Health or hit points in RPGs is kind of a nice simplification of reality in RPGs. It works pretty well, but it's a little boring. I'm not sure in a fantasy game there are many other good options, but there are a lot of interesting things you can do when you are in a spaceship. Here's how I'm planning on implementing "health" in our upcoming space game.
Right now I think your "health" will be shields, armor, and then structure/internals. The interesting part is that each layer of "health" increases in cost for you.
Usually your shields are your first line of defense. Shields will automatically recharge fairly quickly over time so damaged shields aren't a big deal.
After your shields are down, your armor will start being damaged. Armor probably won't auto repair at the beginning and when you do get automatic repairing it will probably be fairly slow. You will be able to pay someone to repair your armor though and it will probably be fairly cheap.
After your shields and armor are destroyed, you are in a bad position. Those were your only real defenses. Now all the damage taken is trashing your ship. Some of the damage will hit the structure of the ship. When your structure gets to zero you explode, so that's kind of bad. However, anything that doesn't hit the structure is hitting important internal structures. You know unimportant things like your engines or weapons. :) Repairing internal components will probably be much more expensive to fix.
In most fantasy games the only item you really have to worry about breaking is your weapon. Anything else really doesn't matter that much. With a space ship that's not true at all, so really close fights are going to be interesting. Lose your thrusters or engines and escape is no longer going to be a good option. Lose all of your weapons and you're screwed. Losing other important systems like your computers, counter measures, or batteries are just going to make the fight that much harder.
Pretty much losing any item will impact you in some way so this is going to impact your items strategy. Should you equip 2 thrusters to make sure if one is destroyed you can still move at a reasonable speed? Or should you just load up on as many weapons as possible? Or maybe you should have multiple shield generators to make sure you never take internal damage in the first place?