Glenn E. Bugos, The Prologue Group
The aerospace industry ranks among the world’s largest manufacturing industries in terms of people employed and value of output. Yet even beyond its shear size, the aerospace industry was one of the defining industries of the twentieth century. As a socio-political phenomenon, aerospace has inflamed the imaginations of youth around the world, inspired new schools of industrial design, decisively bolstered both the self-image and power of the nation state, and shrunk the effective size of the globe. As an economic phenomenon, aerospace has consumed the major amount of research and development funds across many fields, subsidized innovation in a vast array of component technologies, evoked new forms of production, spurred construction of enormous manufacturing complexes, inspired technology-sensitive managerial techniques, supported dependent regional economies, and justified the deeper incursion of national governments into their economies. No other industry has so persistently and intimately interacted with the bureaucratic apparatus of the nation state.
Aerospace technology permeates many other industries — travel and tourism, logistics, telecommunications, electronics and computing, advanced materials, civil construction, capital goods manufacture, and defense supply. Here, the aerospace industry is defined by those firms that design and build vehicles that fly through our atmosphere and outer space.
The First Half-Century
Aircraft remained experimental apparatus for five years after the Wright brother’s famous first flight in December 1903. In 1908 the Wrights secured a contract to make a single aircraft from the U.S. Army, and also licensed their patents to allow the Astra Company to manufacture aircraft in France. Glenn Curtiss of New York began selling his own aircraft in 1909, prompting many American aircraft hobbyists to turn entrepreneurial.
Europeans took a clear early lead in aircraft manufacture. By the outbreak of the Great War in August 1914, French firms had built more than 2,000 aircraft, German firms had built about 1,000, and Britain slightly fewer. American firms had built less than a hundred, most of these one of a kind. Even then aircraft embodied diverse materials at close tolerances, and those who mismanaged the American wartime manufacturing effort failed to realize the need for special facilities and trained workers. American warplanes ultimately arrived too late to have much military impact or to impart much momentum to an industry. When contracts were cancelled with the armistice the industry collapsed, leading to the reconfiguration of every significant aircraft firm. By contrast, seven firms built more than 22,500 of the 400-horsepower Liberty engines, and their efforts laid the foundation for an efficient and well-concentrated aircraft engine industry — led by Wright Aeronautical Company and Curtiss Aeroplane and Motor.
Still, the war induced some infrastructure that moved the industry beyond its fragmented roots. National governments funded testing laboratories — like the National Advisory Committee for Aeronautics established in May 1915 in the United States — that also disseminated scientific information of explicit use to industry. Universities began to offer engineering degrees specific to aircraft. American aircraft designers formed a patent pool in July 1917 — administered by the Aircraft Manufacturers Association — whereby all aircraft firms cross-licensed key patents and paid into the pool without fear of infringement suits. The post-war glut of light aircraft, like the Curtiss Jenny trainers in America, allowed anyone who dreamed of flying to become a pilot.
Most of the companies that survived the war remained entrepreneurial in spirit, led by designers more interested in advancing the state of the art than in mass production. During the 1920s, aircraft assumed their modern shape. Monoplanes superceded biplanes, stressed-skin cantilevered wings replaced externally braced wings, radial air-cooled engines turned variable pitch propellers, and enclosed fuselages and cowlings gave aircraft their sleek aerodynamic shape. By the mid-1930s, metal replaced wood as the material of choice in aircraft construction so new types of component suppliers fed the aircraft manufacturers.
Likewise, the customers of aircraft grew more sophisticated in matching designs to their needs. Militaries formed air arms specifically to exploit this new technology, which became dedicated procurers of aircrafts. Air transport companies began flying passengers in the 1920s, though all those airlines were kept afloat by government airmail contracts. European nations developed airmail routes around their colonies — served by flag-carriers like the British Overseas Airways Corporation, Lufthansa, and Aeropostale. Pan Am’s routes to Asia and Latin America, linked by flying boats built by Sikorsky, Douglas and Lockheed, was the equivalent in the American empire.
The United States was the only country with a large indigenous airmail system, and it drove the structure of the industry during the 1920s. The Kelly Air Mail Act of 1925 gave airmail business to hundreds of small pilot-owned firms that hopped from airport and airport. Gradually, these operations were consolidated into larger airlines. In 1928 — in a mix of stock market euphoria and aviation enthusiasm following Charles Lindbergh’s transatlantic flight — Wall Street financiers formed holding companies that integrated airlines with the manufacture of aircraft and engines. United Aircraft and Transport, for example, combined United Airlines with Boeing, North American Aviation, and the Aviation Corporation. These holding companies struggled for profitability following the stock market crash of 1929, and were ultimately undone in 1934 through legislation that split manufacturers and airlines — a separation that continued thereafter.
The United States was also the only country large enough for air travel to challenge rail travel, and in the 1930s airlines competed for passengers by forging alliances with aircraft manufacturers. The Boeing 247 airliner, based on its B-9 bomber design, marked the start of American dominance in transport aircraft. The Douglas DC-3, introduced in 1935, gave airlines their first shot at solvency by carrying people rather than mail. Many advances in aircraft design during the 1930s addressed the comfort, efficiency and safety of air travel — cabin pressurization, retractable landing gear, better instrumentation and better navigational devices around airports. Britain and Germany produced the best large bombers at the start of the 1930s, though by the start of the World War II American designs were better. American firms, by contrast though, were producing very few of them.
During the 1930s, the European states had begun ramping up production of military aircraft, training pilots to fly them, and building airfields to host them. Once the war began, though, factories were bombed and supply lines cut off. As it became less likely they would overwhelm their enemies with vast fleets of aircraft, German and British aircraft firms instead invested in research and engineering to create better aircraft. Under the exigency of war, Europeans developed the strategic missile, the jet engine, better radar, all-weather navigation aids, and more nimble fighters. The German Messerschmitt 262 fighter aircraft — which combined a strong turbine engine with the innovation of swept wings — approached the speed of sound. The Europeans also innovated in tactics and logistics to use fewer aircraft more effectively. The discipline of operations research grew out of British needs to use patrol aircraft more efficiently. Though American designers also proved innovative in the crucible of war, American firms clearly triumphed in mass production.
In the six-year period 1940 through 1945, American firms built 300,718 military aircraft, including 95,272 in 1944 alone. In the previous six-year period, American firms built only 19,587 aircraft, most of those civil. In 1943, the aviation industry was America’s largest producer and employer — with 1,345,600 people bent to the task of making aircraft. A vast array of firms — especially automobile makers — fed this rapid escalation of production. Engineers disaggregated aircraft into smaller parts to parcel out to subcontractors, managed distributed manufacturing, and devised the concept of the learning curve to forecast when cost reductions kicked in. By the end of the war, Americans firmly believed in the doctrine of air power. They invested in their belief, and for the next half-century Americans would set the agenda for the aircraft industry around the world. Mass production, though, slipped from that agenda. On VJ Day the American military cancelled all orders for aircraft, and assembly lines ground to a halt. Total sales by American aircraft firms were $16 billion in 1944; by 1947 they were only $1.2 billion. Production never again reached World War II levels, despite a minor blip for the wars in Korea and Vietnam. Instead, research ruled the industry.
The Cold War
The Berlin airlift of 1947 marked the start of the Cold War between the United States and the Soviet Union, a symbolic conflict in which perceptions of aerial might played a key role. Once they divested themselves of their surplus plants, American aircraft firms rushed to incorporate into their designs the technological advances of World War II. The preeminent symbol of these efforts, and of the nature of the Cold War, was the massive Boeing B-47 long-range strategic bomber, with six engines and swept wings. Boeing built 2,000 B-47s, following its first flight in December 1947, and emerged as the dominant builder of strategic bombers and large airliners — like the B-52 and the 707. Also symbolizing this conflict was the needle-thin rocket-powered Bell X-1 which, in December 1947, became the first aircraft to break the sound barrier. The X-1 was the first in the X-series of experimental aircraft – sleek, specially built research aircraft that jousted with Soviet aircraft to set speed and altitude records. More importantly, the aerospace industry made new types of vehicles to join the half-century old propeller-driven airplane in the skies.
New technologies prompted a massive restructuring of the industry. Established airframe firms shifted from manufacturing to research, while the military channeled funds to technology-specific startup firms. For example, Sikorsky, Hiller and Bell quickly dominated the market for new type of airframe known as a helicopter. Electronics specialists like Raytheon, Sperry, and Hughes became prime contractors for the new guided missiles, while airframe manufacturers subcontracted to them. Turbojet engines were the most disruptive new technology. Turbojets shared little in common with piston engines so two firms specializing in steam turbines — General Electric and Westinghouse — grabbed the bulk of jet engine orders until Pratt & Whitney caught up. Aircraft firms also struggled to modify their airframes for the greater speeds and altitudes possible with jet engines. Those firms that failed were superceded by those that succeeded — notably McDonnell Aircraft and Lockheed.
Intercontinental ballistic missile programs, started in 1954, fueled the micro-level restructuring of the industry. ICBMs were touted as “winning weapons” to replace massive numbers of aircraft, so missile firms invested in smaller but better factories — with clean rooms and test chambers — rather than in cavernous assembly buildings. Because of the complexity of the designs, the reliability required of each part, and the hurry in which the missiles had to be designed and built, new management models emerged from the military and aerospace firms. The Aerospace Corporation, Space Technology Laboratories of TRW Inc., and Lockheed Missiles & Space were three firms that proclaimed proprietary expertise in this new aerospace management. The ICBM efforts introduced, to all high-tech industries worldwide, the ideal and techniques of program management and systems engineering. When Europeans fretted over The American Challenge in the 1960s, they meant not so much American technology as management methods like these that generated technical innovation so relentlessly. Young men flocked to aerospace because it was cool and cutting-edge.
Also revolutionary were the spacecraft and the rockets that lifted them into orbit. The neologism “aerospace” reflected the shape of the money that flowed into the industry following the Soviet launch of Sputnik in October 1957. The U.S. Aircraft Industries Association changed its name to the Aerospace Industries Association of America, so the public might think it natural that the firms that built aircraft should also build vehicles to travel through air-less space. Furthermore, the laboratories of the National Advisory Committee for Aeronautics formed the kernel of the National Aeronautics and Space Administration, then bent the efforts of academic aeronautics toward hypersonics and space travel. In 1961, NASA got the mission to send an American to the Moon and return him safely to Earth before the decade was out. NASA built enormous space ports in Florida and Texas, enhanced its arsenal of research laboratories, bolstered its own network of hardware contractors, opened up new areas of material science, and pioneered new methods of reliability testing. Following the success of Apollo, in the 1970s NASA invested ahead of demand to create the space shuttle for regular access to space, then struggled to find ways to industrialize space.
Program management and systems engineering were applied to military aircraft in the 1960s, as the Defense Department took a more active role in telling the industry what to make and how to make it. Because of a uniformity in contracting rules, this was one of the few epochs in which the aerospace industry approached monopsony — dominated by a single customer. This systems engineering mentality drove greater design costs up-front. Aircraft grew more expensive, so the fewer produced were expected to have longer lives with more frequent remanufacturing. To get more diverse types of engineering talent involved in design, the Defense Department insisted that airframe firms — former competitors — team to win aircraft contracts. Key members in these teams were avionics firms, as airframes became little more than platforms to take electronic equipment aloft. Fewer contracts meant that Congress, voicing concern over the defense industrial base, made more procurement decisions than experts in the military or NASA. Meanwhile, profits among American aerospace firms remained high compared with almost any other industry.
Amidst all the other shocks to the American economy in the 1970s, in 1975 the United States would record its last trade surplus of the twentieth century. While other American industries lost ground to European or Japanese competitors, American aircraft have remained in consistent demand. Since the mid-1960s, aerospace products have comprised between six and ten percent of all American merchandise exports. The U.S. Export-Import Bank was nicknamed the “Boeing Bank” for its willingness to lend other countries money to buy American airliners. Yet increasingly, the aerospace industry was seen as a cause of American economic failure. So much federal research and development funding filtering through the aerospace firms distorted innovation so that American consumer products suffered. Conglomerates formed in the late 1960s around aerospace firms — like LTV and Litton — suggested that their core competence was not aerospace systems but the ability to read government contracting trends. Aerospace firms that were not consolidated in the mid-1970s, after aircraft lost in Vietnam were replaced, pursued diversification strong in the belief that the engineering skill that made American aircraft so dominant could also make world-class busses and microwave ovens. They failed. Waste, fraud and abuse dominated discussion of military aerospace. Persistent cost overruns and delays suggested no one in the industry took efficiency seriously.
Matters got worse in the 1980s. Republican administrations channeled enormous funds into the aerospace firms dotting the American sunbelt, without a concomitant increase in aircraft actually built. Efforts to build a space-based missile defense system symbolized the accepted futility of this spend-up. Likewise, NASA poured money into Space Shuttle operations without an increase in flights. NASA engineers sketched, then resketched plans for an international space station to create a permanent base in space. American aerospace firms seemed overly mature, and European firms took advantage.
An International Industry
International politics has always played a role in aviation. Aircraft in flight easily transcended national borders, so governments jointly developed navigation systems and airspace protocols. Spacecraft overflew national borders within seconds so nations set up international bodies to allocate portions of near-earth space. INTELSAT, an international consortium modeled on COMSAT (the American consortium that governed operations of commercial satellites) standardized the operation of geosynchronous satellites to start the commercialization of space. Those who dreamed of space colonization also dreamed it might be free of earthly politics. Internationalization more clearly reshaped aerospace by helping firms from other countries find the economies of scale they needed to forge a place in an industry so clearly dominated by American firms.
Only the Soviet Union challenged the American aerospace industry. In some areas, like heavy lifting rockets and space medicine, the Soviets outpaced the Americans. But the Soviets and Americans fought solely in the realm of perceptions of military might, not on any military or economic battleground. The Soviets also sold military aircraft and civil transports but, with few exceptions, an airline bought either Soviet or American aircraft because of alliance politics rather than efficiencies in the marketplace. Even in civil aircraft, the Soviet Union invested far more than their returns. In 1991, when the Soviet Union fractured into smaller states and the subsidies disappeared, the once mighty Soviet aerospace firms were reduced to paupers. European firms then stood as more serious competitors, largely because they had developed a global understanding of the industry.
Following World War II, the European aircraft industry was in shards. Germany, Italy, and Japan were prohibited from making any aircraft of significance. French and British firms remained strong and innovative, though these firms sold mostly to their nation’s militaries and airlines. Neither could buy as many aircraft as their American counterparts, and European firms could not sufficiently amortize their engineering costs. During the 1960s, European governments allowed aircraft and missile firms to fail or consolidate into clear “national champions:” British Aircraft Corporation, Hawker Siddely Aviation, and Rolls-Royce in Britain; Aerospatiale, Dassault, SNECMA and Matra in France; Messerschmit-Bölkow-Blohm and VFW in Germany; and CASA in Spain. Then governments asked their national champions to join transnational consortia intent on building specific types of aircraft — like the PANAVIA Tornado fighter, the launch vehicles and satellites of the European Space Agency or, most successfully, the Airbus airliners. The matrix of many national firms participating variously in many transnational projects meant that the European industry operated neither as monopoly nor monopsony.
Meanwhile international travel grew rapidly, and airlines became some of the world’s largest employers. By the late 1950s, the major airlines had transitioned to Boeing or Douglas-built jet airliners — which carried twice as many passengers at twice the speed in greater comfort. Between 1960 and 1974 passenger volume on international flights grew six fold. The Boeing 747, a jumbo jet with 360 seats, took international air travel to a new level of excitement when introduced in January 1970. Each nation had at least one airline, and each airline had slightly different requirements for the aircraft they used. Boeing and McDonnell Douglas pioneered new methods of mass customization to build aircraft to these specifications. The Airbus A300 first flew in September 1972, and European governments continued to subsidize the Airbus Industrie consortium as it struggled for customers. In the 1980s, air travel again enjoyed a growth spurt that Boeing and Douglas could not immediately satisfy, and Airbus found its market. By the 1990s, the Airbus consortium had built a contractor network with tentacles around the world, had developed a family of successful airliners, and split the market with American producers.
Aerospace extends beyond the most industrialized nations. Walt Rostow in his widely read book on economic development used aviation imagery to suggest a trajectory of industrial growth. The imagery was not lost on newly industrializing countries like Brazil, Israel, Taiwan, South Korea, Singapore or Indonesia. They too entered the industry, opportunistically, by setting up depots to maintain the aircraft they bought abroad. Then, they took subcontracts from American and European firms to learn how to manage their own projects to high standards. Nations at war — in the Middle East, Africa, and Asia — proved ready customers for these simple and inexpensive aircraft. Missiles, likewise, if derived from proven designs, were generally easy and cheap to produce. By 1971, fourteen nations could build short-range and air-defense missiles. By the 1990s more than thirty nations had some capacity to manufacture complete aircraft. Some made only small, general-purpose aircraft — which represent a tiny fraction of the total dollar value of the industry but proved immensely important to a military and communication needs of developing states. The leaders of almost every nation have seen aircraft as a leading sector — one that creates spin offs and sets the pace of technological advance in an entire economy.
A Post-Cold War World
When the Cold War ended, the aerospace industry changed dramatically. After the record run up in the federal deficit during the 1980s, by 1992 the United States Congress demanded a peace dividend and slashed funding for defense procurement. By 1994, the demand for civil airliners also underwent a cyclical downturn. Aerospace-dependent regions — notably Los Angeles and Seattle — suffered recession then rebuilt their economies around different industries. Aerospace employed 1.3 million Americans in 1989 or 8.8 percent of everyone working in manufacturing; by 1995 aerospace employed only 796,000 people or 4.3 percent of everyone working in a manufacturing industry. As it had for decades, in 1985 aerospace employed about one-fifth of all American scientists and engineers engaged in research and development; by 1999 it employed only seven percent.
Rather than diversify or shed capacity haphazardly, aerospace firms focused. They divested or merged feverishly in 1995 and 1996, hoping to find the best consolidation partners before the federal government feared that competition would suffer. GE sold its aerospace division to Martin Marietta, which then sold itself to Lockheed. Boeing bought the aerospace units of Rockwell International, and then acquired McDonnell Douglas. Northrop bought Grumman. Lockheed Martin and Boeing both ended up with about ten percent of all government aerospace contracts, though joint ventures and teaming remained significant. The concentration in the American industry made it look like European industry, except that in the margins new venture-backed firms sprang up to develop new hybrid aircraft. Funding for space vehicles held fairly steady as new firms found new uses for satellites in communications, defense, and remote sensing of the earth. NASA reconfigured its relations with industry around the mantra of “faster, better, and cheaper,” especially in the creation of reusable launch vehicles.
Throughout the Cold War, total sales by aerospace firms has divided one-half aircraft, with that amount split fairly evenly between military and civil, one quarter space vehicles, one-tenth missiles, and the rest ground support equipment. When spending for aerospace recovered in the late 1990s, there was the first significant shift toward sales of civil aircraft. After a century of development, there are strong signs that the aircraft and space industries are finally breaking free of their military vassalage. There are also strong signs that the industry is becoming global — trans-Atlantic mergers, increasing standardization of parts and operations, aerospace imports and exports rising in lockstep. More likely, as it has been for a century, aerospace will remain intimately tied to the nation state.
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Citation: Bugos, Glenn. “History of the Aerospace Industry”. EH.Net Encyclopedia, edited by Robert Whaples. August 28, 2001. URL http://eh.net/encyclopedia/the-history-of-the-aerospace-industry/