SPACEHAB, Incorporated (NASDAQ/NMS: SPAB), a leading provider of
commercial space services, today announced financial results for its
second quarter fiscal year 2005 ended December 31, 2004.

Second Quarter Results

SPACEHAB posted a second quarter fiscal 2005 net loss of $1.2
million, or ($0.10) per share (($0.10) per diluted share), on revenue
of $13.1 million compared with prior year quarter net income of $3.5
million, or $0.28 per share ($0.25 per share diluted), on revenue of
$32.8 million.

“Although our contributions to NASA’s space shuttle program
remained ‘on hold’ through most of our second quarter fiscal 2005
results, we enter our third quarter contracted to undertake new work
associated with NASA’s return to flight scheduled for May or June
2005,” stated Brian K. Harrington, SPACEHAB Senior Vice President,
Finance and Chief Financial Officer. “In January SPACEHAB was provided
authority to proceed with mission-specific work on space shuttle
mission STS-116 and authorized new contract work to add a deployable
stowage platform to STS-118 that will hold spare parts on the
International Space Station.”

Revenue this quarter was impacted by the past year’s postponement
of space shuttle missions pending resolution of all issues addressed
in the Columbia Accident Investigation Board report. Now that NASA has
initiated mission-specific work under our contracts, the Company will
begin to recognize integration and operations revenue as mission
milestones are met. Additionally, a portion of the revenue anticipated
from SPACEHAB’s Astrotech Space Operations subsidiary was delayed two
quarters due to a customer slip in their mission launch schedule.
These missions have since been rescheduled to launch during the
Company’s third fiscal quarter ending March 31, 2005 and subsequent
periods.

Revenue for the second quarter of fiscal 2005 compared to 2004
decreased approximately $19.7 million as the previous year’s quarter
benefited from receipt of a $17.5 million one-time payment related to
the termination of financial guarantees in the long-term payload
processing contract between Astrotech and The Boeing Company. These guarantees were terminated due to Boeing’s assessment
of the lack of predictability of future satellite launches. Since this
time, the Company has been awarded new payload processing contracts by
Boeing on a mission-by-mission basis.

Selling, general and administrative expenses declined to
approximately $2.3 million for the second quarter 2005 compared to
$3.4 million for the same period a year ago. This improvement in
selling, general and administrative expenses is reflective of ongoing
cost reduction efforts by the company. The second quarter 2005
selling, general and administrative costs also include legal expenses
incurred on the claims with NASA for losses of equipment on the Space
Shuttle Columbia accident.

“Operations have produced a solid foundation for profitability as
business and industry conditions improve,” said Harrington. Meanwhile,
we remain focused on costs and growth opportunities in the commercial
space exploration arena, including continued work on NASA’s Concept
Exploration and Refinement effort.” Subsequent to quarter end, NASA
notified the Company of its intent to exercise its option to extend
this lunar exploration contract initiative. Once under contract, this
six month effort will be valued at approximately $1.0 million in
revenue.

Six Month Results

SPACEHAB’s six months ended December 31, 2004 net income was $5.7
million, or $0.45 per share ($0.40 per share diluted), on revenue of
$26.2 million compared to $4.1 million, or $0.33 per share or ($0.30
per share diluted), on revenue of $51.7 million for first six months
of the prior fiscal year. As mentioned, six months revenue for this
fiscal year was impeded due to the grounding of the space shuttle and
a slip in an Astrotech-supported mission originally scheduled to
launch during the second quarter.

The significant decline in revenue for the comparable six month
period reflects the transition from the ReALMS contract structure for
our space shuttle operations to our current structure; the one-time
termination payment of financial guarantees for $17.5 million; and the
completion of two NASA contracts in 2003. This was somewhat offset by
revenue generated in 2004 for mission-specific work on the space
shuttle return to flight, the JETIS contract, as described below, and
other new activities.

Six months results include the recovery of $8.0 million from NASA
in October 2004 for the loss of SPACEHAB’s Research Double Module
(RDM) on the STS-107 space shuttle accident. The recovery, along with
$0.2 million of interest, was reflected in operating expenses and
accounts receivable for the first quarter fiscal year 2005. The cash
settlement of the receivable was received in the second quarter.

Selling, general and administrative expenses declined to $4.2
million for the six months of fiscal 2005 compared to $6.3 million for
the same period a year ago. Interest expense was approximately $2.9
million for the six months ended December 31, 2004 compared to
approximately $4.6 million for the six months ended December 31, 2003.
The decrease in interest expense is due primarily to the restructuring
of the financing of SPACEHAB’s Spacecraft Processing Facility in
January 2004, reducing the facility mortgage by approximately $11.0
million and eliminating the hedge accounting on a portion of the
interest rate swap. The mortgage was restructured with a principal
balance of $5.6 million, a reduced effective interest rate from 7.87%
to a fixed rate of 5.5%, and a shortened maturity date of January
2007.

Liquidity

The Company’s cash and short-term investments were approximately
$6.6 million as of December 31, 2004. As mentioned, in October 2004
the Company received $8.2 million from NASA in indemnification of
losses suffered in the Space Shuttle Columbia accident. This payment
was recorded as an account receivable in the first quarter and
received in the second quarter.

Deferred revenue as of December 31, 2004 was reduced to $2.6
million compared to $7.2 million at June 30, 2004. The decrease is
primarily due to the successful execution of a commercial contract,
JETIS, with the Japan Aerospace Exploration Agency (JAXA) where
SPACEHAB provided for the delivery of a thermal incubator system to
the ISS via the Russian Progress for one of its international
customers. For the three and six months ended December 31, 2004, the
Company recognized revenue of approximately $0.3 million and $1.8
million, respectively under this contract. Additionally, during fiscal
year 2004 the ReALMS contract was closed and replaced with the current
subcontract arrangement with Lockheed Martin Corporation, resulting in
a decrease in deferred revenue.

Current liabilities decreased to $15.2 million at December 31,
2004 compared to $22.3 million at June 30, 2004 mainly due to
reductions in current deferred revenue, accounts payable, and accrued
expenses. As of December 31, 2004, SPACEHAB carried a contract backlog
of $82.2 million, which represents the expected value of
contractually-committed work, a portion of which is subject to return
to flight of the space shuttle.

Update of Ongoing Operations

“SPACEHAB expects to remain a key player in the remaining shuttle
program missions, continue to support the ISS cargo transportation and
research needs throughout its lifetime – and from a variety of launch
platforms – and, carve out a critical path niche for our company in
support of NASA’s emerging exploration initiative,” stated Michael E.
Kearney, SPACEHAB President and Chief Executive Officer. “We are
currently under contract in all three of these domains so we are
confident that we will continue to provide high value, commercial
services to all of our clients.”

SPACEHAB Flight Services (SFS) continues to provide logistics
capabilities and assets in support of the International Space Station
(ISS) program. SFS is under contract for use of SPACEHAB’s single
module as well as its Integrated Cargo Carriers (ICCs) to support four
logistics missions to the ISS: STS-114, STS-121, STS-116, and STS-118,
in order of scheduled launch dates. Support for STS-121, 116, and 118
continue under subcontract to Lockheed Martin. SPACEHAB is currently
providing asset maintenance and related services under letter contract
and is in final contract negotiations with Lockheed for this contract.
Subsequent to quarter end, SPACEHAB received authorization to proceed
on integration and operations activities for the STS-116 mission which
officially kicked off a 13-month processing template for this flight,
which includes a SPACEHAB pressurized single module and an
unpressurized ICC.

Expanding upon its service capabilities, SFS recently received
confirmation of a flight opportunity aboard the European Space
Agency’s Automated Transfer Vehicle (ATV) and is currently seeking a
qualified customer to utilize this unique flight to the ISS.
Commercial access to this vehicle expands SPACEHAB’s growing
operations on a variety of manned and unmanned spacecraft for use by
customers worldwide, including the Japan Aerospace Exploration Agency
(JAXA), currently utilizing a SPACEHAB-provided incubator aboard the
ISS Russian Segment. The incubator was launched and transported to the
ISS, under contract to SPACEHAB, aboard a Russian Progress vehicle.
SFS also expects to participate on a Japanese team bidding for the job
of privately operating the country’s Japanese Experiment Module. The
JAXA contract award on this procurement is expected as early as 2006.

After the first quarter 2005 scheduled downtime, Astrotech moved
into high gear with the arrival of NASA’s Deep Impact spacecraft at
the Company’s Titusville, Florida location. With a successful liftoff
on January 12, 2005, Deep Impact is comprised of two parts, a fly-by
spacecraft and a smaller impactor, a copper projectile that is
scheduled to collide with the comet Tempel 1 on July 4, 2005 and
record photos and data of the event to send back to Earth.

The Astrotech-processed AMC-16 spacecraft, a hybrid Ku/Ka-band
satellite built by Lockheed Martin Commercial Space Systems and the
first of its kind to be housed on an Atlas V launch vehicle,
successfully launched during the quarter in December 2004. The AMC-16
satellite, like its twin AMC-15, is integral to AMERICOM2Home and its
customer, EchoStar’s DISH Network.

December also saw the successful launch of the Boeing Delta IV
Heavy Demonstration mission from Cape Canaveral Air Force Station for
the U.S. Air Force. The payload simulator and five-meter payload
fairing for this flight were processed in Astrotech’s Spacecraft
Processing Facility. This mission represented the first launch of
heavy configuration of the Boeing Delta IV family of launch vehicles.

SPACEHAB Government Services continues to provide configuration
management services within the Program Integration and Control (PI&C)
contract supporting the ISS program. This five-year initiative,
awarded this time last year, was valued at approximately $22.0 million
for SPACEHAB. Additionally, if exercised, there are two one-year
contract options that would increase the award by an additional $10.0
million. The PI&C team achieved an overall award fee evaluation of
‘excellent’ from NASA for its performance during the first contract
year.

Conference Call

SPACEHAB will host a conference call at 10:00 a.m. Central time
following the earnings release. During the call, management will
discuss the Company’s second quarter financial results as well as
other recent and potential future developments relating to SPACEHAB.
To participate on the call, please dial 800.473.8493 (domestic calls)
or 816.650.0756 (international calls) and ask for the SPACEHAB
Earnings Conference. A taped replay will be available following the
conference call and accessible via access code 35553677 until 11:59
p.m. Eastern time on February 10, 2005 at 800.252.6030 (domestic
calls) or 402.220.2491 (international calls). To hear a replay of the
call via the Internet, visit the Investor Information section of the
SPACEHAB website at www.spacehab.com. This audio archived webcast of
the conference call will be available on the Company website for
approximately one year.

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.

Tables follow


                SPACEHAB, INCORPORATED AND SUBSIDIARIES
       Unaudited Condensed Consolidated Statements of Operations
                   (In thousands, except share data)

                            Three Months             Six Months
                         Ended December 31,      Ended December 31,
                       -----------------------------------------------
                           2004        2003        2004        2003
                       ----------- ----------- ----------- -----------
Revenue                   $13,138     $32,816     $26,171     $51,666
Costs of revenue           10,721      12,830      21,507      26,357
                       ----------- ----------- ----------- -----------
Gross profit                2,417      19,986       4,664      25,309
                       ----------- ----------- ----------- -----------
Operating expenses
  Selling, general
   and administrative       2,269       3,403       4,235       6,335
  Research and
   development                  8           2          16           2
  Goodwill impairment           -       8,274           -       8,274
  Impairment of
   investment in
   Guigne                       -       1,800           -       1,800
  Recovery of
   nonrecurring
   charge, loss of
   Research Double
   Module                       -           -      (8,244)          -
                       ----------- ----------- ----------- -----------
      Total
       operating
       expenses             2,277      13,479      (3,993)     16,411
                       ----------- ----------- ----------- -----------
      Income from
       operations             140       6,507       8,657       8,898
Interest expense           (1,428)     (2,859)     (2,886)     (4,599)
Interest and other
 income, net                   39          42          81          75
                       ----------- ----------- ----------- -----------
Income (loss) before
 income taxes              (1,249)      3,690       5,852       4,374
Income tax expense              -        (222)       (142)       (240)
                       ----------- ----------- ----------- -----------
  Net income (loss)       $(1,249)     $3,468      $5,710      $4,134
                       =========== =========== =========== ===========
Income (loss) per
 share:
Net income (loss) per
 share - basic             $(0.10)      $0.28       $0.45       $0.33
                       =========== =========== =========== ===========
Shares used in
 computing net income
 (loss) per share -
 basic                 12,609,863  12,401,291  12,592,044  12,386,123
                       =========== =========== =========== ===========
Net income (loss) per
 share - diluted           $(0.10)      $0.25       $0.40       $0.30
                       =========== =========== =========== ===========
Shares used in
 computing net income
 (loss) per share -
 diluted               12,609,863  13,897,126  14,200,519  13,810,998
                       =========== =========== =========== ===========


                SPACEHAB, INCORPORATED AND SUBSIDIARIES
                 Condensed Consolidated Balance Sheets
                            (In thousands)

                                             December 31,   June 30,
                                                2004          2004
                                             (unaudited)
                                             -------------------------
                   ASSETS
Cash and cash equivalents, including
 restricted amounts of $558 and $430                $558         $936
Investments, including restricted amounts of
 $0 and $1,604                                     6,056        6,641
Accounts receivable, net                           8,109        7,878
Prepaid expenses and other current assets            957          495
                                             ------------ ------------
     Total current assets                         15,680       15,950
Property, plant, and equipment, net of
 accumulated depreciation and amortization        77,598       79,600
Other assets, net                                  3,375        4,375
                                             ------------ ------------
     Total assets                                $96,653      $99,925
                                             ============ ============
       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities                              $15,247      $22,301
Long-term liabilities                             66,247       68,214
Stockholders' equity                              15,159        9,410
                                             ------------ ------------
     Total liabilities and stockholders'
      equity                                     $96,653      $99,925
                                             ============ ============

Contact:

SPACEHAB, Inc.
Kimberly Campbell, 713-558-5049
campbell@spacehab.com