Houston, Texas, January 5, 2005 – SPACEHAB, Incorporated (NASDAQ/NMS: SPAB), a leading provider of commercial space services, announced that it filed an appeal last week with the Armed Services Board of Contract Appeals regarding NASA’s limited response to the Company’s claim for the February 2003 loss of its Research Double Module (RDM) in the Space Shuttle Columbia tragedy.

In January 2004 SPACEHAB filed a formal proceeding with NASA seeking indemnification under the Company’s contract with the Agency in the amount of $87.7 million for the value of the Company’s RDM and related equipment that was destroyed during the shuttle mission. NASA responded to this contract claim in October 2004 determining that its liability is limited under the contract to $8.0 million.

SPACEHAB received payment of $8.2 million, which included $0.2 million of interest, from NASA in October 2004. As previously announced the Company maintained the right to appeal NASA’s decision to deny its claim for indemnification in excess of $8.0 million and has now officially exercised this right.

Simultaneous with the appeal of the contract claim, the Company is pursuing a formal claim filed against NASA under the Federal Tort Claims Act seeking restitution of losses totaling in excess of $79.7 million asserting NASA’s negligence that led to the space shuttle accident and the destruction of the RDM. Since the filing and announcement of this tort claim in November 2004, the Company has not received a response from NASA. In the event that this administrative tort claim is denied, SPACEHAB has the right to pursue the claim further in Federal district court.

About SPACEHAB, Incorporated

SPACEHAB, Incorporated (www.spacehab.com) is a leading provider of commercial and government space services with three primary business units. The Flight Services business unit develops, owns, and operates habitat and laboratory modules and cargo carriers aboard NASA’s Space Shuttles for Space Station resupply and research purposes. SPACEHAB’s Astrotech subsidiary provides payload processing support services for both commercial and government customers at company-owned facilities in Florida and California. The Company’s Government Services business unit supports NASA’s Johnson Space Center providing configuration management, product engineering, and support services for both the Space Station and Space Shuttle programs. Additionally, through The Space Store, Space Media provides space merchandise to the public and space enthusiasts worldwide (www.thespacestore.com).

The statements in this document may contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, trends, and uncertainties that could cause actual results to be materially different from the forward-looking statement. These factors include, but are not limited to, continued government support and funding for key space programs, product performance and market acceptance of products and services, as well as other risk factors and business considerations described in the company’s Securities & Exchange Commission filings including the annual report on Form 10-K. Any forward-looking statements in this document should be evaluated in light of these important risk factors. The Company assumes no obligation to update these forward-looking statements.


Kimberly Campbell
Vice President
Corporate Marketing and Communications