Airplane industry

The manufacture of aircraft, missiles, and related systems is a high-profile and a high-risk industry. Aerospace sales account for nearly 2 percent of the nation’s GDP, generating more than $155 billion in sales and $10.8 billion in profits in 2000. Success factors include science and technology, the state of the economy, competition, and customer priorities.
The army issued the country’s first airplane production contract to the Wright brothers in 1908. Airplane companies were not profit-making manufacturing ventures, but rather small-scale establishments. Many short-lived companies appeared prior to 1917, along with more durable firms such as Martin and BOEING. World War I accelerated industry growth and cemented a permanent relationship with the military. Airplane orders rose dramatically; most were for license production of superior European designs. Because of wartime production control by the automobile industry, airplane production levels never reached anticipated levels. After the armistice, the government canceled more than $100 million in contracts, and many companies folded.
Growing legislative support, a strong economy, and technological innovations helped the postwar airplane industry grow. New firms capitalized on novel approaches to design or manufacturing. Many of these companies, including Douglas, Lockheed, and Northrop, gained publicity through races and record-breaking flights. Legislation in the 1920s stimulated the industry to design transport aircraft and ensured the continuity of government orders. Popular interest in aviation grew, and financiers began investing in manufacturers. Research led to faster, safer, and more fuel-efficient airplanes. Large trusts such as United Aircraft and Transport Corporation, North American Aviation, and Curtiss-Wright appeared, consolidating airplane manufacturers and airlines under one corporate umbrella. These lasted until 1934, when antitrust legislation permanently separated manufacturers from airline operators.
Through the 1930s, domestic and foreign demand for airliners and warplanes grew dramatically. As the government’s call for defenserelated manufacturing intensified, companies frequently sought government aid to build and staff new factories.
After Pearl Harbor, production came under government control. Companies relied on subcontracting and licensing to fulfill mass-production orders. More than 300,000 complete airplanes, 800,000 piston engines, and 700,000 propellers were manufactured between 1940 and 1945. However, as with World War I, sudden contract cancellations at war’s end threatened the survival of many manufacturers.
Renewed demand for commercial aircraft softened the blow for several companies. Douglas, the largest prewar manufacturer of airliners, returned immediately to airliner manufacture, as did Lockheed. Attempts by other firms to enter the airliner market proved unsuccessful. Other firms survived by moving into niche markets such as helicopters, light aircraft, and subassemblies.
The president’s Air Policy Commission in 1947 issued a report calling for the maintenance of a strong airplane industry to supply the armed forces. Firms began experimenting with jet propulsion and high-speed aerodynamics. The Korean War allowed airplane manufacturers to gain experience mass-producing jet aircraft. The decline in military orders after the war was offset by a rise in demand for commercial aircraft. The stage was thus set for the introduction of jet airliners, which revolutionized not only commercial air transport but also the economics of the industry.
In the mid-1950s, Boeing parlayed its experience with mass-producing jet bombers into the design of the 707 airliner, which entered service at the end of the decade. Douglas introduced its DC-8 jet airliner a year later. Other transitional designs appeared as firms sought to discover a new equation of efficiency, economy, and reliability to accommodate jet engines.
Beginning in the late 1950s, the airplane industry became the aerospace industry as a result of increased military demand for missiles and related technologies. Manned and unmanned spaceflight represented a high-profile opportunity for many firms to succeed in a new field.
Despite efforts to diversify, by the 1960s increasing project costs and decreasing unit quantities per order threatened to bankrupt many companies. There were several high-profile mergers, including McDonnell Douglas and Martin Marietta. Firms came under intense criticism for controversial military projects that were called too costly, over-managed, and unnecessary. By the 1970s, military and commercial sales had stabilized at $20 billion. Although the number of aircraft produced dropped considerably; critics claimed the industry operated at overcapacity. Manufacturers sought to improve economies of scale by introducing intercontinental widebody airliners. Boeing’s 747 was the first, followed by McDonnell Douglas’s DC-10 and Lockheed’s L- 1011. However, with rising fuel costs airlines could barely afford them. Efforts to develop supersonic transports were halted by predictions of low passenger yield, poor fuel economy, and potential environmental hazards.
The doldrums of the 1970s were overcome by the effects of airline deregulation and increased military spending, beginning in the early 1980s. The trend toward fewer numbers of increasingly expensive aircraft continued into the 1990s, exemplified by the Rockwell B-1 and Northrop B-2 bombers and the McDonnell Douglas F-18 and Lockheed F-117 fighters. The “make-orbreak” nature of such contracts, and the relaxation of antitrust scrutiny in the face of international competition, resulted in more joint projects and mergers in the 1990s. For example, the team of Lockheed/Boeing/General Dynamics developed the YF-22 fighter for the air force; the rival YF-23 was developed by Northrop and McDonnell Douglas. Shortly thereafter, Northrop and Grumman announced their merger, followed by Lockheed and Martin Marietta that same year. In 1997, McDonnell Douglas merged with longtime commercial rival Boeing to create the world’s largest aerospace firm.
Private and business aviation was never as lucrative as commercial and military aviation. By the late 1970s, major manufacturers had left the field to smaller, specialist companies such as Piper, Cessna, and Lear. After years of strangulation caused by product liability litigation, domestic purchases have risen steadily due to recent legislation designed to reduce the impact of liability suits.
The future of the aerospace industry will likely be oriented toward increasing international competition. Newly opened markets in Asia and eastern Europe represent both opportunities and challenges. U.S. firms will doubtless face tough competition from overseas private and state-owned manufacturers for the civil and military markets of the new millennium.
Further reading
Biddle, Wayne. Barons of the Sky: From Early Flight to Strategic Warfare, the Story of the American Aerospace Industry. New York: Simon & Schuster, 1991.
Pattillo, Donald M. Pushing the Envelope: The American Aircraft Industry. Ann Arbor: University of Michigan Press, 1998.
Rae, John B. Climb to Greatness: The American Aircraft Industry, 1920–1960. Cambridge, Mass.: MIT Press, 1968.