Earlier this year, the National Aeronautics and Space Administration signed a contract hiring Russia's Roscosmos to transport six American astronauts to the International Space Station for $81.7 million per head. The two-year contract was valued at $490 million -- 15% more than the preceding contract. It was intended to secure NASA's access to ISS for the final few months while Boeing (NYSE:BA) and SpaceX get their manned spacecraft programs ready to fly.
That was the intention.
But now it seems NASA must write Russia another big check.
First one shoe drops, then the other
As recently as a few months ago, it looked like Boeing and SpaceX would give NASA what it paid for: a means of putting American astronauts back into space, under our own power, by late 2017, or early 2018 at the latest. In succeeding, they'd save NASA from the necessity of paying Roscosmos another $490 million (or more, given the steep price increase of the last contract) to continue ferrying astronauts to space.
Unfortunately, Boeing hit a snag in October. Announcing that supplier and technical issues would delay the first flight of its CST-100 Starliner capsule, the company now believes CST-100 won't fly before June 2018 at the earliest. Furthermore, CST-100 won't be ready to carry live passengers before August 2018, and Boeing set a regular flight schedule before the end of that year.
Now, the second shoe has dropped. Last week, SpaceX revealed that, in part due to the still-unfinished investigation into its September rocket explosion, its participation in NASA's "Commercial Crew Transportation" project will also be delayed. SpaceX now targets an initial November 2017 unmanned test flight of its Crew Dragon, to be followed by a May 2018 launch date for its first crewed mission. If SpaceX hits that target, it could still beat Boeing into space by a few months.
How SpaceX stumbled
According to The Wall Street Journal, NASA has complained about a whole series of issues with SpaceX's spacecraft, ranging from "stress fractures" in its propulsion system to cracks in a tube used to connect Crew Dragon to ISS, to perhaps the most serious objection of all: SpaceX's plan to board astronauts into Crew Dragon before fueling the Falcon 9 rocket that will carry it.
This would minimize the time between pumping supercooled fuel into Falcon and launching it -- so the fuel doesn't have time to warm up and expand before liftoff. The problem is, use of this very supercooled fuel appears to have been a key contributor to the last SpaceXplosion. And NASA would prefer that if SpaceX's next rocket decides to explode, it not do so with astronauts sitting atop the rocket -- but this puts NASA's preferences at loggerheads with SpaceX's.
To Russia, with cash
So what's the upshot of all this? NASA's inspector general thinks it's "likely" SpaceX will encounter additional delays in getting Crew Dragon ready for launch. If SpaceX doesn't fix its issues quick, this could result in Boeing getting to space first. Either way, NASA is probably going to have to cut the Russians another check.
What does this mean for investors? Two years ago, NASA awarded almost identical Commercial Crew contracts to both Boeing and SpaceX. But NASA paid Boeing $4.2 billion and SpaceX only $2.6 billion to carry the same number of astronauts to ISS. At the time, that seemed an unfair decision to overpay a favored contractor, while shortchanging SpaceX. But now it's looking like NASA may have made the right call.
NASA paid Boeing more in part because its record of reliability suggested Boeing was more likely than SpaceX to succeed in building a working space capsule. And while both contractors have now encountered delays, it's starting to look like Boeing will in fact get to space first. If that's how things play out, it will bolster Boeing's argument that it deserves to be paid a premium when performing tasks identical to what SpaceX performs -- because it performs them more reliably.
Turns out, this record of reliability may be Boeing's best defense against competition from SpaceX -- even if it does mean a higher cost for taxpayers. And if it hastens the day when NASA can stop sending money to Russia, it may be worth the extra cost.