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Twenty months after being grounded, the latest version of Boeing
licensed in letters
If only these were routine times. While the MAX, as it is called, was being tested and modified, the coronavirus pandemic severely depressed the demand for air travel. Boeing’s internal projections indicate that it may be years before the global transportation system returns to trend, meaning 3-5% annual growth.
However, that is a conservative estimate. Depending on how quickly coronavirus vaccines are distributed, travel could pick up quickly. There could be an increase in demand for 737 jets as early as 2021, adding to the backlog of 4,000 orders for the plane that the company has already booked.
Boeing needs that raise, because it is struggling. Thousands of workers have been laid off, and more layoffs are coming. But there is a broader dimension to the 737 story, one that encompasses America’s place in the world and its ability to preserve its superpower status. The 737 MAX is more important than many people, even industry observers, realize.
There’s a lot on the wings of the returning 737 MAX besides the passengers.
Wikipedia
What follows are five ways the return of the 737 MAX intersects with US national security: I should point out up front that Boeing and several of its key suppliers contribute to my think tank.
Boeing is the largest exporter of advanced technology in the United States. Commercial transportation (passenger airplanes) is among the most complex technological systems ever created. Only two companies, Boeing and Airbus, have managed to meet global demand across the full range of product offerings, from single-aisle twinjets to jumbo jets. Boeing’s success in doing this has made it America’s largest exporter for more than a decade.
That fact largely explains why the United States remains the world leader in aerospace, at a time when the United States has been losing its competitive edge in other technology sectors such as microelectronics. Yet 80% of Boeing’s order book for commercial aircraft is 737s. You cannot sustain a globally competitive airliner producer just by building wide bodies. Therefore, Boeing’s future in aviation and America’s future in the aerospace industry depends largely on whether the 737 MAX regains its status as the world’s most popular commercial transportation.
Boeing is a world-class aerospace innovator. Very few companies have built up the range of aerospace skills that Boeing has developed over a century. It is a national asset. The company has been recognized by the National Academy of Engineering for creating some of the greatest technological achievements of the 20th century, including the first wide-body passenger aircraft (the 747) and the first commercial transportation designed entirely on computers (the 777). The 787 Dreamliner is the first airliner with a fuselage made of composite materials instead of metal.
Boeing’s ability to innovate in commercial aviation, in military systems and in space depends on the willingness of shareholders and stakeholders to place bets on new technologies that may not pay off for decades. But it also depends on something else: a constant source of income to sustain design and engineering teams working on ideas that are not yet profitable. More than any other product in the company’s lineup for the past 50 years, it is the 737 that has provided that steady cash flow. Without the 737 MAX, the only version of the 737 Boeing still makes, its ability to innovate would be hampered.
Boeing supports thousands of American companies in its supply chain. Although 80% of the revenue generated by Boeing airliners comes from foreign customers, more than 80% of the suppliers that provide production inputs are located in the United States. Therefore, the company’s commercial transportation lines play a vital role in maintaining an industrial ecosystem that supports the entire national aerospace sector. Many of these providers, such as Collins Aerospace and Spirit AeroSystems
SPR
Boeing is not like your typical multinational company that sets up manufacturing where costs are lower. It has chosen to concentrate all of its vast manufacturing capacity within the borders of the US and attracts most of its suppliers from within those borders as well. Because aerospace skills are interchangeable across various products, Boeing’s manufacturing strategy allows US defense system producers to be less dependent on overseas sources and more likely to secure low prices due to economies of scale.
Boeing’s commercial and defense companies are interdependent. When the Cold War ended, Boeing absorbed several major military contractors to become the world’s second-largest defense company. Its extensive defense and space business builds fighter jets, refueling tankers, radar jets, missiles, military satellites, and unmanned aerial vehicles. While the defense side is larger today than it was at the height of the commercial transportation boom, the two sides of the company are functionally and financially interdependent. If the business side falters due to a problem with the 737 or some other product, the defense side will eventually do too, depriving the Pentagon of a key supplier.
This in part reflects the aforementioned skill fungibility. Boeing’s tankers, radar planes, and maritime patrol planes are derived from its commercial transports (including the 737). More fundamentally, the cycles of demand for commercial aerospace and defense products tend to vary inversely, such that when defense increases, commercial decreases, and vice versa. The financial stability of the company over time therefore depends on having a presence in both markets. If the 737 does not return to routine service and commercial business declines, the viability of the military side could suffer in a future defense recession.
Boeing is a product of free enterprise, unlike Airbus, unlike the Chinese aerospace industry. The United States and China are currently locked in a great power struggle, and the outcome will likely be determined by which country has the best system to promote economic progress. Boeing is a leading example of how America’s free enterprise system can produce world-class companies that lead their industries in market penetration and innovation. The return of the 737 to service is critical to ensuring that Boeing does not follow the path of other former industrial icons such as General Electric.
GIVE
Boeing’s competitor Airbus has created confusion in popular culture about the sources of each company’s success. The bottom line, however, is simply this: Boeing became a world leader in aerospace largely through its own energy and business, with only modest help from Washington. Airbus from its inception was the recipient of illegal government subsidies, without which its existence would have been doubtful. The return to service of the 737 MAX is in part a test of whether America’s last surviving commercial transportation builder, a product of the American economic system, can prevail in a world where its main rivals have chosen to rely on forces outside the market. for most of its operations. strength. If Boeing doesn’t recover, it’s a bad sign for America’s future.
