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
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