Air Commerce Act Creates a Federal Airways System

Date May 20, 1926

Through the Air Commerce Act of 1926, the U.S. government moved to develop air commerce, giving a mandate to operate and maintain the airways system and related aids to air navigation.

Locale Washington, D.C.

Key Figures

• Benjamin Franklin (1706-1790), founder of the American postal service
• Orville Wright (1871-1948), American aviation pioneer
• Dwight D. Eisenhower (1890-1969), president of the United States, 1953-1961

Summary of Event

The U.S. Post Office Department, through its development of an airmail distribution system, was directly responsible for the development of commercial air transportation and, subsequently, the airline industry. Many credit the Post Office Department with being the progenitor of the American commercial air transportation system. Benjamin Franklin, by establishing the postal service at the birth of the nation, recognized the importance of such postal service and communication systems at large. His policy for the postal service focused on its role in assisting and developing all new forms of transportation, which would in turn provide better mail delivery. Early subsidies were paid to stagecoach lines, and the Pony Express was established solely because of the lucrative mail payments given to the contractors involved. Likewise, federal policy provided government assistance to early railroads, including loans for equipment and land grants. Such a policy thrust also involved the Post Office Department in airmail service development.

By 1925, the Post Office Department had conducted airmail service long enough to prove the practicality of this commercial nonmilitary use of the airplane. Throughout the initial period of the department’s support for airmail operations, it was firmly understood that government investment and control would be temporary, with a move by the mid-1920’s to involve private industry in airmail operations. Through the involvement of private firms in airmail, attention was given to the growth of the commercial airline industry.

The last direct flight of the Post Office Department operation took place on September 9, 1927. Beginning in June of that year, department pilots were released as newly formed airlines took over various airmail routes. There had been more than forty pilots involved in the postal airmail service and more than six hundred employees in ground jobs. These employees had contributed to the more than twelve million airmail miles flown.

From the beginning of U.S. government airmail service in 1918 until the last flight in 1927, the entire cost totaled $17.5 million, with more than $5 million in airmail postage sold. The balance cannot be counted as a loss, given that it led to the establishment of commercial air transportation and the entirety of the U.S. airline industry. It should instead be counted as an investment.

Civilian air transportation largely began in the United States with the passage of the Air Mail Act, also known as the Kelly Act, on February 2, 1925. The act made possible the awarding of contracts to private contractors for the transport of airmail and, hence, led to the development of private airmail contractors. The act held that the amount of compensation paid to an air carrier would not be more than 80 percent of the revenue derived from the sale of airmail postage for such mail.

In the middle of 1925, the postmaster general advertised for bids on eight airmail routes. Only five routes were immediately awarded, but by the beginning of 1926 twelve contract airmail routes had been awarded. The awards went to entrepreneurs of various backgrounds, many of them pioneers in commercial operations in the United States. The routes all focused on feeder lines branching off into the main transcontinental routes. Bids were accepted on main routes beginning in 1927, and contracts were written for major as well as feeder routes throughout that year.

Subsequent amendments to the Kelly Act abandoned difficult methods of apportioning payments for letters carried and, over time, reduced airmail postage, leading to a substantial increase in airmail traffic. The young airlines, entrepreneurs, and inventors involved in airline service benefited through the adjustments and the growth in the market, which led to substantial progress in the establishment of commercial aviation.

Although the Kelly Act and Post Office Department policy provided that airlines could carry airmail, it became clear that airlines were not financially stable or large enough to provide for the maintenance and operation of the airways system organized for the postal service’s operation. Therefore, the U.S. Congress passed another major piece of legislation known as the Air Commerce Act of 1926, the purpose of which was to promote air commerce. The law charged the federal government with the development, operation, and maintenance of the airways system and all aids to air navigation. It also charged the federal government with providing safety in air commerce generally through a system of regulation. Air transportation presented new and serious safety issues for the federal government to consider. Unlike many forms of surface transportation, it involved such speed and distance from the surface of the earth that it pointed to potentially hazardous safety situations. Any failures in maintenance, construction, or operation could lead to serious problems of efficiency and safety. The initiative of the 1926 act gave rise also to a complex, continuing structure of safety regulation.

The 1926 act was unlike other legislation dealing with airmail, leaving no hesitancy or reluctance in the belief that the federal government was strongly in the picture of growth and development of aviation by way of its aid and encouragement. The function of safety regulation was to be carried out by the Department of Commerce, and that agency established a department of air commerce. Among the earliest safety regulations provided were requirements of registration and licensing of aircraft and the certification and medical examination of pilots. Civil penalties were allowed in the enforcement of these regulations. This structure was the foundation of what later became the Civil Aeronautics Administration (in 1940) and still later the Federal Aviation Administration (in 1966), when the new Department of Transportation was established and the FAA moved to it from the Department of Commerce. The Air Commerce Act of 1926, along with the Kelly Act, provided a firm foundation for the development of civilian air transportation in the United States.

Significance

The Air Commerce Act of 1926 had several impacts. First, it reinforced the movement of aviation into the civilian or private sector, beginning with the handling of airmail operations. Second, it brought the firm recognition of a new and different role for the government by virtue of government provision of support for infrastructure development and operating assistance in that industry. From the act grew considerable investment in the development of a usable and progressive air traffic control system (largely federally funded and developed), considerable investment in airport expansion and maintenance, and subsidies for airlines. Finally, it established the precursors of regulation in the industry by focusing federal attention on safety mandates for craft and pilots.

The act of 1926 can be viewed as a foundation of government promotion of industry. In its reaction to transportation systems, government normally gives attention to regulation and promotion. Regulation targets itself to monitoring the safety and economic performance of regulated carriers. Statutes mandate inspections and provide guidelines for the acquisition of operating rights and the provision of published fares or rates. Promotion, on the other hand, recognizes the opportunity and responsibility of government to support the development and maintenance of large-scale transport systems. Government can promote transportation through the provision of infrastructure such as highways, airports, and ocean ports; through regulation that adds stability and limits destructive competition; through the allocation of government business that becomes a solid base of financial support; and through assistance in the areas of both military and nonmilitary research and development, the offshoots of which may be advances in the commercial sector of the industry. The 1926 act established solid directions in these areas.

From the act have grown the intricate system of air traffic control as well as myriad standards for the use of air and ground transportation systems. Just as traffic controls, signals, and patrols govern the operation of surface transport systems, an intricate air transportation control system governs the maintenance of the nation’s airways. This system continues to be a marvel in terms of the number and variety of aircraft handled. Despite new threats posed by congestion around major hub cities, the system continues to perform amazingly well. Such development has fostered the growth of the world’s most far-flung and significant air cargo and passenger system. It also has given rise to further interest in the expansion of transportation resources. Orville Wright gave testimony in 1925 before the House of Representatives, arguing that the greatest drawback to the use of aircraft for civilian purposes was the lack of suitable airports. The provision of such airports became a continuing concern of the federal government. Passage of the act of 1926 spurred the development of commercial civil aviation, putting new stress on expanding the outreach of the nation’s airways. Such expansion could not be encouraged solely by expanding the revenue base of the airlines, requiring in addition considerable infrastructure improvements. Subsequent acts provided for considerable investment in the development of airports in the continental United States.

The country continues to enjoy the availability of one of the world’s finest airport and air traffic control systems. Prior to 1946, airports were operated by state, county, or municipal governments, and because of this, development of the system was slow. The Federal Airport Act of 1946 brought about a comprehensive national system of airports, administered by the Civil Aeronautics Administration. Congress appropriated $520 million over a seven-year period to aid in the development of airport systems. During the administration of President Dwight D. Eisenhower, the act was extended and expanded to encompass operational facilities such as runways as well as public buildings or terminals related to the operational facilities. The administration of funds gave rise to the development of a national airport plan and to extensive local and regional planning in airport design. Funds devoted to the program continued to be expanded throughout the 1950’s and 1960’s, leading to massive construction of airport facilities. The Airport and Airway Development Act passed in 1970 furthered the development of related facilities for airports. It further enhanced the move, as well, to national planning for airports. In the same time frame, various devices were instituted by way of taxes and charges to ensure that users and beneficiaries of the airport system paid, at least in part, for governmental investment in development and maintenance of the system.

The regulatory activities initiated by the act of 1926 gave rise in 1966 to the work of the Federal Aviation Administration in evaluating the equipment operating characteristics and the personnel involved in commercial aviation. Considerable concern was focused on the safe operation of the transportation system and on participants in such operation. The FAA continued to be actively involved in safety issues in the field. Although the agency expanded and altered certain of its techniques and structures, it maintained concern for adequate testing and certification of operators and for construction and operating standards for the nation’s airways. The FAA underwent several reorganizations over the decades, culminating in the formation by Congress, after the terrorist attacks on New York City and Washington, D.C., on September 11, 2001, of the Transportation Security Administration, which succeeded the FAA as the principal body responsible for civil aviation security, although the FAA continued to function in all its other capacities.

The Air Commerce Act of 1926 recognized the essential movement of air carrier operations from a government-sponsored airmail focus to general passenger and freight, at first built around airmail contracts. With the act came incentives for the expansion of the nation’s commercial aviation system. The system saw heavy military use in World War II, following which domestic airways were freed for considerable expansion. Airways came to pose a considerable threat to surface forms of passenger and freight transportation. By 1950, the airlines were a permanent fixture and the carrier of choice in a number of long-haul markets. This role continued to grow. Expansion of air transport would likely not have occurred at such speed or depth in the absence of government provision of infrastructure development as called for in the Air Commerce Act of 1926.

Bibliography

Davis, Grant M. Transportation Regulation: A Pragmatic Assessment. Danville, Ill.: Interstate Printers & Publishers, 1976. Examines the U.S. government’s efforts to regulate various transportation industries.

Dilger, Robert Jay. American Transportation Policy. New York: Praeger, 2002. Examines the development of transportation policy in the United States since the nation’s founding, including regulation of the civilian air transport system. Features bibliography and index.

Fair, Marvin L., and John Guandolo. Transportation Regulation. 8th ed. Dubuque, Iowa: William C. Brown, 1979. Comprehensive basic text on transportation regulation provides some details on the state of transportation in the early twentieth century.

Harper, Donald V. Transportation in America: Users, Carriers, Government. 2d ed. Englewood Cliffs, N.J.: Prentice-Hall, 1982. Discusses provision of transportation services and markets for those services, along with government regulation of transportation markets.

Hazard, John L. Transportation: Management, Economics, Policy. Cambridge, Md.: Cornell Maritime Press, 1977. Discusses the foundations of the economics of transportation and provides references to a whole panorama of regulatory actions in this area.

Kane, Robert M., and Allan D. Vose. Air Transportation. 14th ed. Dubuque, Iowa: Kendall/Hunt, 2002. Comprehensive coverage of the history of air transportation and its regulation. A good reference for readers interested in the development of the aviation industry.

Locklin, D. Philip. Economics of Transportation. 7th ed. Homewood, Ill.: Richard D. Irwin, 1972. Introductory textbook provides background on the regulation of air transportation.