Aviation Regulation – History and Practice – Part 4

Aviation Regulation – History and Practice

Part Four

This part covers the Post-War and the Regulated and Protectionist Era and the Role of Government in International Civil Aviation with a focus on the Cold War Era.

POST-WAR AND THE REGULATED AND PROTECTIONIST ERA 

United States Commercial Aviation

Often referred to as the “glory days of airline travel”, the Post-War and the Regulated and Protectionist Era witnessed the manufacture of large capacity, long-haul, piston driven aircraft, the introduction of and transition to commercial jet airliners that ushered in the “Jet Age”, and finally the development of high capacity, wide-bodied aircraft that started the path toward the end to economic regulation of the privately-owned U.S. airlines.

ConstellationIn the United States, the trunk carriers began the transition to peace-time operations, enjoying the technology developed during the war. There was a surplus of former military transport and bomber aircraft that were acquired by the trunk airlines and modified for commercial service. These surplus aircraft were also purchased by entrepreneurs who began to transport people and cargo on an ad hoc basis, with no fixed routes or schedules. Thus emerged a new type air carrier to be known as the non-scheduled or “non-skeds” to the public or as “large irregular carriers” to the CAB, which was powerless to regulate them under the current statutes. This was remedied by an amendment to the Civil Aeronautics Act that created supplemental air carriers and supplemental air transportation requiring these carriers to possess certificates of public convenience and necessity in order to operate as an air carrier.

In addition, the post-war years witnessed the granting of new “feeder” routes by the CAB. Although the trunk carriers claimed a right to these routes under their grandfather rights, the CAB nevertheless granted these new routes to another new class of air carrier known as “Local Service Carriers”, each with a regionally centered route system. Airlines such as Allegheny, Mohawk, Lake Central, Frontier, Bonanza, Ozark and Southern were all certificated during the 1945-1951 period. Because of the thin markets served by these carriers, they were awarded subsidies to keep operating in these markets.

These new air carriers, added to the already existing trunk carriers, meant an overcrowding of American airspace, and the regulation in place for air traffic control was soon considered antiquated.

In 1956, U.S. President Dwight D. Eisenhower appointed Edward Peck Curtis as Special Assistant for Aviation and was named to head a commission to study the dramatic increase in airline traffic and to propose ways to deal with airplane traffic jams at airports. This was followed by and event, however, that shook the very foundation of air traffic control.

800px-1956_Grand_Canyon_mid-air_collisionOn the morning of 30 June 1956, United Airlines flight 718 collided with TWA flight 2 over the Grand Canyon. With 128 fatalities this was at the time the largest loss of life in an aviation accident. This high profile accident, which took place in uncontrolled airspace, raised public concern for airline safety.

As a result, in 1957, Congress passed the Airways Modernization Act that established the Airways Modernization Board (AMB) headed by General Elwood Quesada.  The mandate of the Board was the development and modernization of the national system of navigation and air traffic control facilities to serve the present and future needs of civil and military aviation.

Two subsequent mid-air collisions between military aircraft and commercial airliners, one near Las Vegas, Nevada (United Airlines flight 736) on April 21, 1958, where 49 died, and another involving Capital Airlines over Brunswick, Maryland a month later on May 20 that cost 11 lives, showed further imperfections in the regulation of air traffic, particularly the need for unified control of airspace for civil and military flights.

The day after the Brunswick collision, Senator Mike Monroney and Representative Oren Harris introduced the Federal Aviation Act and two days after Brunswick, a stopgap presidential proclamation was issued that (1) required military jet aircraft to fly by Instrument Flight Rules while in the civil airways below 25,000 ft. (later reduced to 20,000 ft.) and (2) prohibited jet penetration swoops from high to low altitudes through civil airways.

Citing “recent midair collisions of aircraft occasioning tragic losses of human life,” President Dwight D. Eisenhower announced the White House’s support of the legislation on 13 June 1958. The Federal Aviation Act of 1958 passed Congress and was signed into law by Eisenhower on 23 August.

Taking a comprehensive approach to the federal role in fostering and regulating civilNewsign aeronautics and air commerce, the new law repealed the Air Commerce Act of 1926, the Civil Aeronautics Act of 1938, the Airways Modernization Act of 1957, and those portions of various presidential plans dealing with civil aviation. The legislation assigned the functions exercised under these repealed laws to two independent agencies — a new Federal Aviation Agency (FAA) and a Civil Aeronautics Board (CAB).

Provisions of the Act included:

Established the Federal Aviation Agency (FAA, later Federal Aviation Administration).

Abolished the CAA, and empowered the FAA to oversee and regulate safety in the airline industry and the use of American airspace by both military and civilian aircraft.

CAB continued as an independent agency and retained jurisdiction over route allocation, accident investigation and fare applications.

International routes subject to bilateral agreements between the US and the country involved and the CAB designated the carrier to operate the route.

DOT-FAA_Headquarters_by_Matthew_BisanzThe twenty years following the Federal Aviation Act of 1958 was characterized as an era of strict economic regulation in the United States and government protectionism in the rest of the world. The privately owned U.S. flagged airlines were restricted by the CAB as to where they could operate and what fares they could charge. Routes were awarded after long and costly proceedings where a carrier needed to prove the market applied for11.Wash-CAB actually needed the service. Fares were also subject to board approval and were calculated using a formula known as the Standard Industry Fare Level (SIFL). A small handful U.S. carriers operated international routes, most notably Pan American, TWA and Northwest, with Pan American being the dominant carrier and considered the “Chosen Instrument” for the United States.

Below are the regulated-era route systems and typical aircraft of the U.S. carriers American, Pan American, TWA and United:

AA 1976

MAP 1966 Sep

TWA 1978

UAL 74

DC-7B-N339AA-SAN-122562-860x539proctor

707-123B-N7522A-SAN-1263-860x486proctor

Electra - Proctor

DC-9 Mark Hansen

707 inaugural flight Orly

377-3 RA Scholefield

1049G-N7108C-LAX-564-860x461 proctor

707-131-N743TW-LAX-41863-870x504 proctor

DC-8 at LAX

DC-7-N6331C-SAN-dupe-860x503 proctor

On 15 October 1966, the United States Department of Transportation (USDOT or DOT) was established as the federal Cabinet department of the U.S. government concerned with transportation. It began operation on April 1, 1967 and is headed by the United States Secretary of Transportation.

Prior to its establishment, the Under Secretary of Commerce for Transportation administered the functions now associated with it. In 1965, Najeeb Halaby, then Administrator of the FAA, suggested to President Lyndon B. Johnson that transportation be elevated to a cabinet-level post, and that the FAA be folded into the DOT.

DOT’s mission is to “Serve the United States by ensuring a fast, safe, efficient, accessible, and convenient transportation system that meets our vital national interests and enhances the quality of life of the American people, today and into the future.”

Usdot_headquarters

Provisions related to air transportation include:

The FAA became an agency within the department.

The CAB remained an independent regulatory agency with jurisdiction over economic matters (routes and rates/tariffs).

Established the National Transportation Safety Board (NTSB) that took over the CAB’s accident investigatory function. NTSB was severed from DOT by the Independent Safety Board Act of 1974.

International Commercial Aviation

In the international arena, the foreign flagged airlines in the Post War era were largelyAir France state-owned and were controlled by their respective civil aviation authorities. International routes were governed by bilateral agreements between the countries involved and fares were agreed to at Traffic Conferences organized by IATA. The airline of the Soviet Union, Aeroflot, and airlines of Eastern European countries were also state-owned.

Tu114 Pereslautsev Alex

Foreign-flag carriers operating international routes were generally identified as being the “Chosen Instrument” of their owning countries.

377_boac

DC-7C-JA6302-LAX-3460-860x554 proctor

Government Role in International Civil Aviation

One very important factor during this era was the government role in international civil aviation, best illustrated by how governments dealt with aviation issues in three main areas: ICAO, IATA and bilateral Air Services Agreements (ASA). This era was dominated by the Cold War, and the international airline industry was in many respects, though not obviously, a pawn in the struggle between the super powers at the time.

Political considerations became apparent early, when, in 1947, ICAO became an agency ofIberia the United Nations.  In one case, as a condition of acceptance of ICAO into the UN, the Soviet Union demanded the expulsion of Spain from ICAO.  Spain was then considered a key terminal and a source or destination for a substantial amount of traffic, and its expulsion hampered the development of air facilities and aids to navigation that were essential to orderly air transport. In another case involving South Africa, thirty-one African nations demanded the expulsion of that country because of its apartheid policy. The attempt failed because of failure to meet the required advance notice.

Government involvement in IATA activities, although a non-governmental organization, was also prevalent. Under its Articles of Association, traffic or rate conferences were called whenever necessary. Each member had one vote, and each member had veto rights. These conferences made a variety of decisions, but only those that were unanimously agreed on and expressed in the form of a resolution were binding. However, because most international airlines at the time were state-owned, these resolutions would not be binding on the international airline until its government approved. Further, a member would not be bound if it certified the resolution was not coincident with the laws or official policy of its government. Despite these restrictions, however, government approval of IATA resolutions during this period was overwhelming. This can be attributed to the fact that most international airlines received instructions prior to attending the conferences and in some cases, airline representatives were actually state or government employees disguised as officials of the state-owned airline.

The government role in the industry, however, was most intense and interesting at the bilateral level. This was particularly true during the Cold War and the role of government was interpreted in terms of foreign policy. The international airline could either be an instrument of foreign policy or it could reflect or parallel the foreign policy of a country. A country may also use its international airline to gain political favors from other countries. Here, the key to successful negotiations was bargaining power, or the ability to influence other countries in a way that would contribute to the economic success of the home country’s airline. It was also entirely possible that an airline’s profitability could be damaged because something of value to a national airline could be traded away by government to meet a governmental objective.

For the most part the countries of the international airlines exchanged routes on a reciprocal basis and when both had equal bargaining power. A country with greater power, however, can demand more for its routes. In a 1957 case, KLM Royal Dutch Airlines appliedDC-7C-PH-DSC-KLM-IDL-661-Bob-Proctor-860x499 for additional routes in the United States. The U.S. government was not prepared to grant these additional routes because the Netherlands had nothing to offer in return. To the Dutch, KLM was one of the Netherlands’ biggest industries that was a symbol of Dutch internationalism and initiative. Thus, to obtain the desired routes, the Dutch offered a continuing cooperation with the North Atlantic Treaty Organization (NATO). This was acceptable to the US and the routes were granted. The granting of airline rights to foreign governments in exchange for political support, military bases or troop contributions to NATO were regular bargaining tools of the U.S. in order to maintain its military superiority over the Soviet Union.

ASAs can also be subject to disputes between the parties and at times an injured party might resort to counter-measures to protect its interests. This was illustrated in a case between Pan American and Air France in connection with the bilateral ASA between the U.S. and France. Under that agreement Pan American was authorized a scheduled service between Paris and London. However, because of the aggressive subsidies being provided 747-121-N740PA-LAX-102184-860x509proctorby the French government to Air France, Pan American decided to substitute a smaller, more economical  aircraft for the 747 already scheduled on that route (gauge change). The French government refused on the basis ranging from assertions of national honor (Pan American flying anything smaller than a 747 into Paris would be an affront) to the more pragmatic reason that Air France would enjoy the prospect of forcing its competitor to run a grossly unprofitable route (with the 747). Finally, the French compelled Pan American to cease its flights to Paris. The U.S. government proposed arbitration to resolve the dispute, but for two years the French refused. The U.S. eventually made a reprisal by suspending Air France’s Paris-Los Angeles route, long established under the ASA.

This got the French government’s attention and France agreed to arbitration. The issues were (1) whether Pan American could change gauge and (2) whether the U.S. could unilaterally suspend Air France’s route to Los Angeles. The first issue was resolved in favor of Pan American. In the case of the second issue, the French argued that as the ASA provided for arbitration, it was impermissible for the U.S. to engage in unilateral self-help measures. The arbitrator ruled, however, that it was France that had been setting up707-328-AF-LAX-760-Bob-Proctor-860x474 barriers by not agreeing to arbitration and that it was only the U.S.’s retaliatory move terminating the Los Angeles route that brought France to the table. In short, the arbitrator ruled that counter-measures were a necessary part of the punch and counter-punch often needed to get parties to submit their disputes to arbitration or other method of binding settlement.

One point made in this case was that in any use of counter-measures, there could always be a risk of escalation. France could have cut off Pan American’s New York-Paris route and then the U.S. could have retaliated by economic or other sanctions outside the air transport sector, and so on. The point here is that although the underlying reasons for the dispute were aviation related, there could have been other non-aviation factors driving the actions of the French government.

Beyond the government role in ASAs, and as alluded to above, an international airline during this era could be a reflection of or parallel the foreign policy of its country. A good example of this is Aeroflot, then the only international airline of the Soviet Union. As previously mentioned the Soviet Union did not attend the Chicago Convention. The Soviet policy at the time was that of isolationism and civil aviation was kept at a low priority. This changed in the 1950s when the Soviet government switched to a more internationalist policy in relation to the Eastern Bloc countries, and it was reflected in Aeroflot’s opening of new routes to capitals in Eastern Europe. The 1960s also witnessed some dramatic changes after the switch from the Khrushchev regime to the Brezhnev-Kosygin regime. Here the policy changed to greater flexibility toward the Western powers, and Aeroflot began operating to countries outside the Soviet bloc and by 1967 almost all Western European capitals. In 1968, after several years of negotiations, service was inaugurated between the U.S. and the Soviet Union. The agreement best illustrates the concepts of political considerations in bilateral negotiations and the notion of the “Chosen Instrument”. The airlines involved were Pan American and Aeroflot.

If there was any route in Pan American’s history that could be designated as a “Chosen Instrument” route, the U.S.-U.S.S.R. could be that route. Pan American was the selected airline because it was recognized as the primary U.S.-flag carrier as manifested by the So16A-Hambletonviet Union’s aviation officials making the initial contact directly with Juan Trippe. After reporting the contact to the U.S. State Department and the Civil Aeronautics Board, Trippe was authorized to negotiate with the Soviets on key issues for an ASA between the two countries. However, given the political climate, it can be reasonably inferred that political considerations also played a role in formulation of the final agreement between the two countries and both Pan American and Aeroflot were instruments of those considerations, and therefore instruments of both countries’ foreign policy, hence,  “Chosen Instruments”.

For Pan American, a private enterprise as opposed to the state-owned Aeroflot, the operation was a money loser and the competition was not on a level playing field. Quite simply, Pan American could not sell tickets in the Soviet Union and was at a tremendous economic disadvantage. Unfortunately, there was no provision for a subsidy to a U.S. flag carrier operating at an economic disadvantage in an international market at the government’s bidding. Pan American eventually suspended the losing operation but did so when U.S.-Soviet relations were souring. It was not until relations began to improve between the two countries in the mid to late 1980s did the service resume, in 1986, later crowned with a non-stop 747 service in 1988.

59-IL-62-cropped

From the late 1960s through the early 1970s, Aeroflot grew rapidly and by 1973, had set a record for route expansion, operating under sixty-five bilateral agreements with other countries. These changes from isolation to a world-wide presence could be considered a reflection of the Soviet Union’s foreign policy at the time, or it could have been viewed as a challenge to the U.S. superiority in air transport. Whatever the case, the Soviet policy of détente was based on political and economic weakness. There were three basic reasons for this: (1) the Sino-Soviet Conflict, in which China had survived the Cultural Revolution and gained strength in the international arena; (2) the avoidance of Western European unity, which could be a strategic threat and a threat in itself to Eastern Europe and the Soviet control of Eastern Europe; and (3) the weakened Soviet economy, which had found the Soviets lagging behind the U.S., especially in consumer goods. The policy was designed to effect technological cooperation with the West, avoid a political struggle on two fronts (China at one end, the West at the other) and increase political influence in Europe. In 1973, Aeroflot concluded a Trans-Siberian route exchange (connecting Europe and Japan through Moscow, thereby saving time and mileage) with Japan Airlines, British Airways, Lufthansa and Air France.

The Trans-Siberian route was considered important because it impacted the bargaining power of both the U.S., where travel between Japan and Europe was through Anchorage, Alaska, and the Middle East, which had bargaining power with Fifth Freedom rights. By IL62 JAP Aeroflot Malcolm Nasongranting this route to Japan Airlines and the European airlines, the Soviet Union effectively diminished the U.S. and Middle East bargaining power in this market. In addition, this Soviet move made possible increased influence in both Japan and Western Europe.

Whether the Soviet activities at the time were a threat to U.S. leadership is questionable. First, the Soviet aircraft were well behind those of the U.S. technologically and were more expensive to operate; secondly, the airline service offered was not consumer-oriented and was reputed to be deplorable; and third, Aeroflot was not a member of IATA at the time. However, the view at the time was that the rapid Soviet growth was a bid to engage in a contest for national prestige and political influence, by using aviation as a means to an end.

One other event during this era, which occurred on board the fishing boat Wild Goose in the Puget Sound, would set in motion a series of events that would rock the very foundation of the industry:

As legend has it, Pan American’s Juan Trippe asked, “Would you build it if I bought it?” to which Bill Allen of Boeing responded, “Would you buy it if I built it?”

What was “it”? The Boeing 747

END OF PART FOUR

The next installment of this story, Part 5, will cover Deregulation and Open Skies.

 

 

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Aviation Regulation – History and Practice – Part 1

Aviation Regulation – History and Practice

Part One

INTRODUCTION

It would not be an overstatement to say that the history of aviation regulation can be a history of commercial aviation. Indeed, the rules and regulations promulgated since the Paris Convention of 1919 have been largely driven by the technological advances of manned flight, beginning that December day in Kitty Hawk, North Carolina when the Wright Brothers first went airborne with the powered Wright Flyer.

Wright Brothers-2

This history will be presented in several parts. This first part will cover the Paris Convention of 1919, the Havana Convention of 1928, the Warsaw Convention and U.S. airmail contracts. Subsequent parts will cover foreign airmail contracts, early U.S. regulation, early European aviation, European airmail, European consolidation and expansion, the situation leading up to World War II, the Road to Chicago, the Chicago Convention, the Bermuda Agreement of 1946, the International Air Transport Association, the Federal Aviation Act of 1958, the role of the airline industry in international politics, the deregulation movement, the Airline Deregulation Act of 1978, the International Air Competition Act of 1979, Open Skies, liberalization of European aviation, the US-EU Air Transport Agreement, the Montreal Convention, Consumer Protection, Airline Certification/Fitness, the National Transportation Safety Board and a discussion of current issues.

EARLY ISSUES AND CONVENTIONS

 Sovereignty over Airspace

Before manned flight, the “Air” was considered “free” and no individual state had authority over it. However, with no authority, state and national sovereignty, national interests and security were compromised. This was most apparent during World War I with the development of the flying machine as an instrument of war.

800px-Royal_Aircraft_Factory_SE5a   Curtiss JN-4 Jenny Brian Karli

Paris Convention of 1919

The technical developments in aviation arising out of World War I created a completely new situation at the end of the hostilities, especially with regard to the safe and rapid transport of goods and persons over prolonged distances. However, the war had also shown the ugly potential of aviation; it had therefore become much more evident that this new and now greatly advanced means of transport required international attention and an urgent need for some kind of international regulation of aviation. Thus, at the Paris Peace Conference (Congrès de la Paix) of 1919 the idea of international collaboration in aviation matters was brought forward and, on 13 October 1919 the Convention Relating to the Regulation of Aerial Navigation was signed by 27 States. The convention also created the International Commission for Air Navigation (ICAN).

Paris Convention-1 ICAOThe convention recognized a state’s full and absolute sovereignty over its airspace; recognized the desirability of the greatest freedom of international air navigation consistent with state sovereignty and security concerns; and recognized the requirement that every aircraft possess the nationality of the contracting state. In addition, the convention provided for the safe conduct of air navigation, including provisions for airworthiness certificates, licenses for pilots and international rules for the air, including signals, lights, collision prevention and procedures for landing and moving on the ground.

 

 

Havana Convention of 1928

As a consequence of the failure of the United States to ratify and the join the League of Nations, and therefore not joining the convention, the rules and provisions of the Paris Convention did not apply to the Americas. As a result, there was a need for a separate form of international cooperation on a regional American basis.

During the 5th International Conference of the American States in Santiago, Chile, in 1923, a resolution was adopted providing for the creation of an Inter-American Commercial Aviation Commission to consider problems related to aviation. The Pan American Convention on Commercial Aviation was finalized in Havana on 20 February 1928. The Havana Convention was modeled after the Paris Convention and it applied exclusively to private aircraft (government aircraft were not included) and laid down basic principles and rules for aerial traffic, recognizing that every State had complete and exclusive sovereignty over the airspace above its territory and adjacent territorial waters. Clauses also enabled U.S. owned airlines to freely operate services within North and South America.

Warsaw Convention of 1929

With the growth of commercial international air transportation in the 1920s, there came a need to protect air carriers (at the time mostly state-owned with the notable exception of the privately owned air carriers in the United States) from open-ended liability in case of damage to or loss of cargo or baggage and injury or death of passengers. And, on the other hand, shippers and passengers needed to be reassured that if something went wrong they would have an effective remedy against the carrier and be compensated.

Thus after a series of conferences starting in 1927, the Convention for the Unification of Certain Rules relating to International Carriage by Air was signed in Warsaw in 1929, known as the Warsaw Convention.

The Convention applied to any international transportation of persons, baggage or merchandise by aircraft and provided for airline liability for death or injury to passengers; loss or damage to baggage; and loss resulting from delay in the transportation of passengers, baggage or merchandise. The dollar amount of liability was limited.

The Convention has been amended, most notably by the Hague Protocol of 1955, but will be superseded by the Montreal Convention of 1999 upon full ratification.

 

EARLY U.S. GOVERNMENT INVOLVEMENT IN AVIATION

Air Mail Contracts

1024px-Airmail_1930s_Detroit_Smykowski

Early U.S. government involvement in aviation dealt with the issuance of airmail contracts. The first act of Congress related to this was the Contract Air Mail Act of 1925 (Kelly Act) that authorized the Postmaster General to award Airmail stamp 1925-1 Airmail stamp 1925-2contracts to private individuals or companies involved in the air transportation of the mail. Routes and tariffs were established and the airlines were given subsidies that encouraged the introduction of passenger service.

 

The Air Mail Act of 1930 (McNary-Watres Act) changed the way air mail contracts were awarded and eliminated Model Boeing 40competitive bidding. The Act encouraged companies to buy large aircraft and also stimulated the carriers to fill space on the aircraft with passengers. The Act was a product of Postmaster General Walter F. Brown’s request for legislation giving him authority to change postal policy. As a result, the Act gave Brown strong authority over the nationwide air transportation system. There were three main provisions of the Act: The first provision changed the way payments to airlines were calculated, rating them based on volume of mail, rather than weight. It also set a fee on planes of a certain size, whether it was flying mail or not, to discourage the flying of large amounts of junk mail and to encourage the carrying of passengers to increase revenue.

SwallowThe second provision allowed any airmail carrier with an existing contract of at least two years standing to exchange its contract for a “route certificate” giving it the right to haul mail for 10 additional years. The third and most controversial provision gave Brown authority to “extend or consolidate” routes in effect according to his own judgment.

Soon, at what later became known as the “Spoils Conference” Brown invoked his authority under the third provision to consolidate the airmail routes to only three companies, friends of the administration of President Hoover, forcing out the small competitors: Boeing Air Transport (the northern airmail route), Transcontinental Air Transport, later Transcontinental 1280px-EarlyDH4and Western Air (TWA), (the mid-United States route) and Robertson Aircraft Corporation, later American Airways (the southern route). Brown also extended the southern route to the West Coast of the United States, and awarded bonuses for carrying more passengers and purchasing multi-engine aircraft equipped with radios and navigation aids.

 

Ford 5-AT-B

Although this led to increased productivity and efficiency in the airline industry, the small airlines complained that they were left out of Brown’s scheme and a Congressional investigation followed. The “spoils” were exposed and as a result, the legality of the contracts awarded under Brown’s leadership were questioned.

1d_1934-3

On 19 February 1934, President Roosevelt canceled all existing airmail contracts, and, as a temporary measure, directed Army Air Corps General Benjamin D. Foulois to organize a new airmail operation using military planes and pilots. It did not work. The airmen were inexperienced in cross-country flying and the aircraft were ill-equipped. There were numerous crashes and the cost of flying the mail skyrocketed. By 10 March, 12 pilots had died in 66 crashes or forced landings. Could it be that these problems were a product of those provisions of the Havana Convention of 1928 that excluded government aircraft from its application? On 8 May, Roosevelt and then Postmaster General James Farley returned to private contract airmail.

Keystone_B-6_twin-engine_airmail_plane_in_snow_storm,_1920

The return to private airmail contracts came in conjunction with the Air Mail Act of 1934 (Black-McKellar Act). Under the Act, no airline that had held a contract before the government takeover could bid for a contract. To circumvent this, however, the airline companies simply changed their names: Boeing Air Transport became United Air Lines; TWA became TWA Inc., and American Airways became American Airlines. The Act’s main provision broke up the aviation holding companies, large corporations that owned both aircraft manufacturing companies and airlines. The Act also stated that the government would set airmail contracts, routes and schedules; fix subsidy rates and airmail payments; and regulate the airways and license pilots. The Interstate Commerce Commission (ICC) regulated rates and the Secretary of Commerce specified the equipment to be used.

END OF PART ONE

The next installment of this story, Part Two, will cover Foreign Air Mail Contracts, early U.S. Regulation of Air Transportation, European Air Transportation and the situation prior to World War II.