Five reasons why the return to service of Boeing’s 737 MAX is important to national security

Twenty months after grounding, the latest version of Boeing

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The 737 airliner has been cleared by the US Federal Aviation Administration to return to service. The airline will still have to go through a series of recovery phases and airlines will have to implement new training procedures for pilots, but routine service is likely to resume early in the new year.

If only these were routine times. While the MAX, as it is called, was being tested and modified, the coronavirus pandemic has severely depressed the demand for air travel. Boeing’s internal projections indicate that it could take years for the global transportation system to return to the trend, which means 3-5% growth per year.

This is a conservative estimate. Depending on how quickly coronavirus vaccines are distributed, the journey could quickly bounce back. There could be a surge in demand for the 737s as early as 2021, adding to the backlog of 4,000 orders for the plane the airline has already booked.

Boeing needs that surge, because it’s struggling. Thousands of workers have been laid off, with more layoffs on the way. But there is a larger dimension to the history of 737, which includes 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.

The following are five ways the 737 MAX return intersects with US national security. I must point out in advance that Boeing and many of its key suppliers contribute to my think tank.

Boeing is the largest American exporter of advanced technology. Commercial transport – airliners – are 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 over a decade.

This fact explains why America remains the world leader in the aerospace sector, at a time when the United States has lost its competitive edge in other technology sectors such as microelectronics. However, 80% of Boeing’s order book in commercial aircraft is 737s. A globally competitive airliner manufacturer cannot be sustained simply by creating widebody. Therefore, Boeing’s future in aviation and America’s future in aerospace hinges significantly on the 737 MAX regaining its status as the world’s most popular commercial transport.

Boeing is a world-class aerospace innovator. Very few companies have accumulated the range of aerospace expertise that Boeing has accumulated over a century. It is a national resource. The company was recognized by the National Academy of Engineering for creating some of the greatest technological achievements of the 20th century, including the first widebody airliner (the 747) and the first commercial transport designed entirely on computers (the 777). . The 787 Dreamliner is the first airliner with a fuselage made of composite materials rather than metal.

Boeing’s ability to innovate in commercial aviation, military systems and 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 revenue to support design and engineering teams working on ideas that aren’t profitable yet. More than any other product in the company’s range over the past 50 years, it’s the 737 that has provided that steady cash flow. Without the 737 MAX, Boeing’s only version of the 737, its ability to innovate would be hampered.

Boeing supports thousands of US companies in its supply chain. Although 80% of the revenues generated by Boeing airliners come from foreign customers, over 80% of the suppliers providing production inputs are located in the United States. The company’s commercial transportation lines therefore play a vital role in supporting an industrial ecosystem that supports the entire national aerospace sector. Many of these suppliers, such as Collins Aerospace and Spirit AeroSystems

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, they also provide essential inputs for military programs such as the B-21 bomber.

Boeing is not like the typical multinational company that starts production where costs are lowest. It has chosen to concentrate all of its vast manufacturing capacity within the borders of the United States and attracts most of its suppliers from these borders as well. Because aerospace expertise is fungible by multiple products, Boeing’s manufacturing strategy allows US defense systems manufacturers to be less dependent on offshore sources and more likely to secure low prices due to economies of scale.

Boeing’s defense and business operations are interdependent. When the Cold War ended, Boeing absorbed several major military contractors to become the second largest defense company in the world. Its extensive defense and space business builds combat aircraft, aerial refueling tankers, radar aircraft, 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 commercial side falters due to a problem with the 737 or some other product, the defense side will eventually, depriving the Pentagon of a key supplier.

This partly reflects the aforementioned fungibility of skills. Boeing’s oil tankers, radar aircraft and maritime patrol aircraft derive from its commercial transportation (including the 737). Basically, demand cycles for defense and commercial aerospace products tend to vary inversely, so that when defense is on the rise, trade is on the decline and vice versa. The financial stability of the company over time therefore depends on its presence on both markets. If the 737 does not return to routine service and commercial activity lapses, the profitability of the military side could be compromised in a future defense recession.

Boeing is a product of free enterprise, unlike Airbus, unlike Chinese aerospace. The United States and China are currently locked in a struggle between the great powers, with the result that it will likely be determined by which country has the best system for promoting economic progress. Boeing is a prime example of how the American free enterprise system can produce world-class companies that drive their industries in market penetration and innovation. The return to service of the 737 is key to ensuring that Boeing doesn’t go the same way as other former industrial icons like General Electric

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and US Steel.

Boeing’s competitor Airbus has created confusion in popular culture about the sources of each company’s success. However, the bottom line is simply this: Boeing has become a global leader in the aerospace industry largely thanks to its own energy and enterprise, with only modest assistance from Washington. Airbus from its inception was a 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 latest commercial transportation manufacturer, a product of the American economic system, can prevail in a world where its main rivals have chosen to rely on unrelated forces. market for much of their strength. If Boeing doesn’t recover, that’s a bad sign for America’s future.