Boeing Co. lost $160 million in its 2006 second quarter due in part to charges related to the settlement charges of ethical conduct, while warning the cost to close its Connexion by Boeing satellite Internet service could cost the company another $350 million, the company reported July 26.

In May, Boeing agreed to pay the U.S. government $615 million to settle charges of ethical misconduct surrounding the U.S. Air Force‘s Evolved Expendable Launch Vehicle 9 (EELV) competition and the attempted hiring of a former Air Force acquisition official. The settlement led to a net charge of $571 million for Boeing in the second quarter, which closed June 30.

The Network & Space Systems unit, part of Boeing Integrated Defense Systems segment, reported revenues of $2.9 billion in the quarter, down from revenues of $3.1 billion in the 2005 second quarter. Boeing attributed the decline to lower volume in proprietary programs and the sale of Rocketdyne in August 2005.

Network & Space Systems reported an operating profit of $109 million in the 2006 second quarter, down from $200 million in the same period in 2005. The decline was due to charges of $74 million on the Delta 4 program due to the settlement and some launch manifest changes.

Boeing’s other segment, which includes its Connexion By Boeing business, reported an operation loss of $90 million in the 2006 second quarter. Boeing announced it is evaluating its strategic alternatives for the satellite Internet business and a decision could trigger a charge to earnings of up to $350 million in 2006, Boeing warned. Closing the struggling unit would cut operating expenses and improve earnings in 2007, the company said.

Boeing increased its 2006 revenue guidance to between $60 billion and $60.5 billion and raised its 2007 guidance $1 billion to between $64.5 billion and $65.5 billion. The increases mainly are driven by commercial airplane operations.

Network & Space Systems expects revenues of about $11.5 billion and margins of approximately 5.5 percent in 2006, with a moderate growth outlook for 2007. The guidance does not reflect the impact of the proposed United Launch Alliance joint venture, which would merge the government launch operations of Boeing and Lockheed Martin.

Overall, Boeing reported revenues of $15 billion in the second quarter, up 2 percent over revenues of $14.7 billion in the 2005 second quarter when the company reported a profit of $566 million.