On September 2, 1986, Boeing registered the boeing.com domain name, making it 26th .com domain ever to be registered.
The Boeing Company is the largest aerospace company in the world, thanks to its 1997 merger with McDonnell Douglas Corporation and its 1996 purchase of the defense and space units of Rockwell International Corporation. The corporation is the world’s number one maker of commercial jetliners and military aircraft. Boeing has more than 9,000 commercial aircraft in service worldwide, including the 717 through 777 families of jets and the MD-80, MD-90, and MD-11. In the defense sector, the company makes military aircraft, including fighter, transport, and attack aircraft; helicopters; and missiles. In addition to its position as the nation’s top NASA contractor–and the leader of the U.S. industry team for the International Space Station–Boeing is also involved in commercial space projects such as satellite networks and a sea-based satellite launch platform.
Beginnings, Early 20th Century
Founder William Boeing was raised in Michigan, where his father operated a lucrative forestry business. While he was in San Diego, California, in 1910, Boeing met a French stunt pilot named Louis Paulhan who was performing at the International Air Meet. When Paulhan took Boeing for an airplane ride, it marked the beginning of Boeing’s fascination with aviation.
After two years of study at Yale’s Sheffield School of Science, Boeing returned to Michigan to work for his father. He was sent first to Wisconsin and later to the state of Washington to acquire more timber properties for the family business. In Seattle he met a navy engineer named Conrad Westerveldt who shared his fascination with aviation. A barnstormer named Terah Maroney gave the two men a ride over Puget Sound in his seaplane. Later Boeing went to Los Angeles to purchase his own seaplane, thinking it would be useful for fishing trips. The man who sold him the plane and taught him how to fly was Glenn Martin, who later founded Martin Marietta.
While in Seattle, Boeing and Westerveldt made a hobby of building their own seaplanes on the backwaters of Puget Sound. It became more than a hobby when a mechanic named Herb Munter and a number of other carpenters and craftsmen became involved. In May 1916, Boeing flew the first ‘B & W’ seaplane. The next month he incorporated his company as the Pacific Aero Products Company. The company’s first customer was the government of New Zealand, which employed the plane for mail delivery and pilot training. In 1917 the company’s name was changed to Boeing Airplane Company.
Boeing and his partners anticipated government interest in their company when the United States became involved in World War I. They discovered their hunch was correct when the company was asked to train flight instructors for the army. After the war, Boeing sold a number of airplanes to Edward Hubbard, whose Hubbard Air Transport is regarded as the world’s first airline. The company shuttled mail between Seattle and the transpacific mailboat that called at Victoria, British Columbia. Later, when the post office invited bids for various airmail routes, Hubbard tried to convince Boeing to apply for the Chicago to San Francisco contract. Boeing mentioned the idea to his wife, who thought the opportunity looked promising. In the prospect, he and Hubbard created a new airline named the Boeing Air Transport Company. They submitted a bid and were awarded the contract.
To meet the demands of their new business Boeing and his engineers developed an extremely versatile and popular airplane called the Model 40. Fitted with a Pratt & Whitney air-cooled Wasp engine, it could carry 1,000 pounds of mail and a complete flight crew, and still have room enough for freight or passengers. The Kelly Airmail Act of 1925 opened the way for private airmail delivery on a much wider scale. As a result, a number of airline companies were formed with the intention of procuring the stable and lucrative airmail contracts. One of these companies was Vernon Gorst’s Pacific Air Transport, which won various routes along the Pacific Coast. Boeing purchased this company and then ordered a young employee named William Patterson to purchase its outstanding stock. Boeing also purchased Varney Airlines, which began operation in 1925 and won almost every mail contract it applied for until it became overextended and had financial difficulties.
1929-34: ‘United’ Era
With the addition of National Air Transport, Boeing’s airline holdings formed the original United Air Lines. In 1928 all these companies were organized under a holding company called the Boeing Aircraft and Transportation Company. In 1929 a larger holding company was formed, the United Aircraft and Transportation Company. Included in this group were the ‘United’ airlines and Stout Airlines; Pratt & Whitney (engines); Boeing, Sikorsky, Northrop, and Stearman (manufacturers); and Standard Steel Prop and Hamilton Aero Manufacturing (propellers). Boeing was made chairman of the company and Fred Rentschler of Pratt & Whitney was named president.
Boeing and Rentschler became extremely wealthy in this reorganization by exchanging stock with the holding company in a method similar to J.P. Morgan’s controversial capital manipulation. They multiplied their original investments by a factor of as much as 200,000 times. It was, however, entirely legal at the time. In 1933 the government conducted an investigation of fraud and other illegal practices in the airline industry. Boeing was called upon to testify and explain his windfall profits before a Senate investigating committee. Under examination he admitted to making $12 million in stock flotations.
Boeing was so infuriated with the investigation that he retired from the company (at age 52) and sold all his aviation stocks. Upon Boeing’s departure the company’s production manager, Phil Johnson, was named the new president. But William Boeing was not forgotten by the aircraft industry. In 1934 he was recognized for his innovation in aeronautical research and development with the award of the Daniel Guggenheim medal, ‘for successful pioneering and achievement in aircraft manufacturing and air transport.’
1934-52: Breakup and Military Aircraft
In 1934 a government investigation of collusion in the airmail business led to a suspension of all contracts awarded. As a result, the U.S. Congress declared that airline companies and manufacturers could not be part of the same business concern. This led to the break-up of the three aeronautic conglomerates: Boeing’s United, the Aviation Corporation of the Americas, and North American Aviation. All of the Boeing company’s aeronautic properties east of the Mississippi became part of a new company, United Aircraft (later renamed United Technologies), operated by Fred Rentschler. The western properties, principally the Boeing Airplane Company, remained in Seattle exclusively manufacturing airframes. Pat Patterson was put in charge of the commercial air carriers, which retained the name of United Air Lines and based their operations at Chicago’s Old Orchard (later O’Hare) airport.
In the years leading up to World War II Boeing led the way in developing single-wing airplanes. They were constructed completely of metal to make them stronger and faster; more efficient aerodynamic designs were emphasized; retractable landing gear and better wings were developed, along with multiple ‘power plant’ technology; and, finally, directional radios were installed which enabled better navigation and night flying. Boeing had established itself as the leading manufacturer of airplanes.
When the United States launched its wartime militarization program, Boeing was called upon to produce hundreds of its B-17 ‘Flying Fortresses’ for the U.S. Army. During the war the B-17 became an indispensable instrument for the U.S. Air Corps. In June 1944, when production was at its peak, Boeing’s Seattle facility turned out 16 of these airplanes every 24 hours. By this time the company was also producing an improved bomber called the B-29 ‘Super Fortress.’ It was this airplane that dropped the atomic bombs on Hiroshima and Nagasaki in August 1945.
Boeing’s president, Phil Johnson, died unexpectedly during the war. He was replaced with the company’s chief lawyer, William M. Allen, on the last day of the war. Under Allen’s leadership, Boeing produced a number of new bombers, including the B-47, B-50, and the B-52. Boeing’s B-307 Stratoliner, a B-17 converted for transporting passengers, was succeeded by the B-377 Stratocruiser in 1952. The Stratocruiser was a very popular double-deck transport, most widely used by Northwest Orient. It was also Boeing’s only airplane built for the commercial airline market since before the war.
1953-69: Jets, Missiles, and Rockets
In the spring of 1953 Bill Allen persuaded the secretary of the U.S. Air Force, Harold Talbot, to allow Boeing the use of the government-owned B-52 construction facilities for the development of a new civilian/military jet. Boeing invested $16 million in the project, which was intended to put the company ahead of the Douglas Aircraft Company. Douglas had dominated the commercial airplane market for years with its popular propeller-driven DC series.
This new jet, the B-707, first rolled off the assembly line in 1957. American Airlines, a loyal Douglas customer, was the first to order the new jet. Their defection so alarmed Douglas that the company accelerated development of its nearly identical DC-8 passenger jetliner. The government later took delivery of Boeing’s military version of the jet, the KC-135 tanker, alternately known as the ‘missing 717.’ Meanwhile, Boeing expanded its involvement in the defense market through the 1960 acquisition of Philadelphia-based Vertol Aircraft Corporation, a maker of military helicopters. During the Vietnam War, Boeing Chinook and Sea Knight helicopters were heavily utilized by American forces.
Boeing, which changed its name to The Boeing Company in 1961, enjoyed a large degree of success and profitability with the 707. The company devoted its resources to the development of a number of other passenger jet models, including the 720 (a modified 707) and the 727, which was introduced in 1964. The 727 was Boeing’s response to a successful French model called the Caravelle. The Caravelle’s engines were located in the rear of the fuselage, uncluttering the wings and reducing cabin noise. Boeing adopted this design for its three-engine 727, which carried 143 passengers. Douglas, unwilling to be passed by, introduced a similar two-engine model called the DC-9 in 1965.
During this time the company also recognized a demand for a smaller 100-passenger jetliner for shorter routes. As a result, Boeing developed the 737 model. The 737 seemed to run counter to the general trend at Boeing of building larger, more technologically advanced jetliners, but it did have a place in the market and made a profit.
Boeing’s next engineering accomplishment was the creation of a very large passenger transport designated the 747. This new jetliner was capable of carrying twice as many passengers as any other airplane. Its huge dimensions and powerful four-engine configuration made it the first of a new class of ‘jumbo jets,’ later joined by McDonnell Douglas’s DC-10 and Lockheed’s 1011 Tri-Star. The first 747 was produced in 1968, and it made its first commercial voyage in January 1970 on a Pan American flight from New York to London.
The 1960s also saw Boeing active in the defense and NASA contracting sectors. As the Cold War continued, Boeing was selected to develop the Minuteman intercontinental ballistic missile system. The company completed the first test launch of a Minuteman missile at Cape Canaveral, Florida, in February 1961. The Minuteman II and Minuteman III followed later in the decade. In 1966 Boeing was selected to design, develop, and test the short-range attack missile (SRAM); by the early 1970s the company had produced 1,000 SRAMs.
As far back as 1959 Boeing had developed a prototype manned, reusable space vehicle similar to the Space Shuttle of two decades later. Called Dyna-Soar, the project was canceled in 1963. Boeing was heavily involved in NASA’s Apollo project of the 1960s, beginning with its production of several Lunar Orbiters, the first of which was launched in 1966. The Orbiters circled the moon, sending photographs of the moon back to Earth, which helped NASA select safe landing sites for the Apollo missions. Boeing was also responsible for the first stage of the Saturn V Apollo rocket, which launched Apollo 8 in December 1968, the mission that took the first astronauts around the moon. (The second stage of the Saturn V was built by Rockwell’s aerospace unit and the third by McDonnell Douglas–two entities that would be acquired by Boeing late in the 20th century.) In 1969 Boeing began building the Lunar Roving Vehicle, which was used to explore the moon in the early 1970s on the final three Apollo missions.
1970-82: Averting Bankruptcy; Diversification; the 757 and 767
Boeing had seemingly ended the 1960s on high notes. On July 20, 1969, the first human being walked on the moon, with Boeing having played its key role in the Apollo 11 mission. By the time the 747 was first delivered in 1969, 160 orders had been placed for the jetliner. Boeing was counting on increased sales of commercial aircraft to make up for the revenue shortfall engendered by the winding down of the Apollo program. But the aviation industry was hit by a recession just as the 747 was beginning production, leading to an 18-month period when the company received not one new order from a domestic carrier. Aggravating the situation for a new jet that had not yet established itself in the market were higher than expected startup costs and initial delivery problems. A further blow came when development was halted on the 2707, a supersonic transport better known as the ‘SST.’ Boeing and Lockheed had been selected to design the SST back in 1964, but progress on this aircraft was slow and costly. Despite the support of Senator Henry Jackson, the U.S. Congress in 1971 voted not to fund further development of the SST. Shortly thereafter Boeing abandoned the project altogether. Boeing’s situation was so dire that the company was close to bankruptcy. In 1969 a new chief executive, Thornton Wilson, was appointed to head the organization. Faced with an impending disaster, Wilson pared the workforce down from 80,400 to 37,200 between early 1970 and October 1971. The layoffs at Boeing had a profound effect on the local economy, as unemployment in Seattle rose to 14 percent.
Wilson’s austerity measures paid off quickly. Soon Boeing’s jets were rolling off the tarmac, and employees were called back to work. After the company’s initial recovery, it received a deluge of commercial airplane orders and military contracts. Boeing had been selected as the prime contractor for the airborne warning and control system (AWACS) aircraft. First test-flown in 1972, the AWACS was a modified version of a 707 used by the military as an airborne early warning system. The first NATO AWACS was delivered to West Germany in 1981. Another key defense contract won by Boeing was for the air-launched cruise missile (ALCM), which was first test-launched from a B-52 in 1976. Under a $4 billion defense department contract, construction began on an assembly facility for the ALCM program in July 1980 in Kent, Washington. In the space sector Boeing built the Mariner 10 spacecraft, which was launched in November 1973 and completed a flyby of Mercury in March 1975. Three years later the company won a contract with NASA to construct the inertial upper stage rocket used to boost the Space Shuttle.
In 1978 Boeing started development of two new passenger jet models–the 757 and the wide-body 767–intended to take the company into the 21st century. The 767 made its first flight in 1981 while the 757 did likewise one year later. Utilizing advanced technology and improved engines, these jetliners were Boeing’s response to McDonnell Douglas’s MD series and the European Airbus consortium’s 300 series. They also were more fuel-efficient than previous models, in response to the oil shortages of the 1970s, and quieter–the latter a nod to growing concern over aircraft noise. For airlines, the 757 and 767 also had added benefits: they required smaller crews and their shared design led the Federal Aviation Administration to declare in 1983 that any pilot qualified to fly one model was automatically qualified to fly the other. Besides the 757 and 767, Boeing offered an updated 737 for the shorter-range rural ‘puddle-jumper’ market and modified 747s capable of greater range and passenger capacity.
During this period of prosperity with commercial jetliners, Boeing made several attempts to diversify its business. Not all of them were successful. In the 1970s Boeing entered the metro-rail business, manufacturing mass transit systems for Boston, San Francisco, and Morgantown, West Virginia. The systems were modern, computerized, and efficient. They were also prone to frequent breakdowns. After fulfilling its obligation to rectify the systems (at great cost), Boeing decided to discontinue its ground transport business. Other short-lived ventures were the management of a housing project for the U.S. Department of Housing and Urban Development, the building of a desalinization plant in the Virgin Islands, the construction of three huge wind turbines in the Columbia River gorge, and the irrigation of a 6,000-acre farm in an eastern Oregon desert.
Mid-1980s to Mid-1990s: The 777 and Another Industry Downturn
Boeing established an ‘Advanced Products Group’ in the later years of the 1980s to oversee the company’s more futuristic aircraft and keep it at the technological vanguard. Boeing’s twin-engine wide-body 777, originally scheduled to be introduced with the 757 and 767, attracted little interest and was temporarily shelved. The development of the fuel-efficient, 150-passenger 777 was also delayed when declining fuel costs and rising research and development expenses reduced demand. By 1990 the 777 had made a comeback: an initial order of 34 airplanes and 34 options placed by United Airlines put the new jet, which carried 350 passengers, into official production. The first 777-200 was delivered to United in 1995.
Frank Shrontz advanced to Boeing’s chief executive office in 1986, at the start of the world’s largest aircraft order binge in history, and led the manufacturer from sales of $16.3 billion in 1986 to $29.31 billion in 1991. Although Boeing remained profitable, its earnings declined steadily in the mid-1980s and its stock dropped 20 points in October 1987. Boeing jets were involved in four fatal air accidents from December 1988 to March 1989, and the company missed its first delivery deadline in two decades when the 747-400 experienced production delays. These internal problems were exacerbated by increased competition from Airbus, which was heavily subsidized by a consortium of European companies and governments.
Nevertheless, in 1990 Boeing chalked up record sales and net profits of $27.6 billion and $1.4 billion, respectively, and ended the year with a $97 billion backlog. But after its experiences of the 1980s, and due to CEO Shrontz’s vigilance, Boeing began to institute retrenchment moves. Although the manufacturer experienced three years of rising sales and earnings from 1989 to 1992, prospects for the future of the company–and the industry–were not bright. Worldwide orders of all aircraft declined from 1,662 in 1989 to 439 in 1991, and cancellations from the besieged airlines diminished expected delivery figures even more. The commercial airline industry’s downturn started in 1990, heralding brutal price wars and canceled aircraft orders. Around the same time, the Cold War was winding down and Pentagon spending on military systems went into a sharp decline as well, buffeting Boeing’s defense unit. By the fall of 1992, Boeing’s stock suffered on Wall Street, selling for about $35 per share, down from a high of nearly $62 in 1990.
Shrontz moved to reduce Boeing’s cost structure by 20 to 30 percent by 1997, even though his firm was the world’s lowest-cost aircraft producer. Production cuts soon led to layoffs. Boeing’s workforce declined each year from 1989 to 1993, for a total of 40,000 jobs lost. Early in 1994, Shrontz announced that about 30,000 jobs–one-fourth of the company’s remaining workforce–would be eliminated over the course of the year. Sales for 1993 declined to $25.44 billion from 1992’s $30.18 billion, and net earnings slid from $1.55 billion to $1.24 billion. Additional workforce reductions came in 1994 and 1995, years in which revenue and earnings declined still further, dropping to $19.52 billion and $393 million, respectively, by 1995.
Meanwhile, in 1993 NASA selected Boeing as the prime contractor for the International Space Station, which was called the largest international science and technology endeavor ever undertaken, and which was scheduled for completion in the early 21st century. In addition, the company was also becoming increasingly involved in commercial space projects, most notably Sea Launch, a consortium 40 percent owned by Boeing with partners from Russia, the Ukraine, and Norway. In December 1995 this venture received its first order: ten commercial space satellite launches from Hughes Space and Communication Co. In October 1999 Sea Launch successfully made the first launch of a commercial satellite from a floating platform at sea. In the military contracting sector, in late 1996 Boeing was selected as one of two finalists, along with Lockheed Martin, to build and test two variants of the Joint Strike Fighter, a multiservice aircraft slated to be deployed in the 21st century by the U.S. Air Force, Marine Corps, and Navy, along with the U.K. Royal Navy. The project carried the potential for a massive $160 billion contract. Also in 1996 Philip Condit was named CEO of Boeing; Condit became chairman as well in early 1997.
Late 1990s and Beyond: Major Acquisitions and the 747-x Stretch
The industrywide difficulties in the aerospace and defense fields in the first half of the 1990s led to a wave of consolidation through mergers and acquisitions. Preoccupied with straightening out its own house, Boeing watched from the sidelines–that is, until the company completed two major acquisitions within an eight-month period. In December 1996 Boeing paid $3.2 billion for the aerospace and defense holdings of Rockwell International. Gained in the transaction were Rockwell’s contracts for the Space Shuttle and the International Space Station, as well as activities in launch systems, rocket engines, missiles, satellites, military airplanes, and guidance and navigation systems. In August 1997 Boeing completed a $14 billion acquisition of McDonnell Douglas, vaulting Boeing into the number one position worldwide in the aerospace industry. McDonnell had been the world’s number three maker of commercial aircraft, with its MD series of jets; the acquisition therefore increased Boeing’s share of the world market for large commercial jetliners to more than 60 percent–and it left Boeing with just one major competitor in that sector: the European Airbus consortium, which held about one-third of the world market. As the market for commercial planes was once again on the upswing at the time, Boeing particularly coveted the added production capacity the acquisition brought. Another key attraction–and perhaps even more important–was the opportunity to further bolster the company’s defense and space operations, which it hoped would provide a counterbalance to the boom-and-bust cycle of commercial jets. McDonnell was number two among U.S. defense contractors and was the number one maker of military aircraft worldwide. Among the military aircraft were the F/A-18, which formed the core of the U.S. Navy’s jet fleet, and the F-15, which was the U.S. Air Force’s top fighter aircraft. Following the McDonnell acquisition, Condit remained chairman and CEO of Boeing, while Harry Stonecipher, McDonnell’s CEO, was named president and chief operating officer.
Unfortunately, 1997 turned disastrous for Boeing for reasons wholly unrelated to its acquisition spree. Attempting to take advantage of the upswing in airplane orders, which was in part caused by the aging of the airliners’ fleets, Boeing committed to doubling its production over an 18-month period. Various snafus led to production delays, including the wholesale shutdown of some production units while out-of-sequence work was brought back into line. The company took pretax charges in 1997 totaling a whopping $3 billion plus, more than half of which stemmed from the production difficulties. Boeing also took a $1.4 billion charge related to its decision to phase out production of the MD-80 and MD-90 jets by early 2000. These charges led the company to record its first loss in 50 years, a net loss of $178 million on revenues of $45.8 billion. Additional charges were taken during 1998, but the company managed to post net income of $1.12 billion on sales of $56.15 billion thanks to the strong performance of its defense and space operations. It also managed to increase the number of aircraft it produced from the 374 of 1997 to more than 550 in 1998. The company was in the midst of a major cost-containment effort, with its workforce expected to be reduced from its peak of 238,000 at year-end 1997 to between 185,000 and 195,000 by the end of 2000.
As it prepared for the 21st century, Boeing’s defense and space operations appeared to be healthy despite such setbacks as the August 1998 explosion of a Delta III rocket making its maiden voyage, with a satellite in tow, and the delays in the development of the International Space Station because of economic turmoil in Russia. In October 1998 the Air Force awarded Boeing a $1.38 billion contract to launch a new generation of rockets, and Boeing in 1999 also won a $4.5 billion contract to develop spy satellites for the CIA and others. If anything was clouding Boeing’s future it was the commercial aircraft sector, where Airbus was developing into a formidable adversary. In late 1999 Aerospatiale SA of France merged with the aerospace unit of DaimlerChrysler AG to form European Aeronautic Defense & Space Co., which now held 80 percent of Airbus, with the other 20 percent owned by British Aerospace plc. This streamlining of the ownership structure brought closer the long-anticipated transformation of Airbus into a publicly traded, focused corporation; should that occur, no longer could Boeing dismiss Airbus as a clumsy consortium propped up by government subsidies. In fact, the battle lines appeared to have been drawn by the two rivals at the end of the 20th century in the development of the next generation of super jumbo jets. Airbus had in the planning stages a brand-new jet, the A-3XX, envisioned as the largest jetliner ever, featuring four engines, double decks running the length of the fuselage, a range of 8,800 miles, and passenger capacity of 555 to 655. The project was estimated to cost $12 billion. Boeing had in mind producing a bigger, longer-range version of its 747 jet, dubbed the 747-x Stretch, with seating capacity of 500 to 520, a range of 8,625 miles, and a projected cost of just $2-$3 billion. An intense competition for contracts with airliners was expected in the early 21st century as the super jumbos began to take shape.