You know, people travel.
A lot.
Almost 10 million people board over 100,000 flights every single day.
Between them and the 17.5 billion dollars worth of goods that are flown around the world
daily, it’s safe to say that aviation is one of the pillars of the modern world.
That’s why this week on Behind the Business we’ll be taking a look at the largest aircraft
manufacturer in the world, Boeing.
Our story begins at the turn of the 20th century.
Back then the world was in many ways a larger place than it is now.
Most people got around on horseback, except the wealthy few who could afford the earliest
commercial automobiles.
A trip across the Atlantic took at least six days, and the average person wouldn’t travel
more than 50 miles away from his home.
In short, travel was time-consuming and expensive.
Then, on December 17th 1903, two brothers did what was for most of human history considered
to be impossible: The Wright brothers made the first successful
flight of a heavier-than-air aircraft, ushering in the pioneer era of aviation.
In the span of a single decade, aviation stopped being a fringe hobby for wealthy enthusiasts
and became one of the most competitive industries of the time.
It is in the middle of this dramatic advance in technology that a young entrepreneur saw
opportunity.
For William Boeing, aviation felt like an industry he was born to develop.
He was the son of a wealthy German-American industrialist, who held the rights to huge
swaths of timberland around Lake Superior.
William had already obtained an engineering degree from Yale by the time he inherited
these lands, and in his 20s he established a very successful logging business.
The profits from that business went into various side-ventures of his, like buying a shipyard
in Seattle to build himself a yacht, or outfitting several expeditions to Alaska.
One particular field that caught his interest was aviation.
He got his first chance to fly in an airplane in 1914, and he liked it so much that he signed
up for flying lessons and ordered a Martin TA floatplane.
William then got in touch with his friend George Westervelt, a U.S. Navy engineer who
also had a passion for aviation.
Together they created an improved floatplane, whose most prominent feature was the addition
of a second pontoon for stability.
They tested it out in MIT’s newly built wind tunnel, and it flew much better than
its Martin TA counterpart.
This was all the validation William needed and on July 15th, 1916 he incorporated the
business as the Pacific Aero Products Company.
He called the first airplane model the Bluebill, and before the year was over he had another
model in the making.
He was more than ready to pour capital into this new venture, and in just under six months
he hired 30 employees and converted his Seattle shipyard into a makeshift airplane factory.
When the US entered World War 1 in 1917, Westervelt decided to leave the company after being deployed
to the East Coast.
William took the chance to name the company after himself, and he set about filling the
newly created demand for military aircraft.
William’s first independent airplane was the Model C, in which he introduced several
important innovations.
By tilting the wings two degrees upward, and by placing the upper wing slightly in front
of the lower one, the Model C outperformed its competitors by a wide margin.
The US Navy was very impressed and it ordered 50 aircraft, which prompted William to expand
his operations.
By 1918 Boeing’s workforce had increased elevenfold, and they were manufacturing the
airplanes of several other companies: not out of generosity, but due to wartime cooperation
laws.
When the war ended that November, however, Boeing saw half of its orders cancelled.
Worse yet, there was almost no demand for civilian airplanes, since the military had
dumped a large portion of its older models onto the free market.
William was left with hundreds of idle workers, but instead of firing them he repurposed his
Seattle factory to produce residential furniture using the ample supply of spruce wood nearby.
Nevertheless, the company was losing money, and William had to pay 700 dollars in weekly
wages out of his own pocket.
In 1919 Boeing signed a modest contract with the US Army to modernize 300 Havilland DH-4
fighter planes, but no bank was willing to extend the company a line of credit.
The early 1920s saw Boeing’s first attempt at designing an airplane specifically for
commercial use.
They called the plane the BB-L6, a single aircraft custom built for a local pilot doing
air tours.
Despite being eager to enter the commercial sector, Boeing’s biggest client by far was
still the military, both in war and peace.
The recently-established US Army Air Service, the forefather of the US Air Force, was responsible
for saving William’s company for bankruptcy.
They ordered 200 open-cockpit biplanes in 1921, and Boeing happily provided them with
the MB-3A at 7,240 dollars a piece one year later.
At around that time Boeing’s engineers got their hands on the Fokker D. VII, an advanced
German fighter plane from WW1.
They greatly improved upon the plane’s design, replacing its wooden fuselage with one welded
from steel and braced with piano wire.
This prototype fighter could reach a top speed of 159 miles per hour, and the US military
ended up buy 150 planes by 1928.
One year prior to that William had made the lucrative decision of getting into the airmail
business.
Now, the US Post Office had created the first regularly scheduled airmail service in 1918
between Washington, DC and New York.
The signing of the Air Mail Act of 1925 gave the US Post Office the ability to grant contracts
to private companies, and William seized the opportunity by creating the Boeing Air Transport
company in 1927.
It’s first airplane was the Boeing Model 40A, whose light 420-horse-power engine allowed
it to carry twice the usual payload for its size.
Unlike its competitors it would carry mail and passengers at the same time, and by the
end of the year it the BAT had transported almost 2000 people and 67 tons of mail.
In 1928 William negotiated a deal to buy out his only big airmail competitor and a few
months later he also acquired Pratt & Whitney Aircraft, the company that made Boeing’s
engines.
By the end of the decade Boeing had become a near-monopoly in aviation.
During the early 1930s commercial air travel was finally starting to take off, and William
capitalized on this by developing the Model 80, a 12-passenger biplane.
Boeing had designed the plane with comfort in mind, and it was the first aircraft to
have registered flight attendants on board.
Despite the advent of the Great Depression, the aviation industry was booming, and by
1933 Boeing transported half of all passengers and airmail in the US.
That same year they introduced the Boeing 247, the first modern airliner, which featured
a dozen innovations like variable pitch propellers, wing deicers, and a fully functional autopilot.
It was better than any passenger plane up until that point, but Boeing made the arrogant
decision of reserving the first 60 aircraft for its own airline.
This was a massive red flag, and in 1934, after a quick Congressional investigation
on anti-trust grounds, the federal government passed the Air Mail Act of 1934, which broke
up all aviation holding companies.
Suddenly, Boeing was split in three: United Air Lines took control of the air transport
business, United Aircraft took over the manufacturing business in the East, and Boeing retained
the manufacturing business in the West.
William was devastated: He sold his entire stake in the company and
retired to breeding thoroughbred horses for the rest of his life.
The split hurt Boeing immensely, and other companies quickly rose up to take its place.
Boeing’s most notable competitor at the time was Douglas Aircraft, whose legendary
DC-3 airliner from 1936 was both larger and faster than the Boeing 247.
The DC-3 was so good that it’s still in use to this day.
Its success convinced the engineering team at Boeing that bigger was indeed better.
This was a dramatic shift in the company’s approach to aviation.
Up until that point, the company was unequivocally known for its small, but durable fighter planes.
With Europe on the brink of war, Boeing developed a revolutionary bomber of unprecedented scale
for the US military.
The Boeing B-17, dubbed the Flying Fortress, was the largest and heaviest bomber built
at the time.
Powered by four 750-horsepower Pratt & Whitney engines, the B-17 was one of the US’s greatest
strategic weapons: it could comfortably carry up to 8,000 pounds
of bombs and it was protected by 13 12.7 millimeter machine guns mounted in 8 positions.
Calling the B-17 a success would not do it justice:
over the course of WW2 over 12,000 of these bombers were built, each costing 240,000 thousand
dollars, and collectively they dropped 640,000 tons of bombs on Axis territory.
The B-17 became Boeing’s saving grace, and it cemented the company’s decision to design
larger aircraft.
In the late 1930s Boeing developed two commercial aircraft that were also technologically impressive:
In 1939 they introduced the Boeing 314 Clipper, whose unprecedented range of 3,600 miles made
it the first aircraft to fly regular scheduled flights between the US and Britain.
One year later in 1940 they created the first commercial aircraft with a pressurized cabin,
the Boeing 307 Stratoliner.
It could fly up to altitudes of 20,000 feet at a time when other airplanes could barely
climb above 14,000 feet due to oxygen deprivation.
The 1940s saw Boeing restore its position as the top aircraft manufacturer in the United
States.
Towards the end of the Second World War, they were building over 350 planes each month,
and their workforce had ballooned to over 78,000 employees by 1943.
A year later Boeing developed the B-29 Superfortress, a beefed-up version of the B-17 that weighed
twice as much, yet was faster and could carry an extra 12,000 pounds of bombs.
Two special B-29s, the Enola Gay and the Bockscar, would become the only two planes in history
to drop atomic bombs, above Hiroshima and Nagasaki, respectively.
With the war won, Boeing and its competitors returned to the free market, but the sad reality
was that no war meant little demand.
Boeing’s sales declined from a wartime high of 421 million dollars in 1945 to barely 13
million dollars just one year later, and they were forced to lay off almost 70,000 workers.
The decade after WW2 saw the proliferation of jet technology, which was pioneered by
the German Luftwaffe in 1939.
Boeing produced two subsonic jet bombers, the B-47 and the B-52, and they were very
successful, but in 1957 the Cold War steered the aviation industry in a very different
direction: When the Soviet Union launched the first artificial
satellite around Earth’s orbit, the Sputnik 1, the American public was in awe.
This small, 23 inch wide sphere served as a wake up call for the US, and it’s launch
triggered the famous Space Race that kickstarted aerospace development.
The USSR accomplished another historic achievement just four years later by getting Yuri Gagarin
into outer space aboard his Vostok spacecraft.
This caught NASA off-guard, and forced President Kennedy to famously vow to get the first man
on the moon by the end of the 1960s.
The entire aerospace industry was drafting up ideas for the Apollo missions, but by that
point Boeing was already knee-deep in developing rocket technology.
They had started working on a prototype surface-to-air guided missile way back in 1946, and by 1955
they had a working model ready for production.
Boeing called these missiles Bomarc and ended up selling almost 600 units.
Bomarc’s impressive capabilities landed Boeing a pivotal government contract in 1958,
which requested the construction of a land-based intercontinental ballistic missile.
What Boeing developed was a technological marvel:
the LGM-30 Minuteman, a three-stage solid-fuel rocket capable of delivering three nuclear
warheads, each packing around 500 kilotons of energy, which adds up to about one leveled
Manhattan.
At around that time Boeing decided it was time to reclaim their lost share of the commercial
airline business.
They borrowed the swept-wing design of the B-47 jet bomber and dumped a stunning 16 million
dollars, or 25% of the company’s total worth at the time, into the creation of the Boeing
707.
It was a huge gamble, since many airports couldn’t even fit a jet airliner on their
runways, but the aircraft’s speed, size and reliability proved its worth.
Boeing ended up selling over a thousand Boeing 707s, some of which are still flying regular
routes.
This model was the basis for an entire family of jet airliners that are still among the
most used commercial aircraft in the world.
The Boeing 737, introduced in 1968, is the best-selling jet airliner in history, and
it has remained so popular that by the time you’re done listening to this sentence,
two 737s would have departed or landed somewhere across the globe.
Just two years later Boeing introduced the Boeing 747, but it was vastly different from
its predecessors.
It was Boeing’s first wide-body jet airliner, and it featured a double-deck configuration
that could seat over 400 passengers.
It’s humungous size gave it an initial price tag of 24 million dollars, but today these
beauties can go for as high as 350 million.
The R&D costs behind the 747 were so high, that in its final stages of development Boeing’s
engineers were working 10 hours a day, 7 days a week, and were owed several paychecks.
The overtime was worth it though, since to date Boeing have produced over 15 hundred
747s.
Despite its success, Boeing and the aerospace industry in general were hurt badly during
the 1970s.
The oil crisis from 1973 quadrupled the price of the main component of jet fuel, which caused
a spike in ticket prices and a huge decline in airline passengers.
A lot of early 747s were left to gather dust in their hangars and Boeing suffered a drought
period of no orders that lasted a total of 18 months.
The company was forced to lay off 43,000 employees in Seattle alone, which caused two real estate
agents to put up the famous billboard that read, “Will the last person leaving Seattle
- turn out the lights.”
At around that time the French company Airbus was emerging, and to top things off the US
Congress halted Boeing’s funding for their first commercial supersonic aircraft, the
company’s answer to the European Concorde.
All of these factors combined brought Boeing to the brink of insolvency, and they barely
survived thanks to their military contracts for ICBMs.
During these hard times Boeing relied heavily on the income from its lesser known products,
like its helicopters, hydrofoils and even its light rail vehicles that ran in San Francisco
and Boston.
Despite losing a major government contract for the B-2 stealth bomber in 1975 to Northrop,
the late 1970s showed signs of recovery for Boeing.
The price of oil stabilized, people started flying again, and orders for new jet airliners
came rushing in.
The boom-and-bust cycle of the aviation industry had repeated itself for the third time, and
Boeing knew how to take advantage of it: between 1981 and 1982 they pumped out not
one but two successful aircraft models, the 757 and 767, whose combined development costs
amounted to 3 billion dollars.
Boeing also scored a 4 billion dollar government contract for an air-launched cruise missile
system, and they emerged from the 1980s as the biggest aerospace company in the US.
The 1990s saw some of the most dramatic shifts in the industry, as several waves of mergers
and acquisitions culminated with Boeing’s 13 billion dollar deal to acquire their strongest
American competitor, McDonnell Douglas.
Boeing’s hit airliner from the 1990s was the Boeing Triple 7, the world’s largest
twinjet with a range of up to 11,000 miles that has sold 14 hundred units to date.
During the 21st century, Boeing further cemented its position as the #1 aerospace company not
only in the United States, but across the whole world.
Between it’s 787 Dreamliner and over a dozen significant military contracts, Boeing has
expanded from the aerospace industry into satellite communications and cybersecurity.
It has also continued its collaborations with NASA, a decision which has for the past ten
years brought it into conflict with SpaceX, Elon Musk’s own private aerospace company.
The rivalry between Boeing and SpaceX has come to be known as the Second Space Race.
Now, the goal of SpaceX is simple: It hopes to reduce the cost of space travel
in order to enable the colonization of Mars.
It has made huge progress in that regard with it’s groundbreaking reusable rockets.
Just this December SpaceX managed to land the first-stage booster of its Falcon 9 rocket
vertically for the first time.
So far SpaceX has used it’s innovative rockets to run cargo missions for the International
Space Station, an act that has put it in direct competition with Boeing.
Now, Boeing was the station’s first contractor, and it designed and built most of its US modules.
Since then, however, most missions to the ISS have been supply runs, and large chunk
of the more recent ones have gone to SpaceX.
From the 13 upcoming missions granted to companies over the next two years, only two have been
awarded to Boeing, compared to 7 for SpaceX.
The two companies are also racing to become the first corporation to carry astronauts
to space, but whereas Boeing’s Starliner is still in development, SpaceX’s Dragon
2 is already operational.
Combined with Boeing’s recent delaying of its first manned space mission to 2018 and
NASA’s decision to drop the company from its CRS-2 program, it seems like Boeing is
falling behind.
It’s far too early to be calling dibs on the Second Space Race though, considering
the fact that the ultimate challenge of developing missions to Mars is still a long way off.
When you add Airbus’ fierce competition on the commercial aviation side however, it’s
pretty clear that Boeing will be hard pressed to retain its top spot in the aerospace industry
in the years to come.
Hey, thanks for watching!
I hope you liked the video almost as much as we enjoyed making it.
We’ve got a special announcement lined up for you guys in our latest update video, which
you can watch by clicking here.
If you’d like to learn about the surprisingly long history of Nintendo you can click over
there.
And if you’d like to subscribe to the channel you may do so by clicking here.
Again, thanks a lot for watching, and, as always: stay smart.