Main Edition
US
FR
October 21, 2024 - 7:00am
In 1997, Boeing was the toast of Wall Street. The company had just overcome regulatory hurdles to merge with McDonnell Douglas, making it the largest jet airline manufacturer and the second-largest defence contractor in the world, a behemoth with over 200,000 employees and sprawling factories and plants dotted around the US. Boeing, as one financial journalist beamed at the time, is “also one of the nation’s biggest exporters, which makes it sort of like the State Department of American industry”.
These days, prospects for the aerospace giant are decidedly less sunny. Boeing’s star has tumbled, following a series of disasters involving faulty engineering and rushed designs that have proven deadly. The structural defects extend to its finances, and the company is haemorrhaging cash. In response, Boeing’s CEO has just decided to shrink the company and sell assets.
According to a turnaround plan announced last week, Boeing intends to raise about $15 billion in shares and convertible bonds. The news comes just ahead of plans to lay off 17,000 workers, or about 10% of the company’s workforce.
Its labour troubles are far from over, however. Last month, about 33,000 unionised Boeing employees went on strike, with labour representatives upset over stagnant wages and downsized benefits. Striking members of the International Association of Machinists and Aerospace Workers have turned down an initial offer from Boeing for a 25% raise over four years.
Workers have angrily demanded higher pay and better retirement benefits, noting that the company has long prioritised executive compensation and stock buybacks, while ignoring safety concerns to rush assembly lines. Those complaints are hardly new. The firm, which began as a Seattle-based aircraft maker, was once a bastion of creative engineering with a proud company culture. Boeing reportedly designed the B-52 bombers over a single weekend. The 737 airline, originally produced in 1966, was such a marvel of engineering that it remains in production today.
The 1997 merger jolted the company culture, as other reporters have observed. Accountants and business school-trained executives replaced the aerospace engineer leaders of the firm’s earlier iterations. The new Boeing board of directors, as one analyst noted, “would rather have spent money on a walk-in humidor for shareholders than on a new plane”.
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
SubscribeThe problem is that there are only two manufacturers of large airliners in the world. It would be in nobody’s interest for that to shrink to one.
“The problem is that there are only two manufacturers of large airliners in the world. It would be in nobody’s interest for that to shrink to one.”
Not quite true, COMAC (Chinese manufacturer of commercial airlines) are coming up fast on the rails. They already have many small (100 seat) C909 aircraft in service, and the first of their C919 (737 / A320 size) are flying commercially; they have orders for nearly 1,000 of these. They are also working flat out to produce larger models too.
So I can imagine many people at COMAC whose interest it would be in.
Also many at Airbus.
Plenty of people make 100 seat airliners. Only Boeing and Airbus make 200+ seat airliners.
Airframes have a very long life expectancy, which mitigates the downside of disruptions in plane manufacturing. The US B52s built by Boeing in the 1950’s and 1960’s are still flying with no plan to retire them. The major airlines buy shiny new planes mostly to compete for passengers, shedding their older planes to budget carriers and cargo haulers. They can keep their existing fleets flying for decades if needed. Losing Boeing would be detrimental to the US economy and defense but would not necessarily be castrophic to the global economy. Boeing has been delivering scant planes for quite some time now since the 737 Max debacle with little real disruption to the airline industry.
The future of companies like Boeing is complex and conceivably quite different going forward even assuming solvency. At some point our societies are going to have to reconcile the reality that if carbon emissions are really a goal (and I’m not saying they should or shouldn’t be), then discretionary air travel will at some point become a policy contention. Notwithstanding experimental alternatives to fossil fuel propulsion, there exists no feasible technology that will hurl an aluminum tube filled will 300 people through the air for 6000 miles at 500 mph. Nothing close. So, if the template being imposed for automobiles is deployed for air travel, aircraft manufacturers will be looking at a far greater challenge than auto manufacturers. A battery powered 737 is simply impossible. And even if the world just says “screw it” to climate change and abandons the carbon crusade, it is entirely possible that new young entrepreneurs will appear with dreams of creating new companies to build innovative airplanes. 25 years ago no one would have imagined a company like Space-X would be embarrassing mighty Boeing. The same could happen again.
The Comac C9191 is 192 seats, and presumably can be lengthened in future to match the 737MAX and A321.
And as I said earlier, they are working hard on their first wide-bodied jet.
Lots of complacency still in the West about Chinese catch-up.
The chances of the public trusting Chinese made airlines is approaching zero for the very long future. DEI / woke made Boeing fail. DEI / woke is mild compared to CCP rule.
You make my point. The Chinese are coming, like it or not. Airlines around the world will buy their aircraft if they are cost effective, well built, reliable and fuel efficient.
Do you think Ryanair and the other low cost carriers will override their commercial interests to appease Western political hypocrisy? Ryanair in particular have been in negotiations with Comac for over a decade, and I would surmise that if satisfied with these conditions (safety, price, maintenance and operating cost) will buy Comac planes over the coming decade, especially if Boeing and Airbus cannot meet their delivery and cost needs.
There are competitors in China, Russia and Brazil waiting in the wings…
Canada also. However they are all heavily government subsidized. Just look at bombardier stock price. It all based on government handout.
And Boeing isn’t heavily government subsidised? Come off it.
They don’t make widebody airliners though.
Don’t give the Liberals any cute ideas.
General Dynamics Gulfstream seems to have a good rep. Any chance they could expand into airliners?
Another case of a headline screaming while the article it headlines takes a more muted tone. There’s no sign that Boeing is on the verge of collapse. Quite the contrary. After this article went to press Boeing reached an agreement with its striking workers. Its belt has been tightened, and it will be tight for a while, but nothing on the horizon threatens more than that.
Indeed, everything suggests that Boeing will be around for a long time. Boeing has a big backlog of orders for its airplanes — the waitlist stretches well into the 2030s. A Boeing collapse would harm the global economy. Any sign of it and the federal government would step in. We seem as far from that as ever.
It is true that Boeing has lost some of its engineering luster. My father worked at Boeing in Seattle as an electrical engineer to start his career. Back then the company was admired as one of the country’s most innovative. Not so much any more, as this article details.
Not mentioned in this story was Boeing’s humiliation in stranding two astronauts at the International Space Station. NASA did not trust the Boeing spacecraft that had taken the astronauts there enough to let it take the astronauts home, so they will come back on a SpaceX spacecraft next year.
Now SpaceX is an innovative company, one that puts Boeing to shame. In a video from last week I saw a 23-story-high SpaceX Super Heavy rocket booster falling through the air at supersonic speed as it returned to the launch area it had left 7 minutes before. The booster had taken its payload 60 miles into space and 20 miles downrange, then after separating from it had reignited 13 of its 33 Raptor engines to retrace its flight path.
As the booster closed on its home base its engines started to fire again to keep it from slamming into its launchpad. The booster fell closer and closer, moving slower and slower. It approached its launch tower at an angle, now with only 3 of its engines firing, descending in a delicate dance as it righted itself, slowed to a hover, and stood in midair almost motionless, gravity and rocket thrust balancing, until two Mechazilla arms attached to the launch tower closed around it and held it fast.
The engines shut down, and the massive booster stood silent, like a skyscraper suspended 233 feet above the ground, ready for rapid repair, refuel and reuse. A stunning success, on its first try. I can’t remember seeing anything like it. Innovation at its best.
“Another case of a headline screaming while the article it headlines takes a more muted tone.”
As someone once said, when any newspaper article headline ends with a question, the answer is almost always “NO”
Maybe I’m too sanguine. The Walll Street Journal has not one but two articles today singing the same gloomy tune as Lee Fang about Boeing, and warning of a breakup or bankruptcy. I guess we’ll see what happens.
Probably about time to buy Boeing stock.
“Any sign of it and the federal government would step in.”
The federal government once stepped in to save GM and Chrysler. GM is now a shadow of its former self and Chrysler is long gone. Oh, and by the way, the U.S. Government is $35 Trillion in debt and growing, so Boeing will have to queue up behind Social Security, Medicare, student loan debt forgiveness, immigrant relief, the Department of Defense (plus Ukraine, Israel, et al), Green Energy subsidies, and crumbling public infrastructure.
This author is doing what is called ‘cherry-picking’. Boeing has engaged with both Democrat and Republican administrations, doing things that made good sense and things that did not.He pulls one example (without needed context) from 50 years or more of government-corporation interaction, and slides in a subtle jab at the same time.
The trouble is, by observing a single example of cherry-picking in his writing method, it makes this reader observe that his “analysis” may be flawed in the same way.
He sees only what he wants to see.
Boeing joins a long list of American business edifices once deemed invincible but past their prime: General Electric, Westinghouse, IBM, US Steel, HP, and Intel. Many others are diminished or gone. Some plod on in various stages of dysfunction, kept alive through government defense contracts. Boeing may survive but likely never enjoy the prowess it once commanded. It may soon resemble GM, which is a shadow of its past self, staying alive building legacy gas-powered pickup trucks while it thrashes about desperately squandering resources in losing battles with Tesla and BYD. This is not doomsaying or schadenfreude, just the hard reality of the arc of most very large business enterprises. If you were a 22 year old top aerospace engineering graduate right now would you be more excited about a job with Boeing or Space-X? General Dynamics or Anduril? And if you don’t know about Anduril you don’t understand the deepest problem Boeing faces.
The company got infected with Jack Welch disease.
The best thing that could happen to Boeing would be for Elon Musk to take it over. Short of that, put him on the board.
They should gut the current leadership and managment, bring in the best aerospace engineers they can from universities and industry and then hire the brightest minds they can find coming out of places like MIT etc. Then turn them loose to do what they do. Give them a mission to design the most innovative, safe and efficient aircraft possible. Include pilots in the process. Include ground crew in the process. Include maintenance techs in the process.
Then, bring in the foreman and the best leaders and the biggest pains in the backside they can from the manufacturing floors and charge them with coming up with procedures for assuring that every aircraft that leaves the plant is 100% compliant with quality standards. Include the same stakeholders as in the design phase.
Put pilots and engineers in charge of the company and the bean counters in the background.
Then, be willing to lose money for a few years, which they will be able to do with the government supporting them, until they get their new aircraft into production.
Boeing is in thrall to the DEI mob, lock, stock, and barrel. They will never hire the best- only the most diverse.
Seems like the defense, space. And commercial businesses are too much for Boeing’s management to handle. A breakup like GEs might be coming.