Boeing is struggling.
The most recent round of bad news to hit the manufacturer came when, after Boeing’s project to build the next Air Force One was delayed again, this time until 2029, President Trump announced he would instead accept a jet gifted from the Qatari royal family.
While the legality of that move has not yet been settled, the episode highlighted how slow and expensive Boeing’s Air Force One program has become. Although sluggishness is often lucrative for government contractors, Boeing had agreed to a $4 billion cap for the project, which the company has since exceeded. The Air Force One build is now costing Boeing money.
Then, one of Boeing’s prized 787 Dreamliners went down in Ahmedabad, India. While the cause of the crash is still under investigation, and may have had nothing to do with the manufacturer, the incident ended the Dreamliner’s near-perfect safety record — a bad development for a company already on shaky ground.
Boeing’s problems stretch back much further. It has not posted an annual profit since 2018. Its losses over that period have exceeded $30 billion, and its stock price has fallen almost fifty percent.
The decline began with the pair of 737 Max crashes in 2018 and 2019, caused by an overlooked glitch in safety software designed to stabilize the plane. Some 346 people lost their lives, and Boeing lost billions of dollars in restitution, fines, and canceled contracts after grounding its entire 737 Max fleet.
Then the pandemic hit. Air travel was among the hardest-hit industries. Boeing, to its credit, uncharacteristically turned down government bailouts and borrowed money privately to weather the years of reduced demand.
But as travel picked back up, the company was hit by another scandal when a door plug blew out mid-flight on a Boeing plane flying from Oregon to California. While nobody was seriously hurt, the incident drew renewed negative attention to Boeing’s manufacturing process and safety record, as well as production slowdowns that cost the company billions.
What happened to this once-dominant airplane manufacturer? Perhaps the most rigorous attempt at an answer comes from Peter Robison’s 2021 book Flying Blind.
Robison argues that the problems we’re seeing today with Boeing actually began back in the late 1990s, when the company acquired what was then its only domestic competitor, McDonnell Douglas. Both manufacturers had a civilian side, where they produced and sold large passenger jets, and a defense side, where they won contracts to produce various aircraft and weapons systems for the government.
In the decades before the merger, Boeing came to dominate the domestic passenger jet market, in large part because it invested heavily in recruiting the best engineers, those who could build jets that were safer and less expensive than McDonnell Douglas’s accident-prone DC-series.
While McDonnell Douglas had a few solid decades, by the late 1990s, its passenger jet side was no longer a serious competitor to Boeing. The merger was driven more by factors on the defense side.
Robison’s argument is that while the merger was widely seen as Boeing taking over a struggling competitor, the corporate culture of McDonnell Douglas came to dominate at Boeing. As a result, the leadership began prioritizing stock price, financial products, and executive bonuses over the engineering excellence that had put the company into its dominant position in the first place. And eventually, that emphasis led to a culture that neglected safety and created room for calamities, such as the 737 Max crashes and the 2024 door plug blowout.
Robison’s book is well-researched, and the narrative he details is compelling. After all, it is very difficult for companies that rise to dominate their industry to remain on top for years — much less decades, as Boeing has. History is replete with large, successful companies abandoning the innovative practices that generated their success and ultimately losing out to newer, more innovative competitors as a result.
That’s not a glitch but an integral part of the market process. And the insights Robison provides into Boeing’s culture, combined with the company’s dismal performance in recent years, suggest that the manufacturer is past the peak of its market dominance — at least on the commercial jet side.
The Lesser-Known Context for Boeing’s Decline
Robison’s analysis, however, either glosses over or omits entirely important context about the passenger jet manufacturing industry and the economy as a whole. And when that context is left out, it can seem to lend credence to the anti-corporate, anti-capitalist narrative that many on the left are trying to attach to Boeing’s failures.
First, the industry is heavily regulated by the federal government. While this is often assumed to be a net good for passenger safety, the reality is less straightforward.
Designing large commercial jets is a hyper-complex, highly specialized process that relatively few people in the world understand at a high level. And the vast majority of people who meet these criteria are already working in the industry for companies like Boeing. Regulatory capture is prevalent. All this creates a situation, common in many industries, where regulations are often not based on safety or realistic risk, but instead are partially designed to benefit specific, well-connected companies at the expense of others.
Many of the disastrous design decisions that doomed the 737 Max jets, for example, can only be understood in the context of this damaging regulatory regime. Regulators blocked designs for a brand-new plane, forcing Boeing to attempt to redesign an earlier 737. But because the new Max engines couldn’t fit on the old wings, designers had to reposition them. Engineers found that tended to raise the plane’s nose when flying, which is why the tragically glitchy stabilizing software was installed: to force the nose down.
In other words, Boeing engineers cobbled together what we now know was a surprisingly dangerous jet to technically stay compliant with federal regulations. That dynamic is not unique to the 737 Max program, nor has it gone away.
Likewise, the company’s shift from an emphasis on product quality to financing and stock price, as detailed in Robison’s book, impacted many companies beyond Boeing. In fact, it reflects a broader trend of “financialization” that economists have observed over the last several decades.
This trend isn’t based on the values of market participants; it’s a direct consequence of the federal government’s monetary policy, which has given a massive artificial boost to the financial parts of the economy, warping the relationship between financial asset prices and the material reality they’re meant to represent.
In a truly free market, there would have been no conflict at Boeing between an emphasis on engineering great jets and boosting the company’s stock. Not so in our highly warped economy.
And finally, the level and nature of competition in Boeing’s industry limits its competition. For decades, their only true competitor has been the quasi-private European company Airbus. Boeing’s competition with Airbus has been intense, to the benefit of air travelers. The fact that airlines have an alternative, and can ditch Boeing as a supplier when it fails to provide safe, affordable aircraft, is why the company is facing serious economic consequences for its shortcomings.
Now Canada, China, and Brazil have helped create manufacturers that may someday make headway in the industry, but that level of competition still falls short of a genuinely free market. Boeing has used the fact that all of its foreign competitors are heavily subsidized by foreign governments to lobby the American government for support of its own. Boeing benefits from what’s called a “national champion” strategy, where the government attempts to prop them up with subsidies while placing restrictions on their foreign competitors.
Boeing enjoys, for example, artificially cheap, guaranteed loans from the federal government’s Export-Import Bank. And competitors, such as Canadian manufacturer Bombardier, have been slammed with massive tariffs when offering prices Boeing argued were too low. American presidents are also often personally involved in selling Boeing jets around the world.
That heavy support is, in all likelihood, why Boeing enjoys a relative monopoly within the US. The barrier to starting a successful domestic manufacturer is made even higher by the need to compete with the government’s favorable treatment of Boeing. So, although airlines have some room to move away from Boeing’s problematic planes, they don’t have much. As Boeing runs into problems, the pressure to improve isn’t nearly as high as it would be in a freer market, because passengers are forced to continue riding on their jets even when they prove unsafe.
So, in conclusion, Boeing is in a bad place right now, largely because the company has lost touch with the innovative engineering that was responsible for much of its initial success. Boeing’s problems have almost certainly been made worse by the federal government’s regulatory regime and loose monetary policy. Even so, the lack of domestic competition Boeing enjoys as a result of its close relationship with the federal government removes much of the pressure to improve.
So, for now, air travelers are largely stuck flying on the increasingly inferior planes of this once-illustrious American manufacturer.
