Airmail Act of 1934: Effects on the Airline Industry

In 1933, a the united States had a  sum of 34 Contract Air Mail route that were established over a period of time, between February 15, 1926, and October 25, 1930, but with the fall out of the Air Mail Scandal the eliminations of the routes in February 9, 1934 was a consequence of the investigation. The Air Mail Act of 1934 put in place a new set of rules and regulations around the awarding of contracts to the private sector for airmail routes (SNPM). These new set of rules, not only changed the airmail contracts but, changed the structure of the aviation industry eternally. The Air Mail Act added language regarding the bidding and award process, specifically adding language preventing airliners to be awarded routes if they also manufactured aircraft. This additional restriction forced United Airlines to break up into

Literature Review

  In 1930, President Herbert Hoover, signed the Airmail Act of 1930; this act gave the airmail carrier routes to the private sector. There were three provisions of the act that changed the way the carriers were paid, how long they owned each route for, and gave the Post Master General to authority to change the routes at any time. The last provision would prove to be the most impactful, and the reason behind the corruption later revealed. The Post Master General almost immediately changed the routes, combining them into three sectors and awarding these routes to the three major airlines of the time, Boeing Air Transport, Transcontinental Air Transport, and Robertson Aircraft Corporation. These awards pushed out the smaller industry competitors, leaving them to request an investigation into the “spoils conference” revealing the corruption. (Baldwin, 2016)

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A Congressional investigation, known as the Black Committee, concluded that irregularities of the airmail rate arrangement; one such finding was the airline carriers padlocking single pieces of mail to increase overall weight of their cargo. Regardless of the Brown’s administration efficiency performance, this lowered costs from $1.10 to $0.54 per mile. There were questions concerning the ethics of the Black Committee investigation, since the Hoover administration was Republican and the Black Committee was run by the Democrats. (SNPM)

The finding of the Black investigative committee’s report stated that the unethical method of awarding air and ocean mail contracts were that everyone involved  were equally to be blame for the unethical practice. The committee identified and highlighted legislator’s shortfall for preparing and passing “misguided” laws. The committee called out public officials, who betrayed their rolls and responsibility to the public, with the biggest offender being Walter Brown. The committee also accused people of unethically benefiting from the route contracts for their personal profit. A recommendation for competitive bidding was proposed by the Black committee for awarding air and ocean mail contracts and reducing the burden on tax payers by way of  removing subsidies, it was the belief of the committee that the implementation of the proposed recommendation would help the government  save millions of dollars. Armed with the data and information from the official Black committee investigation Congress passed legislation to make changes to existing  laws and practices  that would benefit  the air mail and ocean mail routes in the years to come resulting from the inquiry. (Senate, 2017)

In 1934, President Franklin Roosevelt cancelled all contracts developed during the “spoils conference.” Returning the mail routes to government run proved to be deadly; the Army pilots assigned to these unfamiliar routes were met with bad weather causing accidents. The Airmail Act of 1934 was returned the routes to the private sector but drastically changed the award process.  Due to the corruption in 1930, former contract holders were not allowed to bid and bidding was structured to be more competitive resulting in a more evenly distributed business. The rates were also lowered and so many airlines began to focus more on commercial aviation, developing and profiting from passengers. (SNPM)

Discussion

 The impact of the Airmail Act of 1934 was more significant that the initial intention. This act not only restructured airmail routes bidding and award process, but it forced companies to focus on the commercial side of the industry certainly changing the future of the airline industry extremely.  The new Postmaster General James Farley went after Boeing in a controversial manner by banning the awarding of new contracts to manufactures of planes, and Congress upheld this change. (Crowley, 2003)

Boeing faced with a dilemma, made the decision break up United Aircraft and Transport, which resulted in United Air Lines being reincorporated as a separate company on May 1, 1934. The Boeing Airplane Company as we know it now was reorganized and as of September 26, 1934 United Aircraft and Transport was no more. (Crowley, 2003)

 The Airmail Act of 1934 reduced rates for carrying mail impacting the bottom line for the three major airlines, United, TWA and American. A number of airlines brought the government go to court for loss of revenues during the period when the Air Corps started flying the mail. The government tried to protect itself with the introduction of the Black-McKellar bill which wanted to relegate the law suits by barring the government from getting involved with any business dealing with airlines that filed any law suit against them, there was very strong disapproval the requirement in the bill, which was eventually dropped from the bill. On February 4, 1935, nearly 12 months after the contracts were annulled, the appeals court of the District of Columbia pass judgment that the annulled contracts “amounted to a breach of contract” and property confers cation and not following correct process. The law suits eventually made their way through the court system, 1942 saw the last of the suits settled. The United States Court of Claims then commissioner Richard H. Akers stated in his report that there had not been any deception or conspiracy in the giving of contracts in accordance to the Air Mail Act of 1930. On July 14, 1941. (Green, 2014)

The mail-carrying contracts continued to be unprofitable as consequences of the scandal, and leveraged the airline carriers to start carrying paying passengers. The modern airline transport started to take shape with emphasis on creature comfort for its paying passengers.  New technology and safety features were conceptualize and executed for the modern day airline, the overall rapid growth of the industry was driven by the focus on passenger air travel and what it meant for the bottom line for the carriers. (Green, 2014)

The airmail industry was strictly governed by the Act, the separation of airlines from manufactures was done for safety reasons and to avoid conflict of interest. Several federal entities had oversight over airmail through, the Post Office had oversight of the awarding of postal contracts, while Interstate Commerce Commission would set rates, safety and development of airways was controlled by the Bureau of Air Commerce. Federal Aviation Commission, to later have a name change to the Federal Aviation Administration (FAA), was conceptualize, with the Airmail Act of 1934 whose purpose was to study aviation policy. (Senate, 2017)

Conclusion

 After 1934, the airliners struggled with radically declining federal profits; however, by the end of the 1930’s, it began to recover (SNPM), all due to the implementation of the Airmail Act of 1934. The act changed the dynamic between the airline manufacturers, airliners and government contracts. The change led to the airliners focus shifting to commercial passengers and improving their safety, experience, and using this change to create revenue. The aviation industry has a corruption blemish on its history but the rebound significantly outweighs any damage done and led to the aviation industry we see today. 

References

• Lawrence, H.  (2015). Aviation & the Role of Government (3rd ed.).  Dubuque, IA: Kendall Hunt Publishing Company
• The Airmail Scandal and Beyond. (n.d.). In Smithsonian National Postal Museum. (SNPM) Retrieved May 9, 2019, from https://postalmuseum.si.edu/exhibits/current/airmail-in-america/contract-airmail-service/the-airmail-scandal-and-beyond.html
• Libby, J. H. (2010, Summer). Comments on the air mail episode of 1934. Air Power History, 57, 44-47. Retrieved from http://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/608317614?accountid=27203
• Baldwin, J. P. (2016). I Aviation Regulation History and Practice [Scholarly project]. In Academia.edu. Retrieved May 11, 2019, from https://www.academia.edu/25092598/Aviation_Regulation_History_and_Practice
• Crowley, W. (2003, March 5). Boeing and United Air Lines from Birth to Break Up, 1919-1934. Retrieved May 11, 2019, from https://www.historylink.org/File/5368
• Green, R. (2014, September 30). Daring Deliveries: The U.S. Post Office and the Birth of Commercial Aviation. Retrieved May 10, 2019, from https://unwritten-record.blogs.archives.gov/2014/09/30/daring-deliveries-the-u-s-post-office-and-the-birth-of-commercial-aviation/
• Special Committee to Investigate Air Mail and Ocean Mail Contracts. (Senate) (2017, January 19). Retrieved May 10, 2019, from https://www.senate.gov/artandhistory/history/common/investigations/MailContracts.htm