A conventional understanding of business suggests that for a business owner to maximize profit, he must be in control or own all factors and means of production, including all variables involved in the delivery of a product or service to the final consumer.
This explains why Elon Musk would take the pain to create his own battery factory for Tesla when he could have just outsourced the battery production. Nevertheless, Boeing as a major anomaly with respect to this understanding leaves us wondering; with its ability to produce its own airplanes, why doesn’t Boeing start an airline?
The biggest reason why Boeing doesn’t start an airline is the Airmail Act of 1934, passed in 1934, which calls for the separation of airlines from airplane manufacturers like Boeing. This means that Boeing as an aircraft manufacturer cannot legally start an airline.
In witty terms, Boeing has been there and done that! Contrary to popular knowledge, Boeing actually once had an airline called the Boeing Air Transport, which merged with Pratt & Whitney Aircraft in 1929 to form the United Aircraft Transport Corporation (UATC).
UATC was then subsequently called United Airlines Inc. in 1931. However, due to the Airmail scandal that led to the Airmail Act of 1934 and the fact that it makes a lot of profit by sticking to its sole business of selling airplanes, Boeing has lost interest in floating an airliner.
In this article, we will go in-depth into the factors that prevent Boeing from running its own airline, focusing on important details such as the Airmail Scandal and the Airmail Act of 1934, and other factors that will give us a better understanding of this subject matter.
Table of Contents
Boeing Air Transport: A Brief History
The Boeing Company started out in 1916 as an Aero products company in Seattle, Washington by an American lumber industrialist William Boeing.
In 1919, the Boeing company achieved the very first international postal delivery, forming a new section of the company — both cumulating into the United Aircraft Corp (UAC) in 1927.
This new aircraft company, UAC, was renamed Boeing Aircraft & Transport Company (Boeing Air Transport) in the same year.
Following a series of mergers in 1928 between Pratt & Whitney Aircraft Co. and 2 other airlines, and the acquisition of a mail and passenger service operator (Pacific Air Transport), Boeing’s Air Transport company was renamed and the United Aircraft and Transport Company (UATC) was created.
As a result of these successful mergers and acquisitions, United Airlines Inc. was established to provide coast to coast passenger and mail services. This airline with major shares owned by Boeing in its own rights claims to be the oldest commercial airline in the USA and the first to feature a stewardess, Ellen Church, who was hired as a registered nurse to assist passengers during its long 27-hour flights.
However, this ‘flying start’ was brought to an abrupt end, thanks to the Airmail scandal, which led to the Airmail Act of 1934.
Airmail Scandal of 1934
The Airmail scandal of 1934 also called the Airmail Fiasco by the press was a political scandal that occurred after Congress investigated contracts awarded to airlines to carry air mail, which allowed them to fly mail using the U.S. Army Air Corps.
This investigation was set up to review the Airmail Act of 1930 in response to complaints by smaller upcoming airlines but turned into a huge scandal as it uncovered cases of corruption and a conspiracy to monopolize air mail.
In 1930, congress had passed the Airmail Act of 1930, which allowed postmaster General Walter Brown to divide Airmail routes between the major airlines of the day, in order to foster healthy competition between them. This move, however, backfired as it gave major airlines like the United Aircraft and Transport Company monopolistic powers that prevented smaller airlines from competing favorably.
This caused smaller independent airlines led by Thomas Barniff to issue complaints to congress in a bid to fight back the powers of bigger airlines.
In response to these complaints, congress launched an investigation into the activities of these companies in 1934. What started out as a routine investigation turned out to be a huge scandal as it unmasked several cases of corruption and a conspiracy to monopolize air mail. Congress also uncovered a disregard for safety by these big airlines.
In a bid to make more deliveries and maximize profits, big airlines disregarded safety concerns and overworked their pilots. This disregard for safety consequently led to the death of several pilots. A few days after this investigation was completed, President Franklin Roosevelt canceled all domestic Airmail contracts.
Airmail Act of 1934
Four months after the Airmail fiasco as dubbed by the press, Congress passed the new Airmail Act into law on June 12, 1934. This new act reversed the provisions of the old Airmail Act of 1930 and ultimately led to the break up of large airline companies. The new Airmail Act of 1934 made the following provisions:
- Re-introduction of competitive bidding as the only means for airlines to be awarded mail contracts.
- Separation of airlines from airplane manufacturers like Boeing.
- Commercial airlines that had old contracts provided by the Airmail Act of 1930 were prevented from procuring new contracts.
- The U.S. postal service was given the authority to award postal contracts.
- The Interstate Commerce Commission was commissioned to regulate airmail rates, while the Bureau of Air Commerce was set up to regulate air safety.
- The Airmail Act of 1934 also made provision for the creation of the Federal Aviation Commission to study the aviation industry of the U.S.
The provisions of the new Airmail Act of 1934 made it impossible for Boeing to continue its ties with the United Aircraft and Transport Company (UATC). On the 26th day of September 1934, UATC broke up into three distinct companies:
- United Airlines Transportation Company
- United Aircraft Manufacturing Company
- Boeing Company.
Other Limiting Factors
It is easy to point out that the events of 1934 happened a long time ago and Boeing should be over it by now. One could even suggest that Boeing is in a perfect position to float its own airline in the 21st century.
However, the events of 1934 did not only break Boeing up from the United Aircraft and Transport Company (UATC) but barred aircraft manufacturers from owning commercial airlines. This means that Boeing as an aircraft manufacturer cannot legally start an airline.
To do so, it must first give up its stakes as an aircraft manufacturer. Given its present profitability, it is very unlikely that Boeing will make such a move.
Summary
On one hand, although several debates still exist on the fairness of the events of 1934, we should not be derailed from the fact that the aftermath of the Airmail Scandal gave us the safety conditions we now enjoy in commercial airlines today. On the other hand, it is safe to say that we will not be seeing Boeing or any other aircraft manufacturer float a commercial airline anytime soon, thanks to the events of 1934.
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