The Boeing 747
The background to the 747, and the source of most of its troubles, lay in its engines. These were of a new type, known as the high-bypass turbofan. In contrast to earlier jet engines, which had the long and slender shape of a cigar, they introduced an enormous and gaping mouth, with a very large rotating fan in the front. This arrangement produced high thrust with relatively low noise with excellent fuel economy. The term "high-bypass" reflected the fact that most of the air blown by the fan would bypass the engine core, allowing the fan to act as a high-speed propeller.During the mid-1960s, the Air Force held a burgeoning interest in such engines, which were to power transport aircraft of unprecedented size. These would support the policy of Defense Secretary Robert McNamara, whereby the U.S. was to build up its airlift and sealift capacity to be ready to carry troops and equipment wherever America might choose to intervene. In August 1965, the Air Force picked a high-bypass design from General Electric, the TF-39, and marked it for development. Mounting a fan with diameter of eight feet, this engine was to produce 40,000 pounds of thrust. A month later, in September, the Air Force awarded a contract to Lockheed for the C-5A, the transport that this engine would power. Newsweek later referred to this aircraft as Moby Jet. Placed within a football stadium, it would stretch from the goal line to the opponents' eighteen-yard line. Its wings would overhang both teams' benches. Its cargo would accommodate heavily-armored tanks. Fully loaded, its weight of 769,000 pounds would double that of the largest commercial jetliners. Douglas and Boeing had competed with Lockheed for this award, coming forth with similar designs. At Boeing, the immediate question was how to turn such a concept into something that looked like an airliner. For several reasons, the C-5A as such would not do. It was too big; it could carry far more passengers than the market would provide. Its planned cruising speed, 506 mph, would also be too slow. It would be costly to operate, and its design was to emphasize the military requirements necessary for operation from short and unpaved landing strips rather than from hard-surface airports. Nevertheless, Boeing's work on the C-5A offered a basis for an airliner that took shape as the 747. Right at the start, this project held the strong interest of Juan Trippe, chairman of Pan American World Airways. Pan Am was the nation's leading overseas carrier. While it held no domestic routes, in its chosen realm of international travel, it carried more passengers than all other U.S.-flag airlines combined. Within the aviation industry, Trippe was a power in his own right. He had single-handedly launched the jet age, in October 1955, by placing a $269 million order for Boeing 707 and Douglas DC-8 jetliners. Now, a decade later, he had the strength to launch the 747. His vice-president of engineering, John Borger, began talking with Boeing officials on the very day that Lockheed won the C-5A. Now, by prearrangement, Boeing's advanced-design policy shifted focus to the 747. The group's manager, Joseph Sutter, knew he would head up the new project as soon as the Air Force gave the C-5A to Lockheed. Market projections also favored the 747-and called for it to be huge in size. As the Boeing vice-president John Steiner describes it, aircraft are designed to fit the market four years after they enter service. For the 747, that was to be 1973 or 1974. Traffic had been shooting up for several years at annual rates of increase of 10 to 12 percent; lately those rates had gone up further. Pan Am, carrying nearly six million passengers in 1965, would top the ten million mark only four years later. Yet, if one projected no more than that, growth rates would stay below 12 percent, then airliners delivered in 1970 should accommodate 350 to 375 people. An early issue called for selection of an engine. The big General Electric TF-39 was far from being the obvious choice. GE's management, believing that this engine would find a civilian market, expected to pitch it to the airlines after the Air Force had paid for its basic development. It quickly became apparent, however, that for the 747, the TF-39 was too noisy. While this problem was far from insuperable, it would demand a major rework, a significant civilian effort that would run parallel to the military's. GE took the view that the Air Force would receive priority. That did not suit Boeing, and the chance for a deal fell through. GE's main competitor, Pratt & Whitney, had a different spirit. That firm had built a high-bypass turbofan of its own for the Air Force engine competition. While it had lost to GE's TF-39, Pratt's design won new life as an engine for the 747. The initial concept called for 41,000 pounds of thrust, matching the performance of the TF-39. Pratt called its engine the JT-9D. In turn, the selection of Pratt was propitious, for this contractor had a virtual monopoly (with a market share of some 90 percent) on jetliner engines that were already in production.. By contrast, GE's strength lay in military engines. At Boeing, Joe Sutter's engineers proceeded to prepare design concepts for Trippe's latest world-beater. Initial thinking, during 1965, held the view that the 747 might emerge as something resembling a big 707 with a double-deck cabin. Trippe, who had a strong interest in air freight, insisted, however, that the 747 was to permit easy conversion for use in cargo hauling. His requirement called for the plane to accommodate two side-by-side rows of containers of the type that were traveling by ship, rail, and truck. Their standard dimensions included width and height of eight feet. To fit them into a fuselage of circular cross section, then, would require a diameter of 21 feet. Here was the origin of the wide-body cabin, with its double aisles and ten-abreast seating. It would give a feeling of spaciousness that travelers would greatly appreciate. From this basic decision came others. The 747 might sustain hard landings in which those containers would rip free of their moorings and hurtle forward with crushing force. Hence it would be a good idea to put the pilot and crew out of the way, with the flight deck high above the cargo deck. That would also offer the opportunity to install a big upward-swinging nose door for easy loading of freight, as on the C-5A. For aerodynamic reasons, however, this flight deck could not simply sit atop the front fuselage like a camel's hump. It would have to be faired smoothly with the rest of the fuselage, sweeping gently to the back. This meant there would be a good deal of extra space to the rear of the cockpit. Sutter thought this would be a good place to put air-conditioning ducts. Trippe had other ideas. Some 20 years earlier, Trippe had supported Boeing in another venture that had built a four-engine airliner called the Stratocruiser. It had featured a downstairs cocktail lounge that longtime travelers remembered with pleasure. He now took the view that a similar lounge in the 747, reached by a spiral stairway, would be just the thing. In subsequent versions of the 747, it would grow into a true passenger deck. But even in the earliest models, this lounge would offer a popular center of cheer. Meanwhile, other Boeing officials were addressing the question of where to build their leviathan. The company's existing production facilities were busy building the 707, 727 and 737; hence Boeing would need new facilities for the 747. The search for a new plant site led to Everett, a lumber town 30 miles north of Seattle. The new factory, quite simply, would feature the largest enclosed space in the world, within a building spanning 40 acres. At Cape Canaveral, the Vehicle Assembly Building had held the previous record, with 130 million cubic feet under roof; the new Boeing plant would be 50 percent larger. The completed production center would span more than a square mile and would have a concrete apron with room for 20 of the big jets. Then in April 1966, Trippe formally ordered 23 passenger and two freight versions of the 747, for a total of $531 million. A decade earlier, his $269 million jetliner order had set a record for dollar value; this 1966 order now set a new record. Over the next three months, five other airlines signed on for 28 more 747s. With these orders, the die was cast. As the orders rolled in, however, managers at Boeing and Pan Am followed a course that soon had the weight of the 747 running badly out of hand. Initial design decisions had been relatively straightforward, with the planned weight being 655,000 pounds as of April 1966. Pratt & Whitney was prepared to accommodate such a design using its proposed engine, the JT-9D, and expected to increase its power according to a careful plan. When it entered service in 1969, the engine was to produce 41,000 pounds of thrust. This thrust would increase to 44,000 in new versions planned for 1972. Pratt's designers would do this by pushing up the turbines' operating temperatures; in essence, this engine would deliver more power by running hotter. There are, however, a number of other ways to boost an engine's rated power. The view within Boeing, strongly encouraged by Pan Am, was that Pratt could deliver a 44,000 pound engine a lot sooner and enable the 747 to grow larger still. Once this point of view took hold, Boeing's managers began acting like kids in a candy store. As early as April 1966, as Trippe was placing his order, Boeing was already anticipating that the plane's weight would run to 680,000 pounds. There were plenty of opportunities to go further. For a while, people talked of putting a swimming pool in the upstairs lounge. Though that notion fell by the wayside, the cocktail lounge by itself added more than two tons to the empty weight. More tons went in when Boeing lengthened the fuselage to accommodate extra seats. The additional passengers meant larger and heavier galleys for the food service, which in turn called for weightier structural bracing. The British airline BOAC declared that noise rules of the London Airport Authority would demand quieter engines. The 747's engine pods took on an additional half-ton of sound-absorbing linings. Pratt & Whitney now had to play catch-up. Its basic engine would now be quite inadequate; it had to offer more thrust, and quickly. In October 1966, Pratt achieved a small rise in the turbine temperature, pushing the thrust to 42,000 pounds. This was pushing limits as well and would be all it could offer for a while. In June 1967, Bruce Connelly, Boeing's vice-president of sales, sent a letter to Pan Am's chief technical managers. He stated that the 747's weight was on its way to 710,000 pounds. Even then, the 747 would be lighter than the C-5A. It was to fly considerably faster, however, which is why its engines needed more power. To Pan Am, the 747's weight meant a cut in the passenger capacity that would slice the profit on each flight by as much as $20,000. Alternately, the plane would fall short in range on a number of key overseas routes. Either way, this design would be unacceptable. Boeing nevertheless hoped that Pan Am would accept such limitations on the grounds that better engines soon would restore the 747 to its full promise. Yet, in the words of Laurence Kuter who headed Trippe's technical staff, "There was no doubt that Pan Am was convinced that it was Boeing, not Pan Am, that became pregnant when the 747 was conceived. Pan Am expected Boeing to make good on all commitments to the time of delivery and all elements of guaranteed airplane performance that were specified in the half billion dollar contract." Fortunately, Pratt had some power in reserve. By strengthening the engine's compressor and turbine, it could arrange for the engine to run at higher rotational speeds, processing more airflow and yielding more thrust. This would boost takeoff power to 43,500 pounds. Late in 1967, Pratt offered more. By providing water injection, that firm would boost the takeoff thrust to 45,000 pounds. Pratt promised to deliver such engines late in 1969. Water injection was a specialty of the house at Pratt, dating to the piston-driven aircraft motors of World War II. Small quantities of water injected into an engine's airflow would evaporate within the engine, cooling the air and making it denser. This denser air then could burn more fuel, for extra power. This same principle had carried over to jet engines. Pratt had used water injection on the engines of the Boeing 707. Its additional thrust helped assure safe takeoffs. One senior Pan Am captain declared that he would rather lose an engine on takeoff than lose his water supply. In 1967, however, Pratt, too, was overextending itself. It was promising a hotter, heavier engine of greater complexity: the plumbing and controls needed for water injection would not be simple. Yet this firm was holding to the same delivery schedule of a year and a half earlier, when the design of the JT-9D had been so much less demanding. It was these engines that would determine whether Boeing could build complete airplanes rather than gliders, and whether Pan Am and other airlines could put the 747 into service. In pursuing this program, Boeing faced difficulties that went beyond the sheer size of the aircraft and the need for its vast new Everett facility. The 747 set new marks in complexity. For instance, it was so large that not one of its control surfaces, such as ailerons or rudder, could be deflected through the use of a pilot's muscles. The demands of safety then required four independent hydraulic systems. Earlier jetliners, such as the 727, had gotten along with only two. The demands on suppliers also were correspondingly greater than on the earlier programs. In turn, the task of assembling wings and tail surfaces was that much more complex. At the outset, Boeing's senior management had been well aware that the 747 would soak up money for several years before it could begin to generate revenue by delivering complete aircraft. The up-front expenses would include building and equipping the Everett factory, paying wages and benefits for its workforce, and assembling the first flyable 747 aircraft. Yet even then the company would not be ready to deliver them to customers such as Pan Am. Those initial production aircraft would first undergo extensive flight tests that would win a federal Certificate of Airworthiness for the 747. During these tests, Boeing would have to continue paying salaries as well as interest on borrowed money. This process of certification represented a legal requirement that the 747 would have to meet before it could see use in scheduled service. Only after completion of this process would Boeing be free to deliver those airliners and receive payment. Hence, during 1966, the company laid financial groundwork by assembling a billion-dollar kitty. It raised $420 million through sale of notes, convertible debentures, and stock. Boeing's bankers helped as well, with a $400 million line of credit. The firm owned a subsidiary that was building gas turbines; the president, William Allen, ordered it sold. Airlines, placing orders for the 747, also contributed. They had usually paid no more than one-fourth of the purchase price prior to delivery. For the 747, however, they would pay half. Pan Am, for one, would pay as much as $275 million in advance. Then in 1967, company underwriters converted recently-issued debentures into new stock, thus placing Boeing in a position to sell still more securities. As work began at Everett, however, the 747's assemblers proved not necessarily to be the highly skilled production workers upon whom Boeing had long relied. The mid-1960s had brought a boom and had taken available aircraft assemblers for existing programs, leaving relatively few for the 747. During 1967, amid the buildup for this newest effort, Boeing hired 37,000 employees and let 25,000 go. The company was resting its prospects on its most inexperienced workers. Then the engine problems hit home. Coming to the fore following the rollout of the first 747 in September 1968, these problems dogged the program as it proceeded through initial production and flight test. No one ever expected that the rollout would lead in mere weeks to commercial service, for Boeing had planned from the outset to use the entire year of 1969 in testing five such aircraft. Still, in the words of John Newhouse of the New Yorker: "William Allen, now the honorary chairman, says that what he remembers best about the engines is that "they didn't work." Boeing used eighty-seven engines in testing the 747; sixty of them were destroyed in the process. At one time, Boeing had four 747s to be tested, and couldn't get more than one of them off the ground at a time, because so few of the engines were working. By 1969, finished 747s were rolling off the line, but there were no engines for them. Instead, Boeing was obliged to hang cement blocks on the wings so as to balance the airplanes and prevent them from tipping over." The flight tests disclosed a new engine problem known as "ovalization," which cropped up only after hundreds of hours in the air. It resulted from wear in the compressor assemblies that distorted the circular cross sections of elements of the compressor into an oval shape, with loss of power and considerable increase in fuel consumption. This resulted from the engines' high thrust, which reacted against their supports and bent the engine casings. Though cure emerged in the form of a steel yoke that would stiffen the case, it took time to apply. Meanwhile, new orders were drying up. During 1967, 1968, and 1969, the total value of airliners on order from Boeing, of all types, fell from $3.2 billion to $1.1 billion. This did not reflect a falloff in passenger demand, for airline traffic was zooming. The carriers, however, had anticipated this demand and had provided for it with their earlier purchases. Then, in 1970, as a nationwide recession blew in, passenger traffic went flat. It would not rise again until 1972. Airlines responded by cutting new orders close to zero. Boeing's John Steiner notes that "at the bottom, we did not sell a single commercial airplane to a U.S. trunk carrier for a period of seventeen months." The 747 took its lumps as well. Airline executives, sensing an opportunity, moved to sweeten their terms of purchase. Instead of paying 50 percent of the purchase price prior to delivery, they dropped the amount to 30 percent. It did not help; in the year and a half after September 1970, Boeing sold only two 747s in the world, and went nearly three years without a single sale to a domestic carrier. Total orders were barely 200, too few to cover the program's costs. Even when the Everett facility rolled out production 747s, they were not always in condition for service. In March 1970, two dozen of these craft were parked outside the factory waiting for their engines. Together with other 747s in final preparation, Everett had a total of $800 million worth of aircraft on hand. Boeing could not receive the airlines' checks, for payments due on delivery, until these planes were actually ready for commercial use. These cash-flow problems brought dreadful consequences for the company's debt. Following conservative accounting practices, Boeing had maintained the trust of its bankers. This helped as the firm's debt, owed to a syndicate of banks, topped the billion-dollar mark. In 1970, however, William Allen and Hal Haynes, his chief financial officer, tried for a further increase in their credit line and met defeat. To win further leeway, Boeing had few choices. Its executives could not seek a merger, for the firm was heavily burdened with debt; who would want to buy it? Nor could the company raise capital by issuing new stock; its shares on Wall Street were in a slump. Because it was indebted beyond the value of its net worth, there was no equity on which to base an offering of new bonds or debentures. Bankruptcy loomed. "We have never revealed how close we got to the edge," wrote Steiner. In speaking of the 747, William Allen noted that "the magnitude of the risk and the capital required were sufficiently great that, at best, we knew that it would strain the Boeing Company. It was really too large a project for us." Though he had hoped to keep his debt below the billion-dollar mark, the actual amount topped $2 billion. Much of the difference lay in nearly-complete but undelivered aircraft that sat outside the Everett plant, waiting for their engines. At the worst, Boeing's syndicated debt, owed to its banks, reached $1.2 billion. This set a record, not only within the aviation industry, but for all corporate borrowing. The company could do little more than to fall back on its own resources, instituting sweeping reorganizations aimed at boosting efficiency. Massive layoffs paced these changes. The Commercial Airplane Group was by far the largest part of Boeing, and its employment peaked at 83,700 during 1968. Layoffs proceeded at a modest pace during 1969 but stepped up abruptly during 1970. The number of employees fell below 30,000 by year's end, dropping toward a nadir of 20,750 late in 1971. This was part of an industrywide trend, for from December 1970 to June 1972, employment in the commercial airplane industry fell by nearly one-third. During one week alone, some five thousand of Boeing's people received pink slips. Firings reached to the top of major organizations; even vice-presidents got the axe. People took to saying that an optimist was someone who brought a lunch to work; a pessimist kept his auto engine running while he went inside. In the Seattle area, the consequences were devastating. Each unemployed Boeing worker cost the job of at least one other person, due to the loss of the worker's purchases and spending. The resulting multiplier effect sent unemployment to 14 percent, the highest in the nation, according to the Department of Labor. About the same number of people were on welfare or receiving food stamps. Enrollment in a free-lunch program for schoolchildren soared more than fiftyfold. A brand-new car went on sale at half price-and drew no takers. A former Boeing employee had to back out of a deal to buy a house with a federal low-interest loan, for nothing down. Apartment managers offered a month's free rent along with a free stereo. Nevertheless, vacancy rates reached 40 percent in some suburbs and topped 16 percent within the area, up from one percent during the boom of 1967. Night after night, near the main airport, fewer than half the available motel rooms were full. The operator of one motel, the Sky Harbor, declared that he would "rent any room for any price right now." Auto sales dropped by as much as 50 percent, and more than a dozen dealerships went under. Seattle's sister city, Kobe in Japan, sent food parcels and relief funds. As people fled the area in droves, the demand for U-Haul trailers grew so large that local agencies ran out of equipment to lease. Two real-estate men put up a billboard near the airport, showing a light bulb hanging on a wire and captioned: Will the last person
Turn out the lights Boeing came back strongly following its brush with bankruptcy. Though the company's sweeping layoffs were painful, they were part of a set of management reforms that brought sharp reductions in the time necessary to build a 707, 727, or 737. In 1966, this had averaged 17 months, from customer order to delivery. By 1972, it was down to 11 months. "You may ask why the hell we didn't do that earlier," said Jack Steiner. "We never had to. We could have done better. Any time you're threatened with extinction you develop abilities you didn't know existed." At the nadir, in 1971, Boeing indeed had been close to ruin. Production of the 707, 727, and 737 was forecast to fall to three per month during 1972 (not three of each model but three of the entire group). The SST was dead, and sales of the 747 were flat. As sales of the improved 727 and 737 took hold, prospects did brighten. By late 1974, production of the three narrow-bodies was up to 15 a month. Debt went down rapidly; in 1973 alone, Boeing paid off nearly half a billion dollars. Better yet, orders for the 747 finally picked up. In 1978, the company was back on its feet and was strong enough to launch not one but two new programs: the 757 and 767.
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