Category AVIATION &ТНЕ ROLE OF GOVERNMENT

Since early in their history airlines had been considered by government to be, to some degree, instruments of national policy. Airlines were used:

9 To carry the mail

9 To facilitate commerce between the cities and states

• To establish a fast and efficient passenger transportation system

• To function in the national defense system in times of emergency

9 To carry the flag internationally

To carry out these functions, the airlines had to be financially stable, they had to be depend­able in the long run and reliable at all times. Government regulation of the airlines facil­itated these ends well, and they were among the primary reasons that the federal government began controlling entry, rate, and route allocation in 1938 under the Civil Aeronautics Act. The nascent airline business was a fragile concept at the time and it was by no means certain that unlimited competition would not bring down the whole endeavor. Widespread public acceptance of air travel had not yet occurred. Deficiencies in equipment, weather forecasting, and air traf­fic control contributed to well-publicized airline crashes; flying was still an adventure. The air­lines needed to be stabilized, protected against absolute competition, and developed into an acceptable and safe form of transportation in order to accomplish these government goals.

Thus, for nearly 40 years, entry into the airline business had been controlled by the Civil Aeronautics Board. Under this system no major new entrants had ever been permitted, although the CAB did authorize a limited number local service providers for a subsidized service on less dense routes and to provide feeder lines for the trunk carriers. The number of trunk lines had decreased from 16 in 1938 to 10 in 1978. That year the 5 largest airlines accounted for two – thirds of all domestic revenue and the exclusive 10 trunk carriers accounted for 90% of all air traffic. There were 8 regional service carriers and 10 supplemental carriers.

Under the CAB system routes were sup­posed to be awarded among the existing carriers based on the perceived needs of the communities and cities requiring service, and on the equitable allocation of routes to the existing airlines desir­ing and capable of delivering such service. In fact, the performance of the CAB fails to indicate that it fulfilled even this task, as confirmed by Senate hearings in 1974 and 1975, as the CAB enforced a de facto moratorium on new route awards after 1969, effectively stagnating the system.1 Fares and rates were established mainly as a function of the airlines’ cost of doing busi­ness, which cost was set using an assumption of a 55% load factor for all airlines. This produced a system not particularly designed or administered to be cost efficient, but it was stable. Not one airline in 40 years had been allowed to go into bankruptcy.

Competition in the airline industry had been regulated, but competition had not been elimi­nated. The more efficient the airline, the better its operating ratio and the more money there was at the bottom-line. Northwest was the most efficient airline with a breakeven load factor of 43%. This compared with United, whose breakeven load factor was 59%. The average of all airlines’ load factors at the time was between 50% and 55%.

The effect of airline economic regulation was to create both a financial ceiling and floor for the companies, guaranteeing that neither prof­its nor losses were excessive. While the support of the CAB limiting airline loss was comfort­ing to management, the ceiling limiting innova­tion and profit was frustrating, particularly to the types of men who rose to run the airlines. The technological advance in aircraft and engine design kept airlines busy trying to stay ahead of one another in order to have the most appealing fleet available for the limited passenger market, most of which were business travelers.

Aesthetics and quality of service were high on the list of concerns, since these were two of the few discretionary operating decisions avail­able to management. Marketing schemes were also highly competitive, the effort being lim­ited to the best way to sell essentially the same product that every other airline sold. Each new innovation thought up by an airline, no matter how minor, was pushed as the reason to fly that airline. For instance, the introduction in 1965 of in-flight movies by TWA was highly advertised; it resulted in six to eight more passengers per flight. Delta had a piano in its upstairs bar on the domestic 747, accessible from below by a circu­lar staircase. Southwest dressed its stewardesses in hot pants. National Airlines fielded a sugges­tive advertising program, with TV clips featuring stewardesses inviting passengers to “fly me” to

Miami. Their 727s featured a painted likeness of a beautiful stewardess on the side of the plane with “Fly Me” painted just to the side. Airline management continually strove to bring some quality of uniqueness to their commodity-like operations.

Until the 1960s and early 1970s, leader­ship of the major airlines had remained mostly in the hands of the young men who took over in 1934 after the Black investigation of the so-called “spoils conference” scandal. There was a same­ness about those early airline leaders since they had all been tempered by the same conditions affecting airline growth and essentially all had been both pilots and CEOs. Newcomers like Rob­ert Crandall at American and Richard Ferris at United were natural competitors and often went head to head on issues like market share, com­puter reservation system development, and travel agent loyalty. While these new leaders brought a new entrepreneurial spirit to the airline business, they did so in different ways. Crandall preferred to compete within the established regulatory framework, while Ferris, who came from the hotel industry, was open-minded about deregula­tion. For the most part, however, airline manage­ment was firmly opposed to airline deregulation.

As the railroads spread out from the East, they connected with other lines, north and south, and created interchange points between them. For the first time, goods began to be moved from origins far distant from their destinations. Markets that at one time had been local now became regional and even national. Manufacturing, meatpacking, farming, and the cattle business were becoming interdependent, and America was beginning to depend on transportation—the railroads—as the lifeblood of its commerce.

The railroads wielded vast economic power. Like government, they possessed the power of eminent domain. They set passenger fares as they wished. Freight rates varied according to the whim of the railroads, and were often discrimina­tory and unevenly applied.

Farmers, in particular, were at the mercy of the railroads in marketing their produce. Grain ele­vators were necessary as storage facilities for farm­ers, and these often were owned by the railroads.

Various states, in response to petitions from its citizens, enacted laws designed to curb the excesses of the railroads. But the railroads ran from state to state, and generally considered them­selves immune from attempts at local regulation. These laws, therefore, were uniformly ineffective and were ignored or legally challenged by the rail­roads. It was not until shippers as a group began to assert influence on a national level that the Con­gress did eventually begin to address the problem.

In the United States, governmental authority to regulate lawful enterprises must be based on con­stitutional principles. In 1887, although these prin­ciples were not well defined, it was clear that the national government in Washington had express Constitutional authority to regulate commerce between the states. So it was that Congress that year debated the first regulation of transportation.

Historically, governmental regulation has been grounded on two primary concepts:

1. Economic necessity

2, Legal authority

The concept of economic necessity pre­sumes (1) that there are certain businesses that are necessary in the public interest (e. g., trans­portation companies, gas companies, electric companies, etc.); (2) that these types of compa­nies should be required to serve all of the public without discrimination; and (3) that these compa­nies should be stable and be able to make a rea­sonable, but not too large, profit. To assure that these conditions exist, the government has under­taken to regulate them. This regulation controls entry into the business (which controls competi­tion, expertise, and financial stability), the rates that are charged the public, and to some extent the manner in which the business is operated.

In the United States, most businesses are run under the principles of private enterprise. While businesses that are considered necessary in the public interest are mostly privately owned, they are considered to be “quasi-public,” that is, oper­ated in the public interest. From 1887, when the regulation of transportation began, the federal government considered interstate transportation to be a quasi-public undertaking, thus a legiti­mate object of regulation.

The second basis of regulation is legal. The legal basis of regulation is founded in the U. S. Constitution and the laws that are enacted by Congress. With regard to transportation, the com­merce clause of the Constitution is most often invoked to authorize regulation of companies conducting business among the states (interstate commerce). The commerce clause is based, in part, on the realization that the people of the vari­ous states must be guaranteed equal access to a necessary service. It is also recognized that, in matters between the states, the presumed impar­tiality of the federal government should make it, and not the states, the arbiter of the law.

Once enacted pursuant these constitutional principles, regulation is implemented through either the common law or statutory law.

• Common law is the law that has resulted from judicial decisions derived from litigated cases between individual parties. This law is con­tained in written opinions of judges and is referred to as “judge-made” law. The common law that existed in England before the American Revolution was applied in the American colo­nies, and after independence was won and the United States Constitution was adopted, Eng­lish common law continued to serve as legal precedent in the new United States.

• Statutory law is the law that Congress or the state legislatures have enacted by vote of elected representatives in those bodies. On the federal level, this law is codified in the United States Code, a sequentially numbered series of volumes that contain all current federal statutory law. The United States Code is kept updated by means of supplements published on a regular basis. Some statutes provide for the creation of federal agencies, like the Fed­eral Aviation Administration or the Interstate Commerce Commission, to administer the mandates set down in the statute. Such agen­cies are given rulemaking authority, which means they may conduct public hearings and make rules having the force of law to govern the manner in which the affected business or activity is conducted, like the Federal Avia­tion Regulations, for example.

In 1919, the largest flying boats constructed by Curtiss, the NC-1 through the NC-4 (see Figure 8-11) were launched. In May, three of these, the NC-1, NC-3, and the NC-4, set out to make the first-ever transatlantic flight from Long Island to Lisbon, Portugal. The NC-1 and the NC-3 were forced down prior to reaching the Azores, but the NC-4, after 23 days en route, finally arrived in Lisbon—the first aircraft to cross the Atlantic Ocean.

Although Curtiss did not produce more of the flying boats, the design advances he made were replicated or became the starting point for

all future improvements on aircraft hull design. Boeing became the leading flying boat exponent in the United States, along with Martin and Sikor­sky, and produced the beautiful Clipper Ships of Pan American Airways fame. See Chapter 15.

America’s First Black Aviator and the Curtiss Connection

As a notable and related fact from newly discov­ered evidence,9 it appears that the first licensed African-American pilot, Emory Malick,10 received flight instruction from Curtiss at North Island in San Diego. Malick grew up in central Pennsylvania, where he built and flew his own gliders over the Susquehanna River. At some point (the evidence is still sketchy) he began flying powered aircraft and wound up at the Curtiss School, receiving his pilot’s license on March 12, 1912 from the Federation Aeronau – tique Internationale, number 105. Very little is currently known about his later life in aviation. It is likely that research in the near future may alter the course of history concerning black aviators in the United States.

з Postlude to the Wrights and Curtiss

The innovations, designs, and experimentation of Glenn Curtiss and the Aerial Experiment Asso­ciation provide a study in contrast with those of the Wright brothers. The legacies of both groups continue to be studied and debated, but it is true that both were necessary to the development of aviation in the United States and in the world. It is ironic that the methods of the Wright broth­ers actually tended to inhibit flight when it was

they who had initiated successful, controlled, and powered flight, while the methods of Curtiss tended to expand the concept and application of flight even though he was not first to suceeed. In spite of the combination of brilliance and dedica­tion, on the one hand, and striving and enmity, on the other, that existed in the early world of aero­nautics, the resolution of the differences between the two camps and their allies would be forth­coming, as we shall see in Chapter 9. [6] [7]

4. The Wrights’ commercial venture, like many to come, could only be deemed a failure. Orville Wright sold his interest in the company on August 26, 1915 for $250,000, one-fourth of its initial capitalization.

5. Wright Co. v. Herring-Curtiss Co. et ah, 177 F. 257 (W. D.N. Y. 1910).

6. See remarks in Appendix 2 by Dr. A. G. Bell on February 13, 1913, to the Board of Regents of the Smithsonian Institution regarding Curtiss’ contributions to flight safety using floatplanes.

7. Wright Co. v. Herring-Curtiss Co. et al., 204 F 597 (W. D.N. Y. 1913).

8. Please see Appendix 3 for a discussion of the specific details of the Curtiss revisions to the Langley Aerodrome in 1914 and the flights made at Hammondsport that year. Note that this is a Smithsonian report from the year 1942 that had the approval of Orville Wright, and it is likely part of the reconciliation made between Orville Wright and the Smithsonian in order to allow the Wright machine to be taken to the Smithsonian for exhibition.

9. This reported information was first discovered by a white family member in 2004 in a family album. It was reported in Air & Space Magazine in the March 2011 issue.

10. 1881-1958.

Fred Rentschler had early on formed a working relationship with Chance Vought in negotiating with U. S. Navy personnel. They had cooperated in marrying the Wasp engine with the Vought-built original Corsair for use on early Navy carriers. William Boe­ing and Rentschler had combined to create the most effective aircraft of the time, the

Boeing 40 В with the Wasp engine for Boeing Air Transport. These three men represented the three sectors mentioned, namely engine manufacture, aircraft manufacture, and airmail carrier. Led by Rentschler and Boeing, these three formed United Aircraft & Transport Cor­poration. Soon they added Hamilton Propeller to the group.

The company was set up with Pratt & Whitney owning 50 percent of the stock and the rest being divided among Boeing Aircraft, Boeing Air Transport, the Vought Corporation, and Hamilton Propeller. United then added Standard Propeller, Sikorsky, and Stearman Aircraft Company.

United next embarked on acquiring air transport companies, including Pacific Air Transport, which operated from Seattle to San Francisco and Los Angeles, Varney Air Lines, operating from Salt Lake City to Seattle, and National Air Transport (through a proxy fight), which held the eastern leg of the transcontinental route from New York to Chicago, as well as the line from Chicago to Dallas/Ft. Worth. Upon the acquisition of NAT, United operated the entire transcontinental airmail route, and soon decided to break it out into a wholly owned carrier subsidiary called United Air Lines.

North American Aviation

North American Aviation (NAA) was the brainchild of Clement Keys, a vice president of the Curtiss Aeroplane and Motor Company during World War I. He gained control of that company during the early 1920s and began acquiring an assortment of additional companies, including National Air Transport, which was later to be absorbed by United. Next, he lined up and bought out several airmail routes operat­ing between the Northeast and Florida (which would ultimately form the basis for Eastern Air Lines), while continuing to fly the mails on the midwestern routes. Before the great Wall Street crash of 1929, he merged the Curtiss holdings with Wright Aeronautical Corporation, creating Curtiss-Wright, completing the triad acquisi­tion of companies capable of airplane building, engine manufacture, and air carriage. Gen­eral Motors would gain controlling interest in NAA for a time in the early 1930s. At this time, NAA’s holdings included Eastern Air Transport, Transcontinental Air Transport, and a substantial interest in Douglas Aircraft.

Ш Aviation Corporation

Aviation Corporation was the work of Averell Harriman and Robert Lehman, New York financiers. Robert Lehman was of the Wall Street banking house of Lehman Brothers. Harriman was to later serve in key government posts, including lend-lease administrator, ambassador to the Soviet Union, Secretary of Commerce, and was to be a confidant of presidents. Together they salvaged the Fairchild Aircraft Company in 1929 through a stock sale before the finan­cial crash in October of that year. The new company proceeded to acquire 5 airmail carri­ers, themselves holders of 11 airmail routes; they bought all sorts of aviation properties, including aircraft and engine plants, and even some air­ports. The air carriers were combined to form American Airways.

Harriman and Lehman did not remain in the aviation business very long, losing out in a proxy fight to E. L. Cord in the early 1930s. Harriman then began his government service, while Lehman returned to Wall Street. But Lehman would be heard from again, this time at TWA with Yellow Cab magnate John Hertz.

On September 2, 1940, the United States and Great Britain sealed an agreement that transferred 50 U. S. destroyer-type warships to England in return for land rights on several British possessions, including Newfoundland, the Baha­mas, Jamaica, and other Caribbean islands. This was the first move toward extending the defenses of the United States and at the same time laying the groundwork for a ferry system for the future transport of war materiel to Europe and Africa. On April 9, 1941 the Danish Ambassador (who had relocated to Washington after the Nazi take­over of Denmark in 1940) signed an agreement allowing the United States to build airfields and associated facilities, as well as placing personnel on the island of Greenland (Greenland had been a colony of Denmark since the early 18th century).

The Lend Lease Act

American public opinion was gradually changing from predominately isolationist to one of limited involvement, “as long as we don’t have to go to war.” On March 11, 1941 Congress passed the Lend Lease Act, which empowered the presi­dent “on behalf of any country whose defense the president deems vital to the defense of the United States, to sell, transfer title to, exchange, lease, lend, or otherwise dispose of, to any such government any defense article. . . not expressly prohibited.” This Act allowed the United States to legally provide war materiel to England, China, Russia, and to 35 other nations. Roosevelt had earlier announced that the United States, although not involved in the war, was to become the “arsenal of democracy.” The industrial capac­ity of the United States was about to be tapped, and a mighty force it would prove to be.

There are two types of certificates issued by the federal government to air carriers in the United States. Air Carrier Operating Certificates are issued by the FAA under Part 121 of the FARs to carriers operating aircraft for hire with 10 or more seats. The compliance requirements of Part 121 are numerous, but the two major areas addressed are the training of flight crews and aircraft maintenance programs. Air Carrier Fit­ness Certificates, also referred to as Certificates of Public Convenience and Necessity, are issued by DOT, not the FAA, and establish that the car­rier has shown that it has the financial capacity and management expertise to carry on a sched­uled airline operation. These are required only of carriers operating aircraft with 61 or more seats. While some Fitness Certificates authorize only cargo operations, the majority of such certificates apply to both passenger and cargo operations.

Charter Operations

As we saw in Chapter 18, the market for cheaper air travel had been recognized since shortly after World War II, when charter operators began to fly using war surplus DC-3s. Charter operators were definitely second class citizens in the airline world and in the view of the CAB. They not only got no respect from the scheduled airline world but they were hindered at every turn by regula­tions designed to insulate from competition the trunk air carriers who had been accepted into the system by the CAB in 1938.

Charterers could not sell individual tickets, nor could they fly published schedules. They were essentially relegated to selling the entire aircraft capacity to large, established groups by advance sales. The CAB monitored these opera­tions carefully; ever watchful lest charter opera­tions encroach on the CAB-controlled scheduled airlines’ established routes. But the charter opera­tors showed that a profit could be made with low fares, sometimes as much as 50 percent lower than CAB-mandated fares, so long as the aircraft flew filled with passengers.

The CAB then allowed the trunk lines for the first time to include a cheaper class of airfare in the same aircraft with standard fares; these were the first “coach fares” and this was the cre­ation of separate seating and amenities for sec­ond class passengers on the same flight. Still, the CAB retained its stranglehold on the economics of commercial aviation.

Intrastate Air Carrier Operations and Scholarly Publications

One of the first economic studies to question the advisability of the airline system run by the CAB was published in 1962.2 The conclusion of this study was that there was nothing inher­ently monopolistic about the airline business and there was no need for any government limita­tion or control over entry into it or exit from it. Shortly thereafter, in 1965, a Yale law student by the name of Michael Levine wrote a law review article about the largely unregulated intra­state airline business in California. In comparing the intrastate airline fares with those mandated by the CAB, he concluded that CAB policies “fostered unnecessarily high fares, encouraged uneconomic practices, and limited the variety of service available to the public.” He found that intrastate fares were about half as high as interstate airline fares, yet the intrastate carriers were making a profit and they were flying more passengers.

In 1970, Alfred Kahn, a professor of eco­nomics at Cornell University, produced a two – volume work, The Economics of Regulation, which basically postulated that the heavy hand of government regulation was inimical to the public interest, and that competition would natu­rally produce the best product for the best price for the public.

By 1971, a new intrastate carrier, Southwest Airlines, answering not to the CAB but only to the Texas Public Service Commission, began ser­vice between the three largest cities in the very large state of Texas, setting its fares far below those mandated by the CAB. It, too, proved suc­cessful charging lower fares and flying with full airplanes.

The conclusion was becoming inescapable that government regulation of air carriers was largely preventing low-fare air travel and restrict­ing travel.

The first legislation in the United States regulat­ing transportation was the Interstate Commerce Act, in 1887. This statute heralded the era of “negative” legislation, or legislation that had the effect of curbing or restricting railroads in their conduct of business.

The thrust of the Act was to prohibit the railroads from paying rebates (kickbacks), from giving unreasonable preferences to shippers, and from discrimination against any shipper. Rail­roads were required to publish tariffs, which disclosed rates and schedules, and they were required to charge according to those tariffs. The Act brought uniformity to the relationship between the railroads and the public.

The Interstate Commerce Act and its amend­ments also created the Interstate Commerce Commission, the agency assigned the role of administering the terms and provisions of the statute. It was empowered to monitor railroads to ensure compliance with the terms of the statute, to hear complaints from the affected public, and to make rules and enter orders in furtherance of the statutory mandate.

Subsequent federal enactments continued the era of negative legislation toward the trans­portation industry, including:

• The Elkins Act of 1903 (focused on person discrimination and established a system of fines and criminal penalties)

• The Hepburn Act of 1906 (set maximum rates)

• The Mann-Elkins Act of 1910 (focused on place discrimination)

The pendulum had swung too far in the early and energetic days of railroading, and the government was now catching up to balance things out in the public interest. The days of unbridled capitalism in the railroad business were over. In the early years of the 20th century, the railroads were nearing what was to be their maximum trackage (miles of laid tracks), and they were just about to experience the effects of continuing industrial and technological development (Figure 3-4 displays the emergence of U. S. cities in 1880) that would lead to alternative forms of transportation that would overpower them. The days of the internal combus­tion engine, the open road, and the machines of the air lay just over the horizon.

n 1913, the state of aeronautical advance in the United States was primarily represented by the accomplishments of Glenn Curtiss. Con­versely, leaders in Europe had invested heavily in aircraft technology. Competitions were regu­larly sponsored to encourage advances in aircraft speed, range, and altitude. Europeans had also incorporated aircraft units in their armed forces prior to the first world war. In 1913, the United States had only six pilots in the entire U. S. Army.

In July 1914, the conflict that was to become known as “The Great War” or World War I opened with the Austro-Hungarian inva­sion of Serbia, which was soon followed by a German invasion of the low countries of Western Europe, Belgium, and Luxembourg, as well as France. Russia attacked Germany. The combat­ants aligned into the Allied Powers, consisting mainly of Great Britain, France, Italy, Russia, Japan, and the United States, and the Central Powers, mainly Germany, Austro-Hungary, Turkey, and Bulgaria. The conflict ended on November 11, 1918.

As in most wars, technological advances in weapons and support were greatly accelerated between 1914 and 1918. The United States was late entering the conflict (1917) and did not partici­pate in the major aircraft innovations that occurred
during the war. European manufacturers and designers had jumped ahead in aircraft and engine design, partly out of necessity. On the Allied side, the French Nieuport, followed by the SPAD, manufactured by the French company Societe des Productions Armand Deperdussin (hence the acronym), and the English S. E. 5, Sopwith Pup, and Sopwith Camel, provided the fighter aircraft. In 1918, close to the end of World War I, Glenn Martin was responsible for contributing the only American design for combatant aircraft in the war with his MB-1 bomber. On the Central Pow­ers side, the German manufacturers Junkers and Albatros Werke GmbH produced formidable fighter aircraft, but the Fokker designs proved to be the best, particularly the D. VII, which is widely regarded as the best fighter of the war. This aircraft was flown by Hermann Goering, who was to become the second-in-command to Adolf Hitler in the 1920s and the leader of the German Luftwaffe in the 1930s and during World War II.

Although the Curtiss Aeroplane and Motor Company was the largest aircraft manufacturer in the world during the war, producing 10,000 planes by 1918, the JN-4 did not come close to matching European models in speed, power, ceil­ing, and reliability. First produced in 1916, the

Jenny mounted the OX-5 engine, 90 horsepower and water-cooled. When Curtiss improved his О model engine in 1913, he wanted to publicize its advances by designating it the “O Plus.” But neither the “O Plus” nor the “0+” designation looked particularly good when printed, and the “+” could even be confused with the letter “T.” Someone suggested rotating the Plus sign by 45 degrees, depicted as “OX,” and the new series of engines became known as the OX-2.

The Curtiss models, although behind the Europeans, were higher performance machines than those built by the Wrights. The Wright Company had fallen by the wayside in aircraft design by World War I, its designs being almost entirely based on the outmoded Flyer models.

Manufacturing in the United States upon its entry into the war was made subject to the oversight and control of the Aircraft Production Board, the creation of which was a recommen­dation of the National Advisory Committee for Aeronautics (see below) which decreed that the United States should gear up to produce 22,000 aircraft for delivery to France within a year. Iso­lated between two great oceans, America was far removed from the vast destruction war had brought to Europe just since 1914, and the world was about to appreciate how valuable the heavy manufacturing reserve of the United States could be. But America was too far behind the design performance standards of aircraft already in use in Europe, so much of the American production effort was limited to manufacturing aircraft under license from European designers.

The De Havilland DH-4, a single-engine bomber/observation plane, was the primary mili­tary airplane built in the United States during the war. The Dayton-Wright Company built the most, 3,106 planes, followed by Fisher Body at 1,600, and Boeing, which produced 150.

The Wright Company concentrated on the production of engines under license, notably the 150-horsepower Hispano-Suiza aircraft engine, much in demand by the French. Hispano-Suiza was a Spanish engine and automobile company that, in 1915, refined its V8 liquid-cooled auto­mobile engine for aeronautical use. This engine represented a quantum advance over the rotary engine, which at the time was the primary air­craft engine in use. The French government in 1915 placed orders in the United States for 800 engines, which were required to be built in the United States due to the lack of capacity in Europe during the war. The Wright Company contracted to supply 450 of these. To facilitate filling the order, the Wright Company arranged a merger with Glenn L. Martin in 1916 to form the Wright-Martin Aircraft Company. By the end of the war, the company had produced over 10,000 of the engines, known as the Wright-Hispano. Along the way, the Wright-Hispano replaced the 90-horsepower Curtiss OX-5 in the Curtiss Jenny, which was limited to training use. After the war, in 1919, the Wright-Martin combina­tion was dissolved and the company became the Wright Aeronautical Corporation. Much was to be heard from this company for its contributions to aircraft engine development during the 1920s.

With the entry of the United States into the war, the Aircraft Production Board ordered the production of 44,000 American-built aircraft engines to be used in conjunction with the ambi­tious goal of manufacturing over 22,000 aircraft. The immediate problem was, however, that the United States did not possess an aircraft engine capable of providing sufficient horsepower or speed for military airplanes. Packard Motors happened to have in its design inventory an experimental, but tested, 8-cylinder liquid-cooled automobile engine that was to prove the basis for America’s greatest contribution to the war effort. On May 29, 1917, automobile engineers at Packard began a redesign of the engine with the purpose of supplying the ordered military aircraft engine, and five days later, a revised design was presented for aircraft use. But it was still an auto­mobile engine, having battery ignition instead of magnetos, for example. It was redesigned again, this time expanding its power to 12 cylinders like the British Rolls engine, and with magneto ignition. The new design, the water-cooled Lib­erty, weighed only 710 pounds and, producing 410 horsepower, it surpassed the performance of all other aircraft engines in the world. By war’s end, some 17,935 Libertys had been produced, of which 5,827 had been delivered to Europe for use in aircraft there. The Liberty was installed in the DH-4, and by November 1918 deliveries to the Army numbered 3,431 airplanes. Of these, 1,213 arrived in Europe, but only 248 ever flew at the front.

When the Armistice was signed, so many airplanes and engines had been produced for war use that engine and airplane manufacturing liter­ally stopped cold. Surplus equipment was every­where, and it was cheap. Curtiss Jennys were so numerous that, for $500, a student pilot could receive his instruction and upon solo be awarded a Jenny in the bargain.

As peace settled once again over the world, as the railroads were returned to their owners by the government, as the automobile began hitting the open roads being built by the government, and as all of the planes appeared to be sitting on the ground, many wondered what would become of aviation in America.

Flying was not yet very appealing to travelers in the late 1920s. Forced landings, cancellations due to weather, and airsickness from the heat, noise, and sometimes-violent motion of the primitive aircraft combined to make the experience more of an adventure than a reliable mode of transport. The passenger service that was available was mostly short-haul, and there were parts of the country where there was no service at all, like between New York and Chicago, which was the heavily traveled train route through the Allegheny Mountains. The experience of the early airmail pilots over that route, as well as the subsequent trials of the contract airmail carriers, had con­vinced National Air Transport (Clement Keys), which flew the mails over the route, not to attempt passenger service. Still, Keys believed that airline service was destined to be a market­able and timesaving device for transcontinental passengers.

In 1928, Keys seized upon the idea of providing air transportation by day, then turning the passengers over to the trains for the standard luxurious Pullman service by night. He established a joint venture with the Pennsylvania Railroad in the East and the Santa Fe in the West to round out the full passage. The air carriage portion of the deal was carried out by the newly formed Transcontinental Air Transport (TAT), which had no airmail routes or subsidies, and it had to rely solely on passenger fares for its income. The westbound trip began in New York at Penn Station, where passengers boarded the Pennsylvania Railroad for the overnight run to Columbus, Ohio. Once beyond the Alleghenies, TAT took over at Columbus, flying passengers all day on the next leg to Waynoka, Oklahoma, where they again boarded a Santa Fe over­night train to Clovis, New Mexico. From there, they continued in Ford Trimotor discomfort to Los Angeles. The complete itinerary could be completed, at least on paper, in 48 hours, saving a full day over the fastest through train schedule then being operated. (See Figure 13-5.)

The operation, although highly touted by the railroads and accompanied with big-name fanfare (Charles Lindbergh himself was at the controls of the inaugural flight), was really only

a novelty. The Ford Trimotors held 10 to 14 seats, but the passenger load was usually only six or seven passengers, and sometimes just three. With no airmail subsidy, the airline lost money, $2.7 million in 18 months. The Wall Street crash of 1929 impoverished many of the potential passengers, and by 1930, TAT was barely hanging on.

Ш The Hoover Administration and Walter Folger Brown

Former Secretary of Commerce Herbert Hoover was elected President of the United States in November 1928, and took office in 1929. As we saw at the beginning of this chapter, in his testi­mony before the Morrow Commission Hoover strongly supported a robust aviation system for the country. As we also saw above, the state of commercial aviation after the passage of the

Airmail Act of 1925 was far from optimal, being perhaps better described as chaotic. It was clear, however, that the health of the emerging aviation industry at the time depended on airmail govern­ment contracts.

Hoover appointed Walter Folger Brown as his new Postmaster General in 1929. Brown, a lawyer, had served as Assistant Secretary of Commerce beginning in 1927 under Hoover. Brown had no particular affiliation with aviation prior to his appointment, but he took seriously the mandate that came with his job to “encourage commercial aviation.” The Postmaster General, since 1925, had the responsibility of making awards of airmail contracts, which under the Air­mail Act of 1925 were required to be made on a competitive bid basis.

Under the terms of the original Act, airmail carriers were paid 80 percent of the revenues derived from the postage charged. This had provided too little income for the CAM route
operators to survive, so the law was changed in 1926 to provide for CAM operators to be paid according to the weight of mail carried plus a factor for distance carried. As he immersed himself in his new duties, Brown noticed that sometimes smaller companies submitted unrealistically low bids in order to get the business, and then played games with the weights of mail carried in order to increase their income. Postage rates were not set to cover the actual cost of airmail delivery, but to encourage the use of airmail and to promote commercial aviation. The difference in revenue received by the Post Office and the amount paid to the CAM operators based on weight/distance of airmail carried was a subsidy. Unscrupulous operators were known to have mailed telephone books and machine parts to themselves, paying the upfront postage and then charging the Post Office the much higher contract rate based on weight.

Brown saw that the system in place encouraged fraud, was costly to the government, and did little to promote commercial aviation. He realized that the government subsidy for airmail was open-ended, subject to little government control. It was like an oil gusher that could not be capped.

Although the government controlled the award of CAM routes, it had little control over the operators after the award was made. Control of stock companies was subject to change and was beyond the control of the Post Office under the system in place. In fact, in 1929 a proxy fight for control of National Air Transport, which held the New York to Chicago portion of the transcontinental airmail route, had resulted in United Aircraft & Transport Corporation taking control of that company from the North Ameri­can Aviation group. This gave the United group monopolistic control of airmail carriage all the way across the nation, without Post Office approval, although the government was footing the bill.

Within a relatively short time after tak­ing office, Brown had formed well-researched and thought-out conclusions about what was wrong with the airmail service. Brown believed that the Post Office was paying too much for the carriage of mail, partly because the airline passenger business had not been developed. He believed that by developing passenger traffic, a new, untapped source of income would become available to the carriers. This new income would then be available to help offset the cost of airmail operations.

Brown thought that tying the mail contracts to the size of aircraft (bigger) and requiring on­board state-of-the-art communication equipment (radios) and instrumentation would have the effect of making airline flying safer and more acceptable to the potential flying public.

He noted that a system of illogical short routes had been created through the process of competitive bidding, and that competitive bidding had resulted in a nonsensical pay schedule to the airmail contractors with rates of pay varying from 62 1/2 cents to the maximum of $3.00 per pound. He believed that competitive bidding on airmail contracts was counterproductive and that a system of appointing qualified, well-financed, and experienced operators would render a more stable and efficient system. He felt that those operators who had “pioneered” airmail routes in certain parts of the country, and who had expended effort and money in promoting the airmail system, developing good will and encouraging aviation should be given preferred consideration in the award of airmail contracts. (See Figure 13-6.)