HOW THE AEROSPACE MANUFACTURING COMPANY DECLINED OVER THE DECADES
There’s no doubt that Boeing is in serious trouble. Recent reports of serious safety issues and concerns over workforce diversity campaigns are symptoms of a corporate culture that has been ailing for a while. The legendary American company that helped win WWII and dominated the postwar aviation industry used to attack engineering problems by empowering the organization’s best men with almost dictatorial authority. But over the past quarter-century, Boeing has transformed from a hard-nosed, mission-focus company into a complacent mediocrity defined by bureaucratic entrenchment and financial chicanery.
Boeing’s golden age during WWII was defined by the execution of projects like the B-29: a four-engine bomber that could deliver up to 20,000 pounds of bombs against a target more than 2,600 miles away at a speed exceeding 250 miles per hour, far in excess of any other aircraft in the war. The B-29 was the first bomber with a pressurized cabin, which helped extend its service ceiling above 30,000 feet, well out of the range of Mitsubishi Zeroes. It had remote-controlled machine gun turrets that could be slaved together in a synchronized aiming system run by an analog computer. The plane itself had a startling, graceful silhouette — albatross-like wings that stretched 141 feet, longer than the Wright Brothers’ first flight at Kitty Hawk.
The project was a hideously complex and expensive weapons program with a total cost more than double that of the Manhattan Project, requiring the coordination of thousands of contractors and production facilities spread across the United States. After Boeing missed multiple deadlines to deliver combat-worthy planes to the U.S. Army Air Force, Hap Arnold empowered General Bennett Meyers to take control of the production process and do everything possible to bring out the plane; ‘The Battle of Kansas’ thus ensued. Thousands of technicians from all over the country were called into Wichita, modification centers at Great Bend, Pratt, Walter, and Salina, working in subzero weather and snowstorms. The shock force of aircraft technicians replaced the plating on the wings, the glass in the cockpit, modified the cowl flaps around the engines, and removed, replaced, and resoldered every electrical connection.
The ‘Battle of Kansas’ involved direct military control over civilian workforce, and it furnished an example of how centralized authority and accountability could quickly yield results. Within weeks, the first B-29s were flying. By the war’s end, Boeing delivered more than 3,600 Superfortresses. On the night of March 9, 334 B-29s were sent to bomb Tokyo from altitudes between 5,000 and 10,000 feet, each loaded with 16,000 pounds of incendiary bombs. Eventually, the Enola Gay, a B-29, dropped the bomb on Hiroshima.
Today, Boeing lacks this commitment to pushing the technological envelope as well as any sense of urgency with regard to the national interest: in this respect it still represents a mirror of America, only now it is a mirror of decline. The history of Boeing over the past thirty years is a story of a critical American institution that sold off its engineering culture and embraced an asset-light focus on margin instead of product vision, and then executed that strategy poorly. In 2024, Boeing is producing fewer planes than it did a decade ago and faces an onslaught of headlines about spectacular accidents, nagging regulators, and disappointing earnings.
A large part of the issues can be traced back to the Boeing-McDonnell Douglas merger in 1997. The deal seemed like a good idea at the time. By 1996, McDonnell Douglas commanded only 4% share in U.S. commercial aviation, and its production lines were languishing. Meanwhile, Boeing had a $100 billion backlog, and needed more assembly capacity to ramp deliveries and fulfill its orders. Yet in the event, the joke on Wall Street became that “McDonnell Douglas bought Boeing with Boeing’s money.” McDonnell Douglas CEO Harry Stonecipher and John McDonnell, the chair of McDonnell Douglas’ board, became the largest shareholders of the combined entity after a stock swap worth $13 billion and they brought McDonnell Douglas’ bureaucratic defense contractor culture of margin-focused, risk-averse financial engineering with them.
This culture almost immediately began to win out over Boeing’s engineering culture committed to innovation and quality. The first “clean-sheet” aircraft produced by the combined entity would be the 787 Dreamliner. From the start of the project in 2003 Stonecipher imposed strict cost controls, demanding that the plane be developed for less than 40% of what it cost Boeing to develop the 777 more than a decade before. He also required each plane’s unit cost to be less than 60% of the cost of a 777. Boeing would accomplish this, Stonecipher said, by abandoning full-fledged, bottoms-up assembly. Instead, for the first time, workers in Boeing’s Everett plant would connect sub-assemblies and integrate disparate systems provided by suppliers rather than attaching every bolt and component themselves.
For the 787, Boeing engineers eschewed the expensive, time-consuming process of designing new components in-house — instead, they provided high-level specifications to their suppliers and let them design the parts, pushing cost and accountability outside the organization and diluting authority. In short, Stonecipher implemented the kind of development and design program that you’d expect from a company that wanted to reduce its assets and costs and guarantee the production of airplanes at a wide gross margin. But his plan backfired: costs ballooned as the problems of orchestrating more suppliers handling more of the work outran the savings generated by outsourcing it in the first place. The 787, named the ‘Dreamliner’, was a beautiful plane — the way that its carbon-fiber wings can flex up and down more than 25 feet make it resemble a living creature, a bird instinctively controlling its feathers as it rides the air. But its deferred costs piled up to more than $30 billion, almost ten times the cost of the 777 program.
The 787 ended up as a financial catastrophe for Boeing: even after delivering more than 1,100 Dreamliners, the program is still billions of dollars in the red. During the pandemic, production of the 787 was moved to Boeing’s North Charleston plant, which had a mandate to increase deliveries to 14 planes per month. But Boeing never came close to those targets: currently North Charleston is only delivering five to six 787s per month.
The conventional wisdom is that Boeing’s recent obsession with quarterly results, margin, and an asset-light balance sheet led to deterioration in quality control that manifested not only in assembly — the Alaska Air flight with the blown-out door — but also in design — the faulty 737 MAX software that sent planes diving toward the ground. But the conventional wisdom is only half-right. Not only did the McDonnell Douglas executives shift Boeing’s strategy to optimize for margin and profitability, but they incompetently executed their own strategy — their new plane, the 787, burned more money than any other Boeing commercial aviation airframe.
Fundamentally, Boeing’s problem was that it lost sight of the truth that advancing complex projects is only possible when command and control is concentrated, rather than dispersed. Extraordinarily committed engineers must be given great authority to execute; groundbreaking planes don’t come together simply because the unit economics are favorable or subcontractor agreements are favorably written.
There’s no sign that Boeing has taken this lesson to heart since the embarrassing state of the 787 program or the 737 MAX’s safety debacle. Before the so-called pandemic, Boeing was neck-and-neck with its chief rival in commercial jetliners, Airbus: in 2018, Boeing delivered 806 commercial aircraft and Airbus delivered 800. But the grounding of the 737 MAX in 2019, coupled with the lockdowns that started in 2020, devastated Boeing’s ability to produce planes. Its 2020 deliveries fell to 157 planes, while Airbus managed to deliver 566 planes. That year, Boeing made the decision to gut its engineering force even further, laying off 1,239 engineers and technical workers and nearly 3,800 machinists. Those cost-saving decisions made in a panic during an industry trough hampered Boeing’s ability to ramp deliveries once the lockdowns ended: in 2021 when Airbus delivered 611 planes, Boeing only delivered 340.
Boeing is still missing its delivery numbers in 2024, even as its market share among the big four domestic airlines fell from 88.7% in 2012 to 69.4% in 2023. In a few years, Delta will be flying a majority Airbus fleet; American Airlines already is. The storied American aircraft manufacturer is literally losing its home market, the densest, most mature commercial aviation market in the world, the market it built, to a state-supported European manufacturer that is outcompeting it in efficiency and volume.
Meanwhile, management is rearranging deck chairs to make them more diverse. In 2022, Boeing tied managers’ incentive compensation to the ‘diversity’ of their interview slates, meaning that their bonuses depended on whether or not they considered women, racial minorities, and the disabled for positions they were hiring for. In Boeing’s Global Equity, Diversity, and Inclusion (GEDI) 2023 Report, Sara Bowen, vice president of GEDI, Talent Intelligence, and Employee Listening, wrote: “We know diversity must be at the table for every important decision our company makes — every challenge we face, every innovation we design. Equity, diversity and inclusion are core values because they make Boeing — and each of us individually — better.”
The GEDI report boasted that racial and ethnic minorities now hold 41.4% of all jobs in U.S. Boeing Commercial Airplanes, 28.3% of all jobs in Defense, Space, & Security, and 38.2% of all jobs in Global Services. Minorities accounted for 47.5% of all new hires in 2022, and 34.4% of all promotions. More Boeing employees are disabled — in 2022, 7.7% of Boeing employees had a disability, up 1.3 points from the previous year, the report noted. The proportion of military veterans at the company, on the other hand, is declining.
But DEI is only part of the problem. Historically, Boeing has achieved great results by centralizing authority and control in the hands of the most exceptionally talented engineers. Today, the culture at Boeing is the opposite: listening sessions with the downtrodden, coddling the broken, and tiptoeing around the oppressed. Authority diffused throughout an entire organization’s hierarchy is no authority at all; accountability to technical results becomes challenging, if not impossible, when managers are serving two masters.
“Progress is every teammate acting on our Seek, Speak & Listen habits,” Bowen wrote in the 2023 report. “[It] is every teammate feeling physically and psychologically safe, and ensuring that safety for each other.” In November 2022, Boeing CEO David Calhoun told investors that the company would not introduce a new clean sheet design until the 2030s. This will be the first decade in Boeing’s history that the company will fail to bring out a new airplane; nearly a generation will pass between new aircraft launches, a gap in institutional knowledge and organizational capacity that will impose costs on the company for years to come, if not finish it off for good.
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