One Industry Melts Down While Another Takes Flight


On this day in economic and financial history...

The worst nuclear accident in American history took place near Middletown, Penn., on March 28, 1979. That day, the problematic Three Mile Island nuclear plant reached partial meltdown, beginning in the morning after pumps for cooling water malfunctioned, which would not have been critical if a pressure relief valve had not also failed during the automatic shutdown process. The reactor core overheated, and plant operators -- unaware of the failure -- reduced coolant flow, exacerbating the overheating and causing a rupture in zirconium storage tubes.

The only saving grace in this disaster was the reactor's containment walls, which limited catastrophe to the immediate area. However, the core meltdown's chain reaction created unexpected radiation problems two days later, and Pennsylvania Governor Richard L. Thornburgh announced the evacuation of pregnant women and school-age children within five miles of the reactor. A radioactive hydrogen bubble in the pressure vessel's dome brought the crisis to its final panicked apex before it was determined that it would not cause further harm. Cleanup proved to be a drawn-out process, as 40,000 gallons of radioactive waste released into the Susquehanna River would not be fully dealt with until 1993, at a cost of roughly $1 billion.

The incident led to a strengthening of nuclear regulations and nuclear plant design. It also led to a radical re-evaluation of the use of nuclear power in the United States. After the meltdown, 51 nuclear reactors proposed for construction were canceled in just five years, and no new plants were approved for construction until 2012. The meltdown effectively froze the American nuclear power industry at that point in time. The Three Mile Island reactor that melted down has been permanently decommissioned, but the other reactor -- which has never had a safety incident -- is still operated today by Exelon , the nation's largest nuclear-power operator.

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Japanese merger mania
The Bank of Tokyo and Mitsubishi Bank, two of Japan's largest financial institutions, announced plans to merge on March 28, 1995. This combination would surpass Sumimoto Bank, also of Japan, as the world's largest, with combined assets of $817 billion. The Japanese markets, then about five years into one of the worst long-term slides in financial history, were not kind to this merger. Five years after the announcement, the combined Bank of Tokyo-Mitsubishi had only $700 billion in assets and had slipped to third place on the global rankings behind France's BNP Paribas and Germany's Deutsche Bank.

The Dow loves a good war
War loomed on the horizon on March 28, 1898, when the Dow Jones Industrial Average surged to an 8% gain, the largest such increase in its two years of existence and still one of the largest percentage gains in history. The Spanish-American war would be declared less than a month later after the sinking of the USS Maine in Spanish-controlled Havana Harbor caused a national furor. The big market move was a continuation of the weekend advance of shares following the publication of an inquiry into the sinking.

This 19th-century surge had a far different character from modern market bounces. Trading of nearly 900,000 shares was a notable event, and only 103 different stocks were traded -- but their movement was near-unanimous, as only two declined. And just as we hear about the Federal Reserve moving markets today, bearish investors of 1898 were heard by New York Times journalists to grumble, "Who says now that Washington isn't in the market?" and "a Democrat will be inaugurated in 1901" in response to the inquiry.

Republican William McKinley successfully won re-election despite these grumbles, but he would not stand long as president in the 20th century -- his late-1901 assassination brought legendary President Theodore Roosevelt to power, much to the chagrin of monopolists. The bull market that began in 1896 would continue for more than a year, and the secular bull market of the 19th century did not end until 1901. The Spanish-American War proved a stunning success for the U.S. over crippled Spain, which ceded Puerto Rico, Guam, and the Philippines to a rising American might. Spain would never recover; the U.S. was just getting started.

The dawn of modern aviation
created one of the world's largest and most durable non-state airlines on March 28, 1931, when it combined its air transport enterprise with three other leading air-transport businesses into United Air Lines . Boeing had created its own transport company in 1927, but United considers its origins to be in Varney Air Lines, the oldest of the four combined companies, which had begun in 1926. Upon its creation, United assumed control of the transport companies that had previously been operated under Boeing's monopolistic United Aircraft and Transport Corporation -- a timely split, as the Boeing-led aviation monopoly would be broken up three years later.

United quickly became a national airline, with hubs in Chicago, San Francisco, Denver, and Washington, D.C. -- the same cities where its operations are focused today. After World War II, United fell behind Pan American and American Airlines in the American airline space, but it regained ground in the 1960s following a merger with Capital Airlines and the creation of UAL, a parent holding company. A period of turmoil during the oil price shocks of the 1970s and the deregulatory efforts of the 1980s hampered United, along with the rest of the airline industry's major players, but this period also deepened the airline's relationship with its onetime corporate parent, as United took delivery of Boeing's new 747s only a year after that revolutionary aircraft's first test flight.

The 1990s brought more changes for United as it took over some of Pan Am's international routes following that carrier's bankruptcy. In 1994, a landmark labor deal delivered 55% of the company into its employees' hands, making United the largest employee-owned corporation in the world. Boeing continued to be an important partner, as United was the launch customer for the 777 when it entered commercial service.

The terrorist attacks of 9/11, in which a United plane crashed into the south tower of the World Trade Center, sent the airline industry into a tailspin and UAL into bankruptcy. The company cut back costs dramatically during bankruptcy restructuring, a lengthy and complex process that included the largest pension-plan default in American corporate history. It would be nearly four years before UAL exited bankruptcy in early 2006. Two years later, UAL's shares were hit by a devastating flash crash over outdated rumors of bankruptcy, sending the stock to a penny before the rumors could be rejected and sanity restored. In 2010, United and Continental Airlines merged to become the world's largest carrier, proving that sheer size can help overcome a multitude of corporate sins in certain industries.

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