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FOR IMMEDIATE RELEASE

SPACEHAB FISCAL YEAR 2003 ANNUAL LETTER TO SHAREHOLDERS

Houston, Texas, September 23, 2003 – SPACEHAB, Incorporated (NASDAQ/NMS: SPAB), today announced that it has issued its fiscal year 2003 Letter to Shareholders in an effort to update existing SPACEHAB investors on the current status of the Company, and more importantly, management’s perspective on the Company’s future growth outlook. The text from the letter follows:

"Dear Fellow Shareholders,
It is my pleasure to update you regarding the accomplishments and challenges we faced during 2003 at SPACEHAB, as well as comment on our expectations for the future of the Company. While fiscal year 2003 was one of our more challenging years, I’m very pleased with how the entire team responded to events that were largely beyond our control and how we continued to strive towards improving our business base and increasing shareholder value.

Without a doubt, the most significant challenge we faced was the loss of the space shuttle Columbia, the STS-107 crew, and the SPACEHAB Research Double Module (RDM). This tragic event left the nation and the aerospace community greatly saddened and in a temporary state of uncertainty. We offer our heart felt condolences to those who lost loved ones in this tragedy. We supported NASA in the accident investigation and have since completed the difficult recovery activities. Since the accident, the space shuttle fleet remains grounded. However, the nation’s commitment to the Human Space Flight program remains strong. A Gallup poll published in USA Today shows that Americans continue to support the space program, even in light of tragedy, recognizing that our quest for knowledge through exploration must continue. On the heels of this disaster, we were informed that we were not awarded the competition for the Flight Crew Systems Development (FCSD) contract, work that we had held for over a decade.

Our proactive management team responded effectively to both of these challenges, demonstrating our ability to overcome, persevere, and continue efficient operations. We believe this resilience will make us successful on new contract opportunities, particularly in support of the International Space Station (ISS) program. Our customers continue to see value in our services, and we have several encouraging opportunities that I will share with you in more detail in this letter.

Financial Overview
From a financial perspective, the challenges and opportunities we faced during the year impacted our Company; however, our management team has continued its focus on delivering a steady revenue stream and improving operating cash flow while reducing expenses and debt. The loss of the RDM resulted in a one-time charge of $50.3 million during the third quarter. While commercial insurance proceeds offset a portion of our total loss by $17.7 million, in July 2003 we submitted a detailed claim in draft to NASA for recovery of the RDM investment in the amount of $87.0 million. We expect to revise this claim in the second quarter of fiscal year 2004 to incorporate the findings of the Columbia Accident Investigation Board, and upon revision we will re-file with NASA. We believe we have a basis for recovery of the loss from NASA but there can be no assurances as to the timing or the amount to be received from the claim.

Fiscal year 2003 revenues decreased to $95.0 million compared to $102.8 million for the year ended June 30, 2002. We reported a net loss for the year of $81.8 million, or ($6.66) per basic and diluted share, compared to a net loss of $2.4 million, or ($0.20) per basic and diluted share, for the prior year. The size of this year’s loss was due to three primary outcomes: 1) the write-off of the RDM, 2) the previously recorded and announced reduction in goodwill classified as Other Assets in the amount of $11.9 million, and 3) a write-down of $16.1 million for certain assets under development that are no longer being funded due to uncertainties in human space flight programs. Excluding these three key items, totaling $78.3 million, the Company’s adjusted net loss was $3.4 million.

Business Segment Summary
Our business units continue to focus on the utilization of our existing asset base and the delivery of improved operating results. Through the fourth quarter of fiscal 2003, our SPACEHAB Flight Services (SFS) personnel completed all STS-107 accident investigation support activities with NASA. This business unit is continuing operations, supporting three of the next five planned space shuttle missions. STS-114, currently scheduled as NASA’s return-to-flight mission to be launched no earlier than March 2004, utilizes the Integrated Cargo Carrier (ICC) through a contract with The Boeing Company. This unpressurized flatbed pallet will serve as a storage platform for critical ISS spares. Our support to the STS-116 and STS-118 ISS missions, both under contract to NASA, utilizes our logistics module and ICC. Our SFS team is currently supporting NASA discussions that may lead to additional module and carrier flights. Although we cannot predict the outcome of these discussions, the Company has excess capacity and the capability to support additional research and logistics missions to low Earth orbit.

SPACEHAB Government Services (SGS) continued to provide space shuttle and ISS services to NASA, including support of stowage integration and ISS configuration management. Looking forward, we are competing on ISS-related opportunities through the submission of proposals for three new five-year contracts. I am pleased to report that NASA has notified us that we made the competitive range as a finalist on all three of these procurements. Under the first solicitation, we are bidding as a prime contractor on the Mission Integration Contract that is estimated by NASA to be valued at more than $100 million over the five-year period. This contract would further leverage our core capabilities, utilizing critical skills that include mission integration, ISS stowage integration, and Russian language and logistics services. On the second solicitation, we are bidding as a subcontractor on the ISS Program Integration and Control contract where our configuration management competency is a core element in this procurement. We are vying to capture this effort on the ARES Corporation Team that includes Booz Allen Hamilton. Under the third solicitation, for the Cargo Mission contract, we are bidding as a subcontractor to The Boeing Company where we plan to provide our unique stowage integration, International Partner integration, sustaining engineering of stowage hardware, and program integration capabilities. We anticipate NASA will announce contract awards in October 2003 with contract start dates in January 2004. In the event that SGS is not successful in its effort to secure these bids, we would further adjust our cost structure and evaluate remaining long-lived and intangible assets to maintain a competitive and profitable posture.

Our subsidiary, Astrotech Space Operations, was awarded two new contracts in our fourth quarter ended June 30, 2003. The first was an award by NASA/Kennedy Space Center to provide payload processing support services at its Titusville, Florida facility for two NASA-scientific payloads, NASA MESSENGER and Deep Impact, scheduled for launch in 2004 and 2005, respectively. Most recently Astrotech was awarded a new contract by NASA in support of the AURA mission at Vandenberg Air Force Base, California. These contracts further solidify the Company’s growing business base in the government sector. Astrotech recently celebrated the successful April 2003 launch of the Asiasat-4 spacecraft, the May 2003 liftoff of HellasSat, and the July 2003 launch of the Rainbow 1 Direct Broadcast Satellite, all processed at our Astrotech Florida facilities. Astrotech also supported the processing of the Thuraya D-2 spacecraft that had a successful June 2003 liftoff by Sea Launch. This business unit remains the leading supplier of payload processing services to the commercial business sector, and we are actively discussing opportunities with potential customers for additional government missions at both the Astrotech Florida and Vandenberg Air Force Base facilities to continue the expansion of Astrotech’s customer base.

Outlook
Looking forward, we are enthusiastic regarding several current undertakings. First, we are actively supporting the ISS program in preparation for the Space Shuttle return-to-flight. While new roles may be assigned to our modules and carriers, we are currently manifested on three of the first five missions to the station. As a result of the temporary delays that are necessary to plan for a safe return-to-flight, we are in contract negotiations with NASA and The Boeing Company on the value of equitable adjustments for the STS-114, STS-116, and STS-118 space shuttle missions that will result in additional revenue.

Second, as I previously mentioned, we were recently notified that we have been named finalist in three out of three ISS contract competitions. This outcome is exciting for us. It is a testament to our capability for simultaneously managing several large competitions and to the dedication of our team for expanding our business opportunities. Third, we have been successful in expanding our payload processing business, especially in the government sector, at our Astrotech subsidiary.

Due to the temporary grounding of the space shuttle and uncertainties in human space flight programs, we anticipate that in the next fiscal year we will have to work through and overcome challenges similar to those in 2003. In the meantime, we have considerable intellectual property and high-value assets protected by significant barriers to entry, and we have good prospects for new business opportunities. As we carefully execute our plan to capture these, and future, opportunities, we will continue to ensure that we leverage our core competencies, maintain appropriate margins, and limit cash commitments on capital investments and new asset development. At fiscal year end, cash equivalents, and short-term investments totaled $15.3 million. We expect to utilize existing cash and any potential payment from NASA to support strategies to improve profitability, support new business initiatives, and reduce debt.

We worked hard during fiscal 2003 to streamline operations resulting in a continuous improvement of our selling, general, and administrative (SG&A) and operating expenses. We’ve strengthened our relationship with our primary customer, NASA, who has provided us with numerous accolades regarding our performance on the transition activities during the wrap-up of the FCSD contract, for our recovery efforts on the STS-107 mission, and for our recent international shipping support of equipment and supplies to Russia for launch on Progress vehicles bound for the ISS. And, we’ve continued to pursue new business opportunities that include the previously mentioned ISS contracts, new Alternate Access to Station work, Orbital Space Plane activities, new Astrotech payload processing missions, and more. These new business pursuits are aligned with our core competencies, support our positive brand image and strategic partnerships, and augment our corporate vision.

Our management team is engaged and working diligently to stabilize and grow our business base while finding ways to enhance shareholder value. We are a high-value, low-price supplier to the U.S. Government and commercial markets. We are building on our value-based strategy as a growth platform – a starting point for a multi-faceted service enterprise serving both government and private customers in space and on the ground. Our long-term objective is to become a leading provider of commercial space access and ground processing services. With continued support from our stockholders, I am confident we can achieve this goal.”

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Michael E. Kearney
President and Chief Executive Officer

The statements in this document may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the statements. In addition to those risks and uncertainties discussed herein, such risks and uncertainties include, but are not limited to, whether the Company will fully realize the economic benefits under its U.S. National Aeronautics and Space Administration ("NASA") and other customer contracts, whether NASA and other customers will continue to utilize the Company's habitat modules and related commercial space assets, whether plans to complete the International Space Station ("ISS") are fulfilled, continued availability and use of the U.S. Space Shuttle system, technological difficulties, product demand and market acceptance risks, the effect of economic conditions, uncertainty in government funding, the impact of competition, delays and uncertainties in future space shuttle and ISS programs, resolution of the Company's indemnification claim with NASA arising from the loss of the Columbia orbiter and its crew during the STS-107 mission, and other risks described in reports filed by the Company with the Securities and Exchange Commission. The Company assumes no obligation to update these forward-looking statements.

About SPACEHAB
With approximately $100 million in annual revenue, SPACEHAB, Incorporated (www.spacehab.com) is a leading provider of commercial space services. The Company develops, owns, and operates habitat and laboratory modules and cargo carriers aboard NASA’s Space Shuttles for space station resupply and research purposes. Its Government Services business unit provides Space Station and Space Shuttle support services including orbiter crew compartment integration, stowage, and configuration management to NASA's Johnson Space Center in Houston. SPACEHAB’s Astrotech subsidiary provides commercial satellite processing services at facilities in California and Florida. Additionally, through The Space Store, Space Media provides space merchandise to the public and space enthusiasts worldwide (www.thespacestore.com).

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