Boeing's aircraft production and military spending, 1974-1990

Boeing Spending - 1974 to 1990

The purpose of this work is to research Boeing from the year of 1974 to the year of 1990 and identify the spending by Boeing for those years in terms of projects, expenditures on projects as well as the environment within the Aircraft production industry to those specific years and the shifts and transitions of the industry and how Boeing was affected or in turn effected the industry.

Beginning business July 15, 1916 under the name "B & W," Boeing was founded by Williams E. Boeing. "B & W" changed names first to that of "Pacific Aero" and then to "The Boeing Airplane Company." William Boeing was a Yale scholar and after he acquired his knowledge and learning about the design and assembly of airplanes he put his knowledge to use however due to the legislative changes in 1934 Boeing sold his market share. The Boeing Company continued on and the first flight of the Boeing "Clipper" took place in 1938. The "Clipper" was the large aircraft of it kind of the civilian type with a capacity of 90 passengers during daylight flights and 40 passenger capacities at night. The first regular run between the United States to Europe passenger service began in the year of 1939.

Producing a great number of Bombers by Boeing was done with the aid of many women who were factory workers in replacement of the men who were off at war and by March 1944 the production was revved up to 350 planes a month. Production took place at plants that were camouflaged with all manner of green bush and shrubbery to avoid enemy detection of the aircraft production.

When the war came to an end over 70,000 workers were said to have lost their jobs in the aircraft production business due to cancellations on bomber orders as well as a general drop in business across the board at the war's end. First used during the war, the C-97 helped Boeing of the post-war slump that all manufacturers of aircrafts wee affected by. The C-97 was used to evacuate casualties during the Korean War and the Kc-97 has a boom for use in aerial refueling with almost 900 of them being built by the year of 1958. The C-97 was to be the last propeller-driven plane built by Boeing. The field of rocket technology was entered by Boeing with the Ground-to-Air Pilot less Aircraft which was Boeings first missile. Cruising at speeds that were supersonic the GAPA reached altitude of 59,000 feet in November of 1949 and was the basis for the Bomarc missiles. The Bomarc missiles were the world's first long-range anti-aircraft missile and began mass production in 1957.

I. Boeing's Growth in the 1950's and 1960's:

Boeing accounted for approximately 9% of all U.S. exports in 1985. The air craft industry is comprised of 15,000 companies. Forbes Magazine reported in August of 1986 that Boeing was the only aircraft manufacturer that was making money building airlines. Stating that since the introduction of the 707 in 1958, the first successful commercial jetliner that Boeing had produced a succession of planes that had been profitable to Boeing as well as becoming industry standards. Boeing, it seems was having problems with the 7J7 which was a new propfan jet airliner. The airliner was revolutionary was that it was an "unducted fan engine" UDF. The UDF was said to burn two-third less fuel that the other short to mid-range airliner and one-third less that the latest turbofan-powered design airliner like the Airbus Industries A320. Fuel costs were reported to have been at the rate of 30% of operating costs. However, since the Saudis chose that moment to pump more crude oil and effectively drive down the prices on oil and prices went to aw low as 55 cents a gallon which was down $1.20 from fuel costs in 1983. Fuel prices were running at around 12% of the operating costs of the new Airbus A320.

The report sated that Boeing was already losing the market share to McDonald Douglas' MD-80 and DC-9 that sold for $43 million as well as Airbus Industries a-320. Boeing reportedly would have to spend between $4 billion and $5biolion on the new propfan as well as $1 billion from GE for the engine. The expected price-tag was stated to be around $70 million. Boeing stated in the report that "We are continuing to book airliner sales at a somewhat faster pace that I would have predicted at the beginning of the year." The competition was of an intense nature and margins were being squeezed at the time. In 1985 the revenues on commercial aircraft were at $8 billion with Boeing having an operating cost of $317 million, or 4.7%. Boeing's best prospects were reportedly with new programs but those were considered to be the most vulnerable due to the budgets that were imposed as well as delays and cancellations. One of those programs was the Advanced Tactical Fighter, ATF, which is a $45 billion dollar program.

Immediately after the war the most important program was the B-47 Stratojet bomber. This was America's first swept-wing multiengine bomber. This plane depended on the wind tunnel for its design and in fact, was the first which did. The wind-swept design was a concept that has been followed in the design of every large jet airplane since. The b-47 was followed by the B-52 Stratfortress which was the first long-range wind-swept heavy bomber; it was not only the first but probably was the most significant multiengine air craft that had been built to date. Originally conceived as a "straight-wing, propeller-driven bomber. However the Air Force informed Boeing in the year of 1948 to design a jet bomber instead. Realizing that Air Force might invite other competition for the project if they delayed the group and chief engineer Ed Wells and George Schairer locked themselves up in a hotel room and using only the notes with them and a slide rule designed a balsa model and proposal in the course of only a weekend and surprisingly the Air Force was in approval of the design and began production in 1951 with the first B-52A taking flight in August 1954. During the decade of the 1950's the B-52 broke numerous records of both distance and speed.

The cold war continued and the development of an intercontinental ballistic Missile System or ICBM with the development of the Minuteman ICBM started in 1958. The first test fire was on February 1, 1961 and it was operation by 1962. Minuteman missiles were operational by 1967 and installed as six various U.S. sites. The technology that was rocket-based was use in the design of the Dyna-Soar, a reusable space vehicle staffed with a crew. The project was cancelled with a loss of approximately 5000 jobs in 1963. The concept however, once again appeared in the Space Shuttle design. Boeing bought Vertol Aircraft. The visionaries of the day are said to have foreseen a day of airliners flying faster than the speed of sound transversing the Atlantic Ocean in only five hours. In the year of 1965 the first American SST (Supersonic Transport) was built. Competition abroad was stated to have the British and French in agreement to produce their own SST called Concorde. The know-how of the Soviet's in the KGB's version named the Tu-144 was named the first commercial SST to fly, the race was historically notable.

In 1964 $100 million was appropriated in the fiscal budget in developing the American SST. TWA and Pan AM came to the foreground with $2.1 million advance toward 21 SSTs. North American had a military SST, the Valkyrie however, Boeing beat out the Lockheed D-200- and the American NAC-60 Douglas creations. While surely noting the race between the British, French and Soviets, Boeing acted quickly and deliberately and were leading the 'super-sonic transport' race, they held the belief that delivery of the 'biggest', 'fastest', and 'most efficient' design that they would with a sleight of hand recapture the market share temporarily lost to the Europeans companies. Although the design never quiet worked properly. Boeings end resulted greatly resembled the Lockheed L-2000. Sonic Boom experiments on the part of the Air Force showed that the constant sonic booming was not appreciated demonstrated through the 5,000 claims filed for damages and the 8,000 complaints.

The SST is going to be built" declared President Richard M. Nixon on the 23rd day of September, 1969. Federal Funds to the tune of $500 million had already been devoted to the project at that point in time which was stated to be 'an unprecedented amount for a single non-military project.' Amid mounting pressure applied by Senator Proxmire and others toward cutting the spending of taxpayer money on that of a civilian project.

II. Boeing: The 1970's

In the early part of the decade of the 1970's a crisis of major proportions was faced by Boeing in terms of finance as well as in purpose it would seem. Boeing had utilized vast amounts of time, labor, energy, money and resources into the Apollo Program of the 1960's for the program finally to be cut to practically nothingness in the 1970's.

I. The Apollo Program:

Expenditures for the cost of the Apollo Program were in the total amount of $25.4 billion dollars. There were 11 manned Apollo flights, 381.7 kg of moon material was recovered during the course of the Apollo missions and although there are those who believe that the motivations for the Apollo missions were that of a "psycho-political" nature, the one gift that America and the world were given by the Apollo program was the realization of the reality of "how fragile the earth is."

At the time the Apollo program essentially caved in Boeing also was losing hope in the production of commercial aircraft as they had placed their hopes on the B747 and the price of producing the aircraft was much higher than originally predicted. Boeing had to let over 1/2 of the 80,000 it employed go in the Seattle operations alone. However, the B747 did finally enter into service in 1970. The Boeing 747 is "four-engine long-range airliner" and is said to have "changed the way of flying."

II. History of the Aircraft Industry in Brief:

The aircraft industry was the second largest employer in the United States after the automobile industry in the 1980's. Two studies were performed focusing on the loss of jobs in the United States during the years of the 1970's and 1980's. One looked at employment in manufacturing from 1972 to 1980 and the stated findings were that the economy had experienced a stagnation resulting in the 4.5% decline in manufacturing employment. Further that the demand for unskilled labor was down resulting in unemployment levels that ranged from 6% to 20% in all sectors of the manufacturing industry. Another stated factor voiced by Adrian Word an Economist from Sussex is that Third World exports are having a great affect and the problem is that "rationalism" is destroying jobs. The laborers in Third World countries will work for less hourly wages and will work longer hours. "Low-wage economics" had taken effect.

It appears that the multinational companies are not very active in the world trade markets and tend to keep production within a one-state area in a type of area specialization which keeps the whole product at a better overall value. It also appears that during this time Boeing was receiving thousands of foreign parts from approximately 160 different countries and furthermore was paying inflationary rates that were quiet simply exorbitantly outrageous prices. During this era the "price-gouging" of the airlines was in the news quite often and the knowledge that toilet seat for an aircraft ran in excess of $1,000 became common news.

IV. U.S. Trade in Commercial Aircraft and Parts (1970-2000)

During the 1970's and early 1980's Boeings production contracts on the B-52, the KC-135 and the Minutemen were all coming to an end. The word was for all salesmen to aggressively bid on new business and they did so underbidding contracts and even bidding and winning contracts that they did not have the specific know-how in making good the performance of. Boeings light helicopter deal at the time that of four different prototypes that are under a development contract in the amount of $2.8 billon. Production was to begin in 1996 and $220 million was already invested in the project.

The Chart bellows reflects the growth of ITT and can be traced to the competitive nature of the world air sector. Boeing and Airbus are mainly competitive in term of pricing, quality of product and reputation.

Commercial Airline Manufacturing:

During the late part of the 1970's Boeing Aerospace Corporation was studying concepts for a single stage rocket powered orbit vehicle that would use technology already existing. The project was called the name of "Reusable Aerospace Vehicle comprising a ground-based sled that would serve for acceleration of the aircraft to the speed needed for take-off on a conventional runway and a delta-winged piloted orbital vehicle. Called the RASV it was designed to be constructed of titanium and Rene-41, conventional refractory metals. The RASV would be powered by the main Space Shuttle Engines.

The project was an $11.4 billion project for build of a prototype vehicle. However, the USAF and Boeing funds that were allocated for the RASV ended up going to the development and redesigning of the B-2 Bomber. The RASV project was void and the Air Force was left to the mercy of the NASA Space Shuttle and the expendable rocket fleet.

During 1983 Battelle Labs and the Air Force began what was a "Trans-Atmospheric Vehicle Program" in the attempt to develop a rocket-based single stage to orbit capability for the military use. Soon after in 1983 President Reagan released a statement concerning a revolutionary step in science and technology which was a program with the purpose of the creation of a system to render modern ballistic missiles useless. This program was instantly dubbed the "Star Wars" program. The Department of Defense termed it to be the "Strategic Defense Initiative Organization" the commercial airline manufacturing industry is 8% of the United State manufacturing industry exports which was $53 billion in the year 2000. There are in excess of 780,000 jobs in the airline manufacturing industry and nearly 10% of United States Output as well. The following chart reflects the United States Trade in Aircraft and aircraft parts for the years listed.

Below are two tables which explain the shifts within the finance, economics in the aviation manufacturing industry as to sales, and economy.

US EMPLOYMENT in COMMERCIAL AIRCRAFT PRODUCTION a.b.c.d.

Table 2.0

Jobs

000s) S&E Jobs (000s) S&E%SIEas% of all Sectors

Year Exports

Imports

Imports/Exports

IIT

RCA a. Production plus non-production workers (total employment)

D scientists and engineers

D scientists and engineers as a % of aerospace employment

Aerospace R & D. scientists and engineers as a % total of manufacturing employment

Sources: U.S. Department of Commerce (2001), Pritchard 2002

During the year of 1990 Boeing reported a record sales $27.6 billion, record net profits of $1.4 billion and ended they year with a $97 billion dollar backlog. The military operation was approximately 21% of total sales last year.

U.S. Trade in Commercial Aircraft and Parts

1970-2000)

Table 1.0

U.S. $ millions a.b.c.)

Year Exports Imports/Exports IIT RCA a. imports as a % of exports b. intra-industry trade index IIT = 1[[(xim)]/(x+m)] where x = exports; m = imports c. RCA = (U.S. aircraft x/total U.S. x) / (world aircraft x/total world x)

The defense and space group, the military transportation division all reported an operating loss of $95 million in 1988, $559 million in 1989 and $119 million in 1990. The most important aspect of antitrust enforcement occurred during the "merger wave" of the 1990's. During the Fiscal year from September 30, 1996 to September 30, 1997, there was approximately 3,500 transactions value at more than $15 million dollars which were reported to the federal enforcement agencies.

The merger wave of the late 1960's was different from this wave and as well the leveraged buyout and hostile takeover junk bonds of the 1980's. The 1990's merger wave wasn't motivated as much by financial considerations or by manipulation so the stock markets but instead the biggest percentage of the 1990 transactions were in response to the shifts in the world economy.

Summary and Conclusion:

This paper has shown that Boeing certainly put much into the Apollo program in terms of labor hours, testing, production, manufacturing, design, for it to be so abruptly cancelled somewhat as did NASA and indeed the whole aviation industry collectively experienced with the Space Shuttle program and the victories and defeats both inclusive of the experience.

Boeing certainly had its up and downs and one must wonder where all the equipment that was built and sold by the aviation countries is now. Investigations show that there are Boeing airliners throughout the world in Iran, the Kingdom of Saudi, as well as many other various and diverse part of the globe. The very element that caused the driven expansion in the aviation industry was fed by that expansion that being the ownership of other entities of advanced systems particularly of aviation weaponry.