Boeing’s Network and Space Systems division reported slightly higher revenues and a sharp increase in operating profit for the first six months of 2007 on the strength of classified U.S. government programs and a commercial Delta 2 rocket launch, Boeing said in a July 26 filing to the U.S. Securities and Exchange Commission.

Chicago-based Boeing said the company posted a revenue increase

despite the removal from Boeing’s books of the Delta rocket’s government business, which accounts for most Delta launches. Boeing’s government launch business

has been transferred to United Launch Alliance, a joint venture with Lockheed Martin Corp.


Network and Space Systems division reported $5.8 billion in revenue

for the six months ending June 30, up 2 percent from a year earlier. Operating profit was $418 million, up 61 percent, for an operating margin of 7.2 percent compared to 4.6 percent a year earlier. In 2006 the division’s performance suffered from Delta 4 program losses and increased charges on the Wideband Global satellite program, a fixed-price contract for the U.S

. Air Force.

In its SEC filing, Boeing addressed, for the first time, its dispute with satellite-fleet operator SES New Skies of The Hague, Netherlands, regarding a replacement for the NSS-8 satellite destroyed in the January failure of the Sea Launch Co. rocket.

Boeing owned the satellite and had insured it for $200 million. As of June 30, the company had received $142 million from its insure


. The remainder is expected by September, Boeing said.

SES New Skies had an option with Boeing to provide a duplicate of the NSS-8. The satellite operator declined to exercise the option in May, saying Boeing had refused to respect the contract terms calling for delivery within 26 months of the contract signing.

“We believe that had New Skies exercised its option, we would have fulfilled our contractual responsibilities,” Boeing stated in

the SEC filing.

Boeing is a 40 percent shareholder in the Sea Launch Co. venture, which uses Norwegian, Russian and Ukrainian hardware to launch heavy telecommunications satellites into geostationary transfer orbit from a mobile platform in the Pacific Ocean.

Following the January failure, the mobile platform has been undergoing repairs and Long Beach, Calif.-based Sea Launch plans to return to service in October. Boeing said the launch failure would

not have a material effect on its financial results. “We continue to look at alternative capital structures for the venture,” Boeing said, without detailing possible options.

As of June 30, Boeing had a net financial liability related to Sea Launch totaling $184 million, only slightly less than the $188 million recorded as of Dec. 31, 2006. Boeing has guaranteed loans made to Sea Launch that stood at $461 million as of June 30. But the company estimates that it could recover $277 million from its Sea Launch partners and from the sale of Sea Launch assets, reducing its net worst-case exposure.

Boeing continues arbitration with insurers for several satellite customers whose spacecraft suffered failures for which the insurers allege Boeing is liable. Thuraya Satellite Telecommunications Co. of Abu Dhabi and Telesat Canada both purchased first-generation Boeing 702-model satellites and were reimbursed by their insurers following in-orbit failures of these satellites’ solar arrays. The insurers

now are seeking a total of $585 million from Boeing based on what they paid in claims to Thuraya and Telesat.

Boeing maintains that its in-house insurance coverage should cover potential losses related to the Thuraya and Telesat arbitration. Boeing’s insurers disagree and have served notice in the Circuit Court of Cook County, Ill., most recently on April 26, affirming that Boeing is not covered. The matter awaits a resolution of the arbitration process in both cases, Boeing said.

Insurers for Space Communications Corp. of Tokyo are asking an arbitration panel to award them more than $240 million following the mid-2004 launch of SCC’s Superbird-6 satellite.

The satellite was launched aboard a Lockheed Martin Atlas vehicle, but the insurers concluded that Boeing, as satellite manufacturer, was responsible for ordering faulty launch-injection parameters for the satellite, which was placed into a too-low orbit and was subsequently de-orbited.