The Boeing Company (BA - Free Boeing Stock Report) is the largest aerospace/defense company in the world, with more than 168,400 employees. Its commercial aircraft are employed around the globe, while its numerous defense products are utilized by the United States and its allies. However, like most other corporations, this Dow-30 member started from humble beginnings.
In July of 1916, William Boeing and George Westervelt formed the Pacific Aero Products Company. At the time, the two men owned one seaplane and were hired by the government of New Zealand to deliver mail and instruct future pilots. Soon after, the company changed its name to the Boeing Airplane Company. During World War I, it manufactured seaplane trainers, and after the conflict, it was contracted to produce a number of civilian and military aircraft. Then, in 1924, it won several contracts to manufacture hundreds of fighter aircraft for the U.S. Navy and Army Air Corp (precursor to the Air Force). Also at this time, Boeing developed the Model 40, a commercial aircraft, which was able to carry passengers, crew, and 1,000 pounds of mail. This plane was greeted warmly by airlines, since, at the time, a number of them were vying to secure lucrative government mail delivery contracts. Furthermore, through the addition of National Air Transport, Boeing consolidated its airline holdings and formed what would become United Airlines (now known as United Continental Holdings (UAL)).
Throughout the 1920s and 1930s, Boeing’s operations expanded materially. At this time, it assembled and manufactured aircraft and related components, owned an airline, and delivered mail, among other businesses. However, during this period, the U.S. government suspected that the country’s airmail industry was fraught with collusion and unfair business practices. As a result, in 1934, the U.S. Congress declared that companies could no longer be engaged in both aircraft production and airline operations. Thus, this led to Boeing being split into two entities. The company’s Western aeronautical operations kept the Boeing name and relocated its headquarters to Chicago, Illinois (where it remains to this day). The Eastern operations formed a new entity, United Aircraft, which would eventually become United Technologies (UTX – Free United Technologies Stock Report). For those interested in obtaining a more thorough understanding of United Technologies’ history and current business,click here.
A New Boeing is Born
Once separated, the new Boeing concentrated on expanding its aircraft production business. It was during this time that the company successfully launched a number of new aircraft, and utilized materials that helped planes travel farther distances, at higher speeds. When the United States sought to increase military preparedness due to World War II, Boeing manufactured the B-17 for the Army. The “Flying Fortress” proved to be invaluable during the war, as did Boeing’s B-29 aircraft. During the conflict, Boeing manufactured hundreds of these long-range bombers, and they remained staples of the U.S. military for several decades. In the 1950s, Boeing developed the 707 passenger aircraft, which was very popular among airlines. In addition, this plane was converted for military purposes and branded the KC-135, and this tanker aircraft remains in service to this day.
The 1960s brought the development and production of the 737 and 747 models. Updated versions of these aircraft are taking off and landing at airports at this very moment. Once the 747 hit the tarmacs in 1970, it was the largest commercial airplane in the world, capable of carrying twice as many passengers as any other aircraft. It was at this time that Boeing also expanded its defense business. It purchased a manufacturer of military helicopters and designed the Minuteman Intercontinental Ballistic Missile system, a program that flourished during the Cold War. Boeing also dedicated immense resources to the space program and produced lunar orbiters for NASA.
Boeing struggled mightily during the 1970s. Due to a severe recession that took hold in mid-decade, demand and orders for commercial planes completely dried up. In addition, the company experienced a number of costly design and production delays for some of its aircraft and other products. The situation was so dire that Boeing appeared to be on the verge of bankruptcy and slashed its workforce by more than 50%, or approximately 40,000 employees. Thankfully, thereafter, conditions brightened and the economic situation improved. By 1980, Boeing aircraft were rolling off the assembly line and the company benefited greatly from the success of its two new commercial aircraft, the 757 and 767. Airlines were eager to purchase these planes since they utilized improved technology that reduced noise and required fewer crew members. In addition, they burned less fuel per flight than some comparable offerings, which carriers yearned for after major oil shocks during the 1970s.
The success that stemmed from the 757 and 767 models, unfortunately, did not last long. Throughout the 1980s, once again, Boeing experienced production delays and cost overruns, this time with its new 777 aircraft. Another economic downturn, albeit a less severe one in some respects, along with four fatal crashes of Boeing planes, significantly hampered demand, as well. Manufacturing problems also plagued the 747, which missed a number of scheduled delivery dates for the first time in its history. Elevated competition from Airbus, another large maker of commercial aircraft, had a meaningful effect on Boeing’s bottom line, and the stock performed poorly during the late 1980s through the beginning of the century’s final decade. The market for commercial aircraft remained weak well into the 1990s. At this time, Boeing once again attempted to move more of its focus and resources from commercial aircraft to other business endeavors. It won several NASA contracts, including becoming the prime contractor for The International Space Station, and was involved in a number of shuttle and satellite launches. In 1996, Boeing was also selected to be one of the lead contractors for the U.S. military’s new aircraft program, the F-35 Joint Strike Fighter, which will soon enter active service.
The tough commercial aircraft market led to a wave of consolidation activity. In 1996, Boeing purchased Rockwell International, which bolstered its space and military divisions. More important, the following year, Boeing acquired McDonnell Douglas for $14 billion. This addition made Boeing the largest aerospace/defense company in the world, a title, as mentioned earlier, it still holds. McDonnell gave Boeing a more than 60% market share of the commercial aircraft industry leaving Airbus as its sole major competitor. The economic climate of the late 1990s was quite favorable and demand for aircraft increased materially. McDonnell gave Boeing greater production facilities, as well as increased exposure to military contracts, which helped reduce its long-standing dependence on the commercial aircraft market. Boeing was now producing the F-15 and F-18 fighters for the U.S. military and these two aircraft formed the backbone of both the U.S. Navy and Air Force, and are still protecting American skies at this very moment.
During the late 1990s, Boeing appeared to be firing on all cylinders and its prospects were bright. However, another bout with production delays and cost overruns surfaced. In 1997, it incurred hefty charges, and share profits fell to $0.63 for the year, down from $1.42 in 1996. Soon after, it launched a large restructuring effort, which consisted of workforce reductions and the production stoppage of several aircraft, among other initiatives. These initiatives proved successful and Boeing closed out the 20th Century in good financial shape.
The Chicago-based manufacturer and Dow component remains a fixture in the aerospace/defense industry. It operates through two business segments: Commercial Aircraft and Defense, Space, and Security. Boeing is one of only two world producers of large commercial aircraft. Popular Boeing models include the 737, 747, 757, 767, 777, and 787, which was delivered on September 26, 2011, after years of production and testing delays. The 787, which utilizes cutting edge technology and new, lighter materials, is in great demand, as noted by its hefty backlog. In addition, after years or production and testing delays, on September 26, 2011, it delivered the first 787 Dreamliner. This plane, which utilizes cutting edge technology and new, lighter materials, is in great demand, as noted by its large backlog.
Boeing also remains a major defense and space contractor of military aircraft and hundreds of other air, land, and sea products ranging from missiles to logistical services. It is a major service provider to NASA, and operates the International Space Station and space shuttle. The company possesses customers in more than 90 countries and, in terms of sales, is one of the largest U.S. exporters. As mentioned, it has its fingers in a lot of pies, which should help it remain on the forefront of the aerospace/defense industry as we move deeper into the 21st Century.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.