Houston, Texas, February 9, 2005 – 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 years 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 (NYSE: BA). 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).

For more information, contact:

Tables follow

SPACEHAB, INCORPORATED AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Operations Three Months Ended December 31, Six Months Ended December 31,   (in thousands, except share data) 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

Condensed Consolidated Balance Sheets (In thousands)     December 31, 2004 (unaudited)   June 30, 2004 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 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