's No. 1 aerospace company, is NASA's biggest contractor and a major player in the shuttle program.

The company maintains and modifies shuttles and provides planning and operations as a partner with defense contractor Lockheed Martin Corp. in the joint venture called United Space Alliance. Boeing also builds, tests and maintains the shuttle's main reusable liquid-fuel rocket engines.

Financial analysts said Saturday it was too early to know the explosion's impact on Boeing and other contractors. But uncertainty about its cause will mean a slow-down on space spending, said John Rogers, an aerospace analyst for investment firm D.A. Davidson & Co.

"There's a lot 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," he told Reuters. Anyone involved in supplying space programs will be affected, he said.

Boeing's Web site offered a brief statement of condolence and said "we are doing everything possible to support NASA and the United Space Alliance in their investigation of today's tragedy."

In Palm Beach County, shuttle contractor Pratt & Whitney called in senior rocket managers and engineers to help NASA figure out what went went wrong with Columbia. Pratt is one of 100 companies that provide or work on components of the shuttle's three main engines.

It builds one of the engine's most critical parts -- the turbopumps. There are two on each of the shuttle's three engines. NASA plans to review their development and assembly along with the rest of the shuttle's parts and systems in a piece-by-piece search for defects or damage.

One of Boeing's subcontractors is Honeywell International Corp. The Morristown, N.J., company's Clearwater division has been part of the space shuttle program since its early-1970s start.

Among its subcontracts is to refurbish and upgrade controllers attached to each of the shuttle's three engines. Honeywell officials couldn't be reached for comment.

Boeing has been diversifying from the cyclical commercial airplane business, which contributed just more than half its $54.1-billion in revenues last year.

The sour economy and the Sept. 11 terrorist attacks left the airline industry in its worst-ever financial slump. Boeing had to reschedule more than 500 jet deliveries and severely cut production. The company laid off 30,000 workers last year.

Last week, Boeing reported a significant drop in profits, from $2.8-billion in 2001 to $2.3-billion last year. Revenue fell from $58.2-billion to $54.1-billion.

While commercial airline revenues were off 19 percent, Boeing's military and space business revenues rose 9.4 percent and are expected to soon surpass commercial airline revenues.

The company's space business goes back to the 1960s, when it built the rockets for the Apollo space program. Boeing became a bigger player in 1996 by acquiring the aerospace and defense operations of Rockwell International, which built the shuttles.

Boeing also builds Delta rockets to launch satellites for the government and private customers and is NASA's prime contractor for design and development of the international space station.

-- Times staff writer Scott Barancik and news researchers Barbara Oliver and John Martin contributed to this report, which used information from Reuters and the Associated Press.

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