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John Engle
John Engle
Articles (529) 

Boeing’s Spaceflight Program Gets a Congressional Boost

The latest draft authorization act for NASA calls could put the embattled aerospace giant in charge of the next moon mission

January 27, 2020 | About:

On Jan. 24, a House of Representatives committee released the draft of an authorization act for the National Aeronautics and Space Administration. The proposed legislation appears to repudiate much of the Trump administrations roadmap for human space exploration.

Yet, while the White House may be the loser of the proposed NASA authorization, another embattled institution looks like a major winner: Boeing Co. (NYSE:BA).

Struggling with space stuff

While the controversy surrounding its 737 MAX aircraft program has dominated most headlines and industry coverage, it is far from the only issue facing Boeing in recent months. The venerable aerospace companys vaunted rocket and space flight programs have also shown signs of trouble.

In September, Boeing found itself effectively out of the running to lead the development of the U.S. Air Forces Ground Based Strategic Deterrent, a next-generation intercontinental ballistic missile system. Unable to compete on the exacting specifications for the program, Boeing watched rival Northrop Grumman Corp. (NYSE:NOC) seize the lions share of the $85 billion contract.

On Jan. 22, Boeing announced its withdrawal from the XS-1 Experimental Spaceplane program, which it was developing on behalf of the Defense Advanced Research Projects Agency. Boeings withdrawal has led DARPA to scrap the XS-1 program.

Boeings efforts to develop a manned space capsule has fared somewhat better. In December, it managed to land its Starliner crew capsule successfully, though the landing only came after Boeing was forced to abort its planned docking with the International Space Station.

Congress calls for course change

President Donald Trump has been an aggressive advocate for expansion of U.S. investment in space exploration and development since winning the presidency in 2016. Since taking office, Trump has called for the creation of a Space Force, as well as set an ambitious timeline for the Artemis Program, which aims to return American astronauts to the moon and eventually carry them to Mars.

However, Trumps enthusiasm has not been matched by many in the U.S. Congress. In May, the House roundly rejected Trumps moon mission plan, especially its call to move up the target launch date from 2028 to 2024. The Jan. 24 draft authorization is an even more glaring repudiation. Indeed, it calls for a distinctly different roadmap, and moon exploration strategy, as Eric Berger discussed in a Jan. 27 article for Ars Technica:

The big-picture takeaway from the bipartisan legislation is that it rejects the Artemis Program put forth by the Trump White House, which established the Moon as a cornerstone of human exploration for the next decade or two...Instead, the House advocates for a flags-and-footprints strategy whereby astronauts make a few short visits to the Moon beginning in 2028 and then depart for a Mars orbit mission by 2033.

Big break for Boeing?

If Congress passes the new NASA authorization bill successfully, it could prove a tremendous boon for Boeing. Remarkably, the committee has called for a number of changes to the moon mission roadmap that would fundamentally favor the controversy-wracked aerospace giant.

One of the most revealing provisions of the authorization is a call for government ownership of the Human Landing System, meaning the commercial contract will have to be designed as a cost-plus contract. Also of note are its calls for an integrated lunar landing system. This is interesting because Boeing is the only company to have proposed such an integrated lunar lander. As Ars Technicas Berger observed, the House bill would have the practical effect of handing Boeing a serious windfall:

The net effect of this is to shut down all potential competition and cost savings for the lunar lander...With the House bill, legislators seem to be trying to take NASA's human exploration program and give it over to the Boeing Company, going back to an era of cost-plus contracting.

Certainly, if passed into law, the authorization bill could end up putting Boeing in the drivers seat of Americas program to get astronauts back to the moon. That would result in Boeing enjoying favored status across a wide range of lucrative related contracts.

Verdict

Unsurprisingly, the potential consequences of the authorization bill have not gone unnoticed. Indeed, it has already received vehement industry opposition. Even with the Houses best efforts, it seems quite unlikely that these legislators will get their way on this issue. After all, the Trump administration has continued to pursue its aggressive strategy in spite of congressional efforts to waylay it. However, it is indicative of the storied companys powerful influence.

What investors should consider most of all, apart from the specifics of this particular program, is how much support Boeing still enjoys from certain power centers in Congress. Despite getting raked over the coals by legislators during the high-profile hearings in the wake of the 737 Max disaster, Boeing clearly still has friends in high places. Investors should consider that fact carefully before taking a position on the name based on its recent troubles.

Disclosure: Author is short Boeing.

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About the author:

John Engle
John Engle is president of Almington Capital Merchant Bankers and chief investment officer of the Cannabis Capital Group. John specializes in value and special situation strategies. He holds a bachelor's degree in economics from Trinity College Dublin, a diploma in finance from the London School of Economics and an MBA from the University of Oxford.

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