UNITED STATES ARMY IN WORLD WAR II

Special Studies

BUYING AIRCRAFT: MATERIEL PROCUREMENT FOR THE

ARMY AIR FORCES

by

Irving Brinton Holley, ir.

CENTER OF MILITARY HISTORY

UNITED STATES ARMY

WASHINGTON, D.C., 1989

Foreword

Buying Aircraft: Matriel Procurement for the Army Air Forces offersthe reader a liberal education in military procurement. It examines indepth, and with judicious understanding, the following: procurement ofaircraft; budgeting and budgetary changes; contracting; design changes; thenature and development of the aircraft industry; manufacturing techniques,especially in the introduction of mass production into the aircraft industry,and problems in the use of automobile assembly plants for making aircraft;and the War Department's relations with Congress and the Comptroller.Professor Holley recognizes the broad sweep and interrelationship of politi-cal, economic, legal, and military problems, and stresses the importance oforganization within both government and industry. The volume focusesupon problems inherent in procurement, but does not concern itself withair or ground force doctrine. Its subject matter is the procurement, notthe employment, of air power. Because Professor Holley's volume offersconcrete examples of problems involved in the design and purchase ofcomplicated and expensive items of military equipment over a period ofyears, the experiences described should profit the officer engaged in pro-curement of missiles and aircraft today as well as the student of logistics,and will add immeasurably to the thoughtful citizen's understanding ofnational defense.

HAL C. PATTISONBrigadier General, USAChief of Military History

Washington, D.C.5 November 1962

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The Author

Irving Brinton Holley, jr., received his B.A. from Amherst College andhis M.A. and Ph.D. from Yale University. Enlisting in the Army, he roseto the grade of staff sergeant as an instructor in aerial gunnery, attendedthe Army Air Forces Officer Candidate School at Miami Beach, Florida,and graduated in April 1944. After serving as a gunnery officer in theFirst Air Force, he was assigned to technical intelligence at Headquarters,Air Matriel Command, Wright Field, Dayton, Ohio. From 1945 to 1947he was a member of the faculty of the Industrial College of the ArmedForces.

In 1947 Mr. Holley accepted an appointment in the History Depart-ment of Duke University, where he is now a full professor. He holds acommission as a lieutenant colonel, USAF Reserve, and has continued totake an active part in reserve affairs.

Professor Holley is the author of Ideas and Weapons, published by theYale University Press in 1953, as well as numerous articles and reviews inscholarly publications.

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Preface

Readers have a right to expect something in the way of answers to twobasic questions before they read further in this volume: What is it aboutand for whom is it written? Although these questions seem simple enough,neither of them can be adequately answered without considerable elabora-tion.

This book is about procurement in the broadest sense of the word. Tobe sure, the mechanics of purchasing and contracting are considered atsome length, but the term procurement is here used to embrace far morethan is generally implied by the word itself. The chapters that followattempt to present the problem of air matriel procurement as a whole:the computation of requirements, the evolution of internal organization,the relationship and accommodation of conflicts between executive andlegislative agencies, the character and capabilities of the aircraft industry,and many other similar facets are presented as the vital context withoutwhich such topics as contract negotiation and facility expansion canscarcely be understood.

Above all, the author wishes to make clear that he did not undertakethis book as an exercise in fulsome praise. He may have leaned in theopposite direction, emphasizing unduly the failures while neglecting thesuccesses. But if this kind of history is to be useful and meaningful, itcannot afford to devote its limited number of pages in adding to the paeansof praise already in print. If the nation is to escape or even minimize theblunders of the past, it cannot neglect to study its mistakes.

If the author has been frugal with praise, he has been no less cautiousin apportioning personal responsibility when discussing some of the moreegregious failures that marked the procurement program. The search forscapegoats makes exciting journalism and can provide many a political foot-ball, but it misses the point. The really meaningful question to be askedof disaster is not "Who was to blame?" but "What were the problems?"Personal censure and recrimination are fruitless; to illuminate even a fewof the problems encountered is to help the future avoid the pitfalls ofthe past.

In the main, then, individuals are accorded their privacyin success aswell as in failure. The major exceptions to this rule are the leaders, bothpolitical and military, in the highest echelons. Of necessity, as they them-selves must recognize only too well, they forfeited their private lives when

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they climbed into the realm of folk heroesor villainsand became a partof the public domain.

This book was not written for the procurement specialist. Nor was itwritten exclusively for the participants who helped shape many of the eventsdescribed; for the most part these individuals have left the scene and arising generation has taken their places. It is this new generation in par-ticular to which this book is addressed. The author has kept his sightsconsciously trained upon the ambitious young staff officer of tomorrow aswell as the general reader. His aim is to provide the broadest possiblesynthesis of the problems of air arm procurement, giving a comprehensiveor general view of the sort required by those who aspire to exercise com-mand as general officers. But the issues discussed here should have mean-ing for many more readers than those in the limited circle of air arm staffofficers, regular and reservist, seeking advancement; the themes developedin this book should provide insights for officers in all the services. More-over, since military expenditures constitute a major portion of the na-tional budget, no student of public policy who would understand the impli-cations of this spending in the national economy can ignore the intricaciesof air arm procurement.

Because this book has been written primarily for a generation that didnot experience the mobilization effort of the World War II years, the authorhas spelled out in considerable detail the peacetime background of boththe air arm and the aircraft industry. Participants in the wartime procure-ment program may feel this belabors the obvious, but the author is con-vinced that the procurement story of the war era cannot be comprehendedunless one is well aware of the assumptions and premises generally held atthe time. And precisely because the attitudes were widely if not univer-sally shared, they were often unstated. What everyone takes for grantedno one bothers to record. Unless this milieu can be recaptured, a subse-quent generation will misunderstand the events of the war years and beled to false conclusions regarding the lessons to be learned from them.

For example, the attitude of the aircraft manufacturers toward plantexpansions in 1940 is comprehensible only when seen against the events ofthe depression just preceding. Readers in the postwar world, who knowthe aircraft manufacturers only as industrial giants at the top of the nationaleconomy, can appreciate the procurement problems of World War II onlywhen they are placed in the context of an industry ranking in fourteenthor fifteenth place among the nation's economic groups. Or again, the deci-sions and plans of responsible air arm officials, particularly in the crucialprewar months from September 1939 to December 1941, can best be appre-ciated when seen in the context of their long relationship with Congressand the Comptroller General.

One final caveat remains to be stated. This volume makes no claim ofbeing a definitive account of the subject treated. While it is planned as anintegral work, one to be read as an inclusive account of the procurement

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story as a whole, the writer has sought to avoid needless duplication of thestudies done by others in this field, notably R. Elberton Smith, The Armyand Economic Mobilization, a volume in the official history series,UNITED STATES ARMY IN WORLD WAR II, and Alfred Goldberg'schapters in W. F. Craven and J. L. Cate, THE ARMY AIR FORCES INWORLD WAR II, Volume VI, Men and Planes. With the needs of officerspreparing staff papers particularly in mind, the author has been at pains toinsert numerous cross references to those and many other published sourcesbearing on the subjects discussed. The reader will also find, in addition tothe usual documentation, a large number of citations leading to archivalmaterials useful to those who wish further illustrative matter for staffstudies.

The author will be more than gratified if interested readers are suffi-ciently provoked to prove that his judgments and interpretations requirerevision at some points. If this volume stimulates further study and acontinuing analysis of the problems of procurement, it will have servedits purpose well.

Whatever mistakes Buying Aircraft: Matriel Procurement for the ArmyAir Forces may contain, whether of fact or interpretation, responsibilityrests firmly upon the author and not upon the literally hundreds of indi-viduals who shared in one way or another in the preparation of thisvolume. For their help, however, the author wishes to express his sincereappreciation.

While the author is heavily indebted to the many writers of monographsand special studies cited repeatedly in the footnotes, he wishes to single outas particularly noteworthy the work done by R. R. Russel at Wright Fieldand J. P. Walsh in the Eastern Procurement District headquarters.

The following individuals, all at one time or another associated withOCMH, read and criticized the entire manuscript: Dr. Kent RobertsGreenfield, Dr. Stetson Conn, Dr. John Miller, jr., Col. Seneca W. Foote,and Mr. R. Elberton Smith. If their strictures on early drafts were occa-sionally painful, the author is conscious that the net effect of their effortshas been highly constructive. Equally welcome were the evaluations oftwo outsiders, Mr. T. P. Wright, vice president of Cornell University, andGeneral O. R. Cook, USAF, Retired, both of whom read drafts of thebook and prepared elaborate critiques from no other motive than a life-long dedication to the problems of national defense.

Among those who went far beyond the requirements of their officialpositions to facilitate the author's research, the following merit particularattention: at Wright Field, Dr. Paul M. Davis and his staff in the HistoricalOffice; at the Industrial College of the Armed Forces, Dr. Marlin S.Reichley and Miss Clara J. Widger with her library staff; at the NationalWar College, George Stansfield; in the Office of the Chief of Military His-tory, Mr. Israel Wice and his staff, Dr. Robert W. Coakley, and Dr.Richard M. Leighton; at the Air Force Historical Division Liaison Office,

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Dr. Alfred Goldberg; at the World War II Records Division, NationalArchives and Records Service, General Services Administration, all thoseanonymous people who repeatedly performed prodigies in locating obscureand elusive documents from the mounting millions stored there. And forassistance at virtually every turn over the several years during which thisbook was in preparation, the author wishes to extend his particular thanksto Mrs. Constance McL. Green, Miss Carol S. Piper, and Miss K. E. Brand.

The heavy task of editing the manuscript fell upon Miss Mary AnnBacon. If the author has bitterly complained that her blue pencil cut offall the colorful peaks in his prose, he cheerfully concedes that she has alsomanaged to fill in most of his otherwise incomprehensible prose valleys.For this he is truly appreciative, as he is to Mrs. Marion P. Grimes, the assist-ant editor. Mrs. Norma Heacock Sherris arranged the photographs.

Finally, the author wishes to acknowledge the patience, understanding,and help rendered by his wife, Janet Carlson Holley, throughout the yearsthis volume was in preparation.

Washington, D.C. IRVING BRINTON HOLLEY, JR.5 November 1962

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ContentsChapter Page

I . INTRODUCTION . . . . . . . . . . . . . . . . 3

II. THE AIRCRAFT INDUSTRY ON THE EVE OF WORLDW A R I I . . . . . . . . . . . . . . . . . . . 6

A Survey of the Industry . . . . . . . . . . . . 6The Market for Aircraft . . . . . . . . . . . . . 10Research and Development . . . . . . . . . . . . 22Production . . . . . . . . . . . . . . . . . . 2 6Financing the Aircraft Industry: 1934-38 . . . . . . . 33

III. CONGRESS AND THE AIR ARM . . . . . . . . . . 43Authorized Strength: How Many Aircraft? . . . . . . 44Authorizations, Appropriations, and Aircraft . . . . . . 63

IV. PROCUREMENT LEGISLATION, ORGANIZATION, ANDADMINISTRATION . . . . . . . . . . . . . . 8 0

Organic Legislation for the Procurement of Aircraft ... 80The Organization of the Air Arm for Procurement ... 93The Administration of Procurement . . . . . . . . . 106

V. PROCUREMENT UNDER THE AIR CORPS ACT . . . . 113Procurement: 1926-34 . . . . . . . . . . . . . . 1 1 3Congressional Cloudburst . . . . . . . . . . . . 1 1 9New Procurement Policy . . . . . . . . . . . . . 128

VI. AIRCRAFT PROCUREMENT ON THE EVE OF WORLDW A R I I . . . . . . . . . . . . . . . . . . . 1 3 2

The New Policy Reconsidered . . . . . . . . . . . 132The War Department Seeks a Solution . . . . . . . . 143Peacetime Procurement: A Retrospect . . . . . . . . 146

VII. PLANNING FOR INDUSTRIAL MOBILIZATION . . . . 150T h e Problem . . . . . . . . . . . . . . . . . 1 5 0The War Department and Industrial Mobilization . . . . 151The Air Corps Organization for Mobilization Planning . . 153Air Corps Mobilization Planning . . . . . . . . . . 155Air Corps Planning in Perspective . . . . . . . . . 166

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Chapter PageVIII. THE TIDE TURNS . . . . . . . . . . . . . . . . 169

The President Proposes; Congress Disposes . . . . . . . 169The First Expansion Program . . . . . . . . . . . 175The Search for a Yardstick . . . . . . . . . . . . 186

IX. FOREIGN POLICY, POLITICS, AND DEFENSE . . . . . 194Politics and Armament . . . . . . . . . . . . . 194Aircraft Exports and National Defense . . . . . . . . 196Aircraft Exports and Mobilization Planning . . . . . . 205

X . REQUIREMENTS . . . . . . . . . . . . . . . . 2 0 9An Essay on Requirements . . . . . . . . . . . . 209Origin of the 50,000 Figure . . . . . . . . . . . . 221

XI . 50,000 AIRCRAFT . . . . . . . . . . . . . . . . 229From Slogan to Program . . . . . . . . . . . . . 229There's Danger in Numbers: The President's "Must Pro-

gram" . . . . . . . . . . . . . . . . . . . 2 3 7Return to Reality . . . . . . . . . . . . . . . 243

XII. ORGANIZING FOR PRODUCTION . . . . . . . . . 247Posing the Problem . . . . . . . . . . . . . . . 247Evolution of an Organization . . . . . . . . . . . 249

XIII. LEGISLATION FOR PROCUREMENT . . . . . . . . 274Wartime Buying With Peacetime Laws . . . . . . . 274Improvising Legislation in a Crisis . . . . . . . . . 283

XIV. THE PROBLEM OF INDUSTRIAL CAPACITY . . . . . 290The Beginning of Facility Expansions . . . . . . . . 290Enter Detroit: Air Arm Use of the Automobile Industry . 304Expansion or Conversion? . . . . . . . . . . . . 316The Facilities Program: An Appraisal . . . . . . . . 324

XV. THE NEGOTIATION OF CONTRACTS . . . . . . . . 330The Transition to Wartime Buying . . . . . . . . . 330The Negotiation of Contracts . . . . . . . . . . . 337The Administration of Contracts . . . . . . . . . . 364

XVI. THE COST-PLUS-FIXED-FEE CONTRACT:NEGOTIATION AND ADMINISTRATION . . . . . 372

Some Revolutionary Implications . . . . . . . . . . 372The Fixed-Fee Problem . . . . . . . . . . . . . 374The Determination of Allowable Costs . . . . . . . . 379Auditing and Accounting . . . . . . . . . . . . 390The Problem of Property Accountability . . . . . . . 397The Relation of Primes to Subs . . . . . . . . . . 401The Conversion of Fixed-Fee Contracts . . . . . . . . 410

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Chapter PageXVII. PRICE ADJUSTMENT . . . . . . . . . . . . . . 421

Escalator Clauses . . . . . . . . . . . . . . . 4 2 2Excess Profits and Voluntary Refunds . . . . . . . . 428Statutory Renegotiation . . . . . . . . . . . . . 4 2 8

XVIII. CONTRACT TERMINATION . . . . . . . . . . . . 446The Background of Termination . . . . . . . . . . 446The Character of the Termination Problem . . . . . . 447The Organization for Termination . . . . . . . . . 451Some Illustrative Aspects of Administration . . . . . . 454A n Afterword . . . . . . . . . . . . . . . . . 4 6 0

XIX. ORGANIZATION FOR PROCUREMENT . . . . . . . 462Co-ordination, Control, and Command . . . . . . . . 462Cross Procurement . . . . . . . . . . . . . . . 4 8 0Centralization a n d Decentralization . . . . . . . . . 4 8 7

X X . PRODUCTION . . . . . . . . . . . . . . . . . 5 1 1The Problem Defined . . . . . . . . . . . . . . 511The Dilemma of Mass Production . . . . . . . . . 512Resolving the Dilemma . . . . . . . . . . . . . 529

XXI. THE PROCUREMENT RECORD . . . . . . . . . . 548A Statistical Summation . . . . . . . . . . . . . 548The Measure of Success . . . . . . . . . . . . . 552Counting the Cost . . . . . . . . . . . . . . . 556The Contribution of Industry . . . . . . . . . . . 560

XXII. SOME CONCLUDING OBSERVATIONS ON MILITARYPROCUREMENT . . . . . . . . . . . . . . . . 5 6 9

What Is Air Arm Procurement? . . . . . . . . . . 569Procurement and Politics . . . . . . . . . . . . . 570Procurement Leadership in Wartime . . . . . . . . 571Air Power and Organization . . . . . . . . . . . 572

Appendix

A. MEMBERSHIP IN THE AERONAUTICAL CHAMBER OFCOMMERCE; 1938 . . . . . . . . . . . . . . . 5 7 5

B. WARTIME PRODUCERS OF AIRCRAFT . . . . . . . 576

C. MAJOR PRODUCERS OF AIRCRAFT ENGINES: JULY1940-AUGUST 1945 . . . . . . . . . . . . . . . 580

BIBLIOGRAPHICAL NOTE . . . . . . . . . . . . . . . 5 8 3

GLOSSARY . . . . . . . . . . . . . . . . . . . . . . 5 8 8

INDEX . . . . . . . . . . . . . . . . . . . . . . . . 5 9 5

TablesNo. Page

1. Production of Aircraft Engines . . . . . . . . . . . . . . 72. Comparative Importance of Military and Civilian Markets . . . . 213. A Comparison of the Aircraft Industry With the Automobile

Industry . . . . . . . . . . . . . . . . . . . . . 2 74. Percent of Earnings as Dividends and Surplus, Eighteen Top Aircraft

Manufacturers: 1934-38 . . . . . . . . . . . . . . . . 3 45. Yearly Increment to Surplus or Deficit Compared With Yearly Incre-

ment to Deferred Development Charges, Eighteen Top AircraftManufacturers: 1934-38 . . . . . . . . . . . . . . . 3 5

6. Comparative Cost of Two-Engine and Four-Engine Bombers ... 1427. B-24 Modifications at Willow Run . . . . . . . . . . . . 5378. Engine Production by Type: 1940-45 . . . . . . . . . . . . 5499. Engine Production by Horsepower: 1940-45 . . . . . . . . . 549

10. Propeller Production: 1940-45 . . . . . . . . . . . . . . 54911. Number of Airplanes Procured by Army Air Forces, by Type and by

Year of Acceptance: January 1940-December 1945 . . . . . . 55012. Aircraft Deliveries to the AAF: July 1940-December 1945 . . . . 55413. Heavy Bombers Accepted by the AAF . . . . . . . . . . . . 55514. Total Military Aircraft Production of Four Major Powers: 1939-44 55515. AAF Cash Appropriations and Expenditures: 1935-45 . . . . . 55716. AAF Expenditures by Major Categories: 1942-45 . . . . . . . 55817. Expenditures for Modifications and Research and Development:

1942-45 . . . . . . . . . . . . . . . . . . . . . 5 5 818. Comparison of Civilian Payroll to New Aircraft and Research and

Development: 1938-41 . . . . . . . . . . . . . . . . 5 5 919. Average Unit Costs of Selected Aircraft: 1939-45 . . . . . . . 56020. Production of Turbojet Engines: July 1940-August 1945 . . . . 56221. Production of Automatic Controllable Pitch Propellers: July 1940-

August 1945 . . . . . . . . . . . . . . . . . . . . 5 6 322. Distribution of Employment in Airframe Industry: April 1945 . . 56523. Direct Man-hours per Airframe Pound Accepted . . . . . . . 565

Charts

1. Organization Chart Showing Channels of Communication Betweenthe Secretary of War and the Air Corps . . . . . . . . . . 95

2. Organization of OCAC, Washington Headquarters of Air Corps . . 963. Materiel Division, Wright Field, Dayton, Ohio . . . . . . . . 984. Composite Organization Chart Showing the Agencies Primarily Con-

cerned With Air Matriel Procurement in the Two Decades Afterthe Air Corps Act of 1926 . . . . . . . . . . . . . . . 103

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No. Page5. Army Air Forces Organization: 9 March 1942 . . . . . . . . 4876. Organization of the Materiel Command: 19 October 1942 . . . . 4887. Organization of the Resources Control Section of the Production Divi-

sion, Materiel Command: July 1943 . . . . . . . . . . . 4898. Army Air Forces Organization: 29 March 1943 . . . . . . . . 4909. Hypothetical Learner Curve . . . . . . . . . . . . . . . 536

Illustrations

U.S. Mail Plane Loading From Mail Truck . . . . . . . . . . . 13National Advisory Committee for Aeronautics . . . . . . . . . . 24NACA Full-scale Wind Tunnel at Langley Field . . . . . . . . . 25Hand Assembly of Stearman Primary Trainers . . . . . . . . . . 30T h e Morrow Board . . . . . . . . . . . . . . . . . . . 4 7House of Representatives Committee on Military Affairs . . . . . . 60Maj. Gen. Oscar Westover . . . . . . . . . . . . . . . . . 69Boeing B-17 . . . . . . . . . . . . . . . . . . . . . . 7 6Douglas B-18 . . . . . . . . . . . . . . . . . . . . . . 7 7Maj. Gen. M. M. Patrick . . . . . . . . . . . . . . . . . 89Wright Field, 1935 . . . . . . . . . . . . . . . . . . . . 1 0 0Wright Field, 1942 . . . . . . . . . . . . . . . . . . . . 1 0 1Martin B-10 . . . . . . . . . . . . . . . . . . . . . . 1 1 8Maj. Gen. Benjamin D. Foulois . . . . . . . . . . . . . . . 121DC-2 Transports in Production . . . . . . . . . . . . . . . 135B-17 a n d XB-15 . . . . . . . . . . . . . . . . . . . . 1 4 9War Department Subcommittee of the House Appropriations

Committee . . . . . . . . . . . . . . . . . . . . . . 1 7 6Secretary Louis A. Johnson . . . . . . . . . . . . . . . . . 177Theodore P . Wright . . . . . . . . . . . . . . . . . . . 1 9 2President Asks Congress for 50,000 Aircraft . . . . . . . . . . . 226Curtiss XP-40 . . . . . . . . . . . . . . . . . . . . . 2 2 7British Spitfire . . . . . . . . . . . . . . . . . . . . . 2 2 7Douglas A-26 . . . . . . . . . . . . . . . . . . . . . . . 2 4 4Martin B-26 . . . . . . . . . . . . . . . . . . . . . . 2 4 5Lt. Gen. William S. Knudsen . . . . . . . . . . . . . . . . 256T h e B-24 . . . . . . . . . . . . . . . . . . . . . . . 3 0 6T h e B-25 . . . . . . . . . . . . . . . . . . . . . . . 3 0 7Brig. Gen. Charles E . Branshaw . . . . . . . . . . . . . . . 466Maj. Gen. Kenneth B . Wolfe . . . . . . . . . . . . . . . . 469General Brehon B. Somervell . . . . . . . . . . . . . . . . 478Brig. Gen. A. J . Browning . . . . . . . . . . . . . . . . . 479Secretary Robert P . Patterson . . . . . . . . . . . . . . . . 479Maj. Gen. Oliver P . Echols . . . . . . . . . . . . . . . . . 479

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Page

Assembly Jig, B-24 Center Wing Section . . . . . . . . . . . . 525B-24 Assembly Line, Willow Run . . . . . . . . . . . . . . 526Boeing B-17 Assembly Line . . . . . . . . . . . . . . . . . 541

All photographs are from the Department of Defense except for the following:page 227, Air Force and Space Digest; pages 24, 25, 177, 192, and 479, NationalArchives; pages 306, 525, and 526, Ford Motor Company; and page 226, Harrisand Ewing, Washington, D.C.

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BUYING AIRCRAFT:

MATRIEL PROCUREMENT

FOR THE ARMY AIR FORCES

CHAPTER I

Introduction

The strength and structure of theMilitary Establishment of the UnitedStates are responsibilities of the Amer-ican public expressing its will throughCongress. Since the Army is an operat-ing agency with but limited voice in theformation of national policy, it is incum-bent upon departmental officials to sub-mit accurate and meaningful reports tothe public and its representatives if theyare to provide an effective legislativebasis for the maximum in national se-curity at the least cost.1 Unfortunatelythe information necessary for sound leg-islation has not always been readily avail-able.

If the American public, congressmen,editors, and the man in the street held anumber of serious misconceptions aboutthe Army's air arm and its state of readi-ness on the eve of World War II, it mayvery well be that their erroneous im-pressions were derived from authorita-tive sources. General Malin Craig, theChief of Staff, himself assured the peopleof the United States in his annual reportof 1938 that Army planes were "equal,

if not superior," to any in the world.2

Perhaps the aircraft were superior, but acurious congressman might have beenforgiven had he asked on what founda-tion this assurance rested. The Chief ofStaff claimed that the outstanding per-formance of Army aircraft was "convinc-ingly demonstrated" by the flight of sixArmy bombers on a record-breakingjourney to Argentina.3 The long-dis-tance flight, spectacular and significantas it may have been at the time, was notproof of tactically superior aircraft.Even though the Chief of Staff's logicmight be imperfect, the inquiring con-gressman might still conclude that allwas well in the air armunless he readfurther in the official reports of the WarDepartment for the year 1938.

In commenting on the air arm dur-ing the fiscal year just past, the AssistantSecretary of War Louis A. Johnson dif-fered with his military colleague andsounded a warning. While the Army'saircraft in 1937 had been, "in general,the best and most efficient in the world,"it now appeared that "our former tech-nical superiority" was "no longer clearlyapparent." The tone of assurance in theChief of Staff's boast of aircraft "unex-celled" by the military planes of any

1 Those familiar with the preparation of annualreports within the Army might argue that no oneshould attach too much importance to such docu-ments, often prepared in haste and sometimes inac-curate. Nonetheless, that some officers recognizedtheir potential importance is attested by the 1934annual report of Chief of Staff, General DouglasMacArthur, which is paraphrased above.

2 Annual Report of the Secretary of War, 1938,p. 34.

3 Ibid.

4 BUYING AIRCRAFT

nation was not to be found in Johnson'sreport:

"Recent advances in other countrieshave equalled if not exceeded our efforts.We have known for some time that for-eign nations far surpassed us in the num-ber of military aircraft at their disposalbut we also knew that we led the fieldtechnically. It now appears that our re-search and development programs mustbe accelerated if we are to regain ourposition of technical leadership." 4 Fur-ther, current production programs aswell as those contemplated for wartime,he flatly declared, fell far short of pro-viding even a minimum number of air-craft that "any realistic view of the prob-lem would show to be necessary." 5

If the Chief of Staff and the AssistantSecretary of War appeared to contradicteach other, Secretary of War H. H.Woodring did little to clarify the pic-ture. Looking back five years, he re-called that the rest of the world was"setting a fast pace" in the developmentof air power, while the United Stateswas "floundering along in the ruck." 6

By 1938 the Secretary of War felt freeto report a "far more encouraging sit-uation." 7 This was a cryptically vagueand entirely relative characterization

that might have lent support either tothe optimistic view held by the Chief ofStaff or to the pessimistic one held bythe Assistant Secretary of War.

What, then, was the uninitiated citi-zen to believe? One official reassuredhim, another warned him of imminentdanger, yet another left him undecided.An inquirer might indeed conclude thatfreedom of expression prevailed in theWar Department. Useful and thoughtprovoking as this diversity of ideas mayhave been within the Department, thecontradictory reports published for pub-lic distribution indicated that Congress,the President, and the man in the streetwould have to seek further for the in-formation so indispensable to an in-formed and intelligent national policyon air power. This volume may make acontribution toward that quest.

Did the United States have a superiorair force on the eve of World War II?The question is now largely academic,but it may well be asked because it posesanother, more useful question: exactlywhat constitutes a superior air force?Air power is something more than acollection of aircraft, the ground instal-lations necessary to keep them flying,and the trained men needed to maintainthem in action. In addition, an air armrequires a body of doctrine, for doctrinesregarding the strategic and tactical ap-plication of air power are as fundamen-tal as the bombers and fighters that exe-cute a wartime mission. Yet even tostop here would be to confine the defi-nition of an air force, by implication atleast, to the limits so frequently encoun-tered in newspapers and newscasts. Al-most equally important, and less fre-quently mentioned in public debate, are

4 Ibid., p. 26.5 Ibid., pp. 26-27.6 Ibid., pp. 2-3. Compare this statement by Sec-

retary of War Woodring with that on page 10 ofFinal Report of War Department Special Committeeon Army Air Corps (Baker Board Report), 18 July1934 (see below, Chapter III), which found U.S.combat aircraft in 1934 "superior to those of anyother country." Jane's All the World's Aircraft (Lon-don: Sampson Low, Marston and Co., Ltd., 1935)whose caustic editor, C. G. Grey, was certainly neverone to give an unduly favorable view of U.S. aviation,placed this country at least two years in advance ofEurope in 1934.

7 Ibid., pp. 2-3.

INTRODUCTION 5

a host of other ingredients that contrib-ute to the sum total called air power.Among these are the productive capacityof the nation's aircraft industry and itspotential for expansion, the proceduresand practices by which the necessaryfunds are secured from Congress, as wellas the forms and methods governing theprocurement of matriel.

In short, although the continuing na-tional debate on air power policy gen-erally takes place in terms of the questfor quantitative and qualitative superi-ority, other factors essential to a superiorair force cannot be slighted with im-punity. And in one way or another, thegeneral subject of procurement is re-lated to all of them. It is no exaggera-tion to suggest that one cannot truly un-

derstand the problem of air power with-out first coming to appreciate somethingof the enormous complexity of procure-ment.

The pages that follow seek to illus-trate the almost infinite ramifications ofthe procurement process and its intimaterelationship with virtually every otheractivity of an air force. In addition, theexposition should make it clear that theelements of air power are never static.Science probes further horizons, tech-nology advances, and novel weapons areperfected that require revised concep-tions for efficient use. To survive in theultimate competition of war, an air forcemust continue to perfect its techniquesof procurement no less than its doctrineand its weapons.

CHAPTER II

The Aircraft Industry on the Eve of

World War II

A Survey of the Industry

A cross-section view of the nation's air-craft enterprises on the eve of World WarII reveals that the industry was in fact acomplex of manufacturing enterprises,not all of which were primarily concernedwith airplanes. While airplane manufac-turers as such constituted the aircraft in-dustry in the popular sense, in reality theterm was far more inclusive, covering notonly manufacturers of airframes but allthose concerns producing engines, acces-sories, and component parts or subassem-blies.

The designation aircraft industry thusactually embraced four rather distinctgroups. First and best known were theairframe manufacturers. These firms de-signed new aircraft and produced them,sometimes fabricating nearly all of theitems within their own manufacturing or-ganizations and sometimes merely assem-bling components and subassembliesmade elsewhere.

Engine manufacturers constituted asecond group. During World War I, air-craft engine production was virtually en-feoffed to the automotive industry. Onthe eve of World War II this was nolonger true. By then seven or eight man-

ufacturers specialized in the produc-tion of engines.1 Two of these firmsthe Wright Aeronautical Corporation atPatterson, New Jersey, and the Pratt andWhitney Aircraft Division of the UnitedAircraft Corporation at East Hartford,Connecticutdominated the field interms of numbers produced, dollar vol-ume of business, and units of horsepowerdelivered. (Table 1) A third concern,the Lycoming Division of the AviationManufacturing Corporation at Williams-port, Pennsylvania, shared significantlyin producing engines for trainers.

1 House Subcommittee of Committee on Appro-priations, Hearings on Supplemental Military Estab-lishment Bill for 1940, May-June 1939, pages319-20, mentions the following engine manufac-turers: Allison Engineering Co., Indianapolis, Ind.;Continental Motors Corp., Detroit, Mich.; JacobsAircraft Engine Co., Pottstown, Pa.; Lycoming Divi-sion, Aviation Manufacturing Corp., Williamsport,Pa.; Ranger Engineering Corp., Farmingdale, LongIsland, N. Y.; Pratt and Whitney Aircraft Division,United Aircraft Corp., East Hartford, Conn.; andWright Aeronautical Corp., Patterson, N. J. To thisgroup should be added: Aircooled Motors (Frank-lin), Kinner Airplane and Motor Co., and MenascoManufacturing Co., all producing engines in a classbelow 260 horsepower. Of the firms listed above,Allison, Pratt and Whitney, and Wright Aeronauticalproduced engines with horsepower ratings above1000. For a contemporary survey of the engine in-dustry, see Aviation, February 1939, pages 55ff.

AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 7

TABLE 1PRODUCTION OF AIRCRAFT ENGINES

Source: W. B. Harding, The Aviation Industry, pp. 25-26.

Subcontractors constituted a thirdgroup within the aircraft industry. Ofvital significance in wartime, subcontrac-tors in peacetime were not only fewer butnot so well recognized as a definite groupwith distinctive characteristics.2 Therewere very few entirely vertical corpora-tions in the aircraft industry producingairframes, engines, and all major compo-nents, but most airplane manufacturersdid not rely heavily upon subcontractorsfor components and subassemblies. Fac-tors such as the absence of manufacturerswilling to accept subcontracts, the limitednumber of units in production runs, theneed for close tolerances in precisionwork, and the necessity for a high orderof production co-ordination in an area offrequent and rapid design change, as wellas the desire of the airframe manufac-turers to find employment for idle sec-tions of their own production forces, allcontributed to the peacetime practice ofminimizing subcontract work. Even sucha relatively large-scale manufacturer asthe Boeing Aircraft Corporation fabri-cated all dies for presses, hammers, anddrawbenches in Boeing shops.3 Whenthe emergency arrived and it proved ad-

vantageous to depend upon an increasingnumber of subcontractors, the lack ofwidespread peacetime use of subcontrac-tors made wartime expansion in the fielddifficult. However, even though sub-contractors were few in number duringthe prewar years, they did constitute adistinct part of the aircraft industry.

Vendors or suppliers were the fourthand last group of the aircraft industry.While subcontractors fabricated partsand assemblies to order by special con-tract with an airframe or engine manu-facturer, vendors supplied ready-madeitems off the shelf. Such standard andsemistandard miscellaneous items aswheels, pulleys, rivets, instruments, con-trol cables, turn buckles, and the likemade up the vendor's stock in trade.Some vendors, such as the Sperry Corpo-ration, specialized in the field of instru-ments and controls; others concentratedon difficult-to-manufacture items such asexhaust stacks and collector rings or oleostrut shock absorbers.4 Among the vendors,

2 For the role of subcontractors in wartime, seebelow, pp. 401-10.

3 Aerodigest (January 1936), pp. 26-29.

4 William Barclay Harding, The Aviation Industry(New York: C. D. Barney and Co., 1937), pages 30-31,lists the vendors doing a major portion of their busi-ness in aviation during 1937 as follows: Air Asso-ciates, Aero Supply, Breeze Manufacturing Co., Brew-ster Aeronautical Corp., Cleveland Pneumatic ToolCo., Irving Airchute, and Sperry Corp. Propellermanufacturers might be listed with this group exceptthat the most important happen also to be aircraft

8 BUYING AIRCRAFT

one will serve as a representative exam-ple. Air Associates, Incorporated, com-bined manufacturing with a mail orderhouse and general store business in air-craft parts. With one store in New York,one in Chicago, and a third on the westcoast, Air Associates could supply suchstandardized items of aircraft hardwareas fuel strainers, high pressure hydraulicpumps, relief valves, safety belts, land-ing wheels, and nuts, bolts, and screws forimmediate delivery. Catalogues distrib-uted to 20,000 buyers in a world marketattested the scale of the firm's operations.5

Vendors, whether supplying one complexspecialty item such as autopilots or tenthousand minor hardware items fromrivets to landing wheels, composed a sep-arate and important segment of the air-craft industrial world.

While the four separate groupsair-frame manufacturers, engine manufac-turers, subcontractors, and vendorsdidexist as identifiable entities, not everyconcern can be neatly tagged as belong-ing to one or another. Vertical organiza-tions such as the Curtiss-Wright Corpo-ration cut sharply across the groups,producing engines, airframes, and manycomponent parts within a single manage-rial domain. Some vendors did subcon-tract work in addition to selling itemsfrom stock by catalogue. Moreover, as ifto foreshadow a practice that was to be-come a problem during World War II,

there were occasions when two airframemanufacturers did subcontract work foreach other, thus becoming prime con-tractors and subcontractors at the sametime.

That the business of aircraft produc-tion was never an integrated enterpriseand never became a single, harmonious,smoothly functioning group working en-tirely within the team rules of a trade or-ganization is perhaps best reflected in theexperience of the industry with the Na-tional Recovery Administration (NRA)in the early thirties. The various com-ponent portions of the industry had suchdifficulty in finding common ground foragreement that promulgation of an ac-ceptable code proved impossible. Whenthe Supreme Court toppled the wholeNRA structure in 1935, the aircraft in-dustry was still without a code.6

Although the aircraft industry wasthus in reality a complex of several in-dustries, the airframe manufacturers defi-nitely held the center of the stage. Asdesign initiators and as synthesizers of thecontributions from all the other groupsin the industry, the airframe manufactur-ers necessarily require more attentionand closer study of who they were, wherethey were located, and what their pecu-liar problems were on the eve of the war.

Membership in the AeronauticalChamber of Commerce during 1938amounted to some 86 manufacturers.This included 8 engine firms, 34 airframefirms, and 44 accessory firms. Of the air-frame firms, more than half built onlysmall, low-powered civilian airplanes; 14handled both civilian and military types;

or engine manufacturers. Three important propellermanufacturers were Hamilton-Standard (a UnitedAircraft Corp. subsidiary), Curtiss, and Lycoming.Bendix Aviation Corp. was a leading vendor in theyears immediately before the war, but only about aquarter of its total business lay in the aviation field;therefore, along with RCA, which supplied radiocomponents, it cannot be clearly designated as anintegral component of the aircraft industry.

5 Aerodigest (January 1932), pp. 36ff.

6 L. W. Rogers, "Functions of the AeronauticalChamber of Commerce," Journal of Air Law (Octo-ber 1935).

AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 9

and 4 worked almost exclusively on mili-tary contracts.7 (See Appendix A.) Thislisting does not include firms that for onereason or another did not join the Aero-nautical Chamber of Commerce. Thenonmembers were by no means all un-important and small-scale producers, in-cluding among their numbers such widelydifferent manufacturers as Rearwin Air-craft and Engines, Inc., in the light air-plane field and Glenn L. Martin in thelarge transport and heavy bomber field.

When war came, the nation had abouteighteen to twenty manufacturers withconsiderable experience in building mili-tary aircraft and about the same numberwhose production, though largely in thelight airplane field, would qualify themas experienced in component and sub-assembly fabrication. Taken together,these manufacturers comprised the air-frame industry; their skills and tech-niques would provide the essential basisfor the nation's wartime achievements inaircraft production.8

A glance at a map of the United Stateswill show how the prewar industry waslocated about the country. There werefour loosely defined areas of concentra-tion: those on the west coast from LosAngeles and San Diego to Seattle; thoseon the east coast in an area of three orfour hundred miles about New York(the Hartford-Buffalo-Baltimore axis);the Detroit-Akron-Cincinnati triangle;and the Wichita-Kansas City-St. Louistriangle. Beyond the fact that the eastcoast area produced most of the enginesand the west coast strip turned out a ma-

jority of the airframes, no very clear pat-tern of production by functional typesaccording to geographic location is dis-cernible. Such widely dispersed plantsas Boeing in Seattle, Douglas in SantaMonica, and Martin in Baltimore all pro-duced bombers.

In the light of subsequent wartimepressures for "strategic dispersal," itshould be profitable to digress here mo-mentarily to consider why the nation'saircraft industry grew up as it did. As inthe case of many another new business,irrational factors such as the sheer acci-dent of the founder's residence probablydecided the location of many plants.Few, it appears, made their decisionsafter a careful weighing of all considera-tions as did Martin before moving to asite near Baltimore.9 Some selected a sitebecause local capital was available.Douglas is reported to have been movedby such an inducement. In other casesthe presence of other aircraft plants anda pool of trained labor helped determinesite selection. Occasionally, as in thecase of Wright Aeronautical, a site waschosen because local businessmen madeoffers of excellent facilities such as a newfactory or free use of a municipal flyingfield. Boeing is said to have gone to Seat-tle to be near the spruce supply so essen-tial in early aircraft.10 Year-round flyingweather and the presence of the big Navyair arm installation at San Diego helpedattract Consolidated to California.11

There is no evidence to show that stra-

7 House Subcom of Com on Appropriations, Hear-ings, Supplemental Military Establishment Bill for1940, pp. 319-20.

8 Air Commerce Bulletin (15 May 1938), p. 280.

9 Glenn L. Martin, "Development of AircraftManufacturing," Royal Aeronautical Society Journal(October 1931), p. 894.

10 Denis Mulligan, Aircraft Manufacture in Chi-cago (Chicago, 1939), pp. 30-32.

11 Business Week (February 22, 1936), p. 44.

10 BUYING AIRCRAFT

tegic considerations played any part inplant location before 1939.

When the war broke out in Europe in1939 the nation's airplane builders wererepresented in some forty firms whoseproducts ranged from puddle jumpers tofour-engine bombers and whose factorieswere located anywhere from Hartford toSeattle. Large or small, east coast or west,all these manufacturers faced problemsof marketing, research and development,production, and financing that, differingin degree, were nonetheless common tothe aircraft industry as a whole. A de-tailed discussion of these four fundamen-tal problem areas is needed to help laythe basis for an appreciative understand-ing of the aircraft industry with whichthe nation entered World War II.

The Market for Aircraft

In the aircraft industry in the UnitedStates the curve of aircraft production hasreflected the curve of demand rather ac-curatelyat least for the period followingthe market crash of 1929 and during de-pression when manufacturers learnedthat frequent design change and highunit costs made the accumulation of un-sold items in stock an almost certain pre-lude to disaster:12

Observed superficially, these figureswould seem to tell little more than therise and fall of sales in phase with thebusiness cycle of the nation, booming in1929, hitting bottom in 1933, then stag-ing a comeback, but still far below 1929levels at the end of the period. Like moststatistics, however, these figures repre-senting totals of annual production aredeceptive.

Mere numbers, lumping four-enginebombers with two-place puddle jumpers,fail to provide the essential truth. Toreduce the annual production totals intomeaningful segments, one must ask forwhom the aircraft were produced. Inbroadest terms there are three marketsfor the industry: the domestic market forcivilian aircraft, the domestic market formilitary aircraft, and the export marketfor both of these types. Each constitutesa rather distinct problem.

Military aircraft sales, although smallerin number of units than civilian sales, ac-counted for the larger portion of the in-dustry's dollar volume. For example, in1928 the 1,219 military planes sold werevalued at $19,000,000; in 1933, 466 at$9,000,000; and in 1937, 949 at $37,000,-000. In the field of civilian aircraft, thefigures for the same years were: 3,542,$17,000,000; 591, $6,000,000; and 2,281,$19,000,000.13

12 Civil Aeronautics Administration (CAA), Sta-tistical Handbook 1948, p. 43.

13 Figures are from E. W. Axe and Co., Inc., TheAviation Industry in the United States, Axe-Hough-ton Economic Studies, Series B, No. 6 (New York,1938) (hereafter cited as Aviation Industry in theU.S.), page 70, and Automotive Industries, February23, 1935, page 295, and February 26, 1938, page 262.Values shown do not include parts. It will be notedthat the figures given here do not add up to theproduction totals given in the earlier table. Thedifference is accounted for by variant systems ofenumeration used by the two compilers, one listing

AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 11

Virtually the same pattern prevailed inthe field of aircraft engines.14 Clearly,military sales, whether for domestic orexport destinations, constituted the mostimportant element of the aircraft marketeven during the years of peace from 1928to 1938. Without denying the impor-tance of civilian aircraft to the health ofthe aircraft industry, any appraisal thatfails to take full cognizance of the pre-dominating role of the military marketwill be entirely misleading. Bearing inmind this relatively greater importanceof production for military users, it willbe easier to retain an adequate perspec-tive when discussing, each in its turn, thethree major divisionscivilian, export,and militaryof the aircraft market.

The Domestic Civilian Market

Just as it is essential to separate civilianfrom military sales to perceive the eco-nomic realities of the whole aircraft mar-ket, so too the civilian market must besubdivided. On the eve of the war therewere in the United States more than20,000 licensed pilots and 10,000 licensedaircraft.15 However, these figures maygive a false impression. In a total of 1,823

civilian aircraft produced in 1938, only53 were multiengine units. Expressed inother terms, the aircraft industry turnedout 1,745 units in the one- to five-placecategory, but only 42 units with capacitiesranging from five passengers up.16 If thisappears to suggest that small aircraft dom-inated the picture, one should note thatthe larger aircraft represented an averageunit value of nearly $63,000, whereas theaverage unit value of all the othersamounted to only a little more than$3,500.17 Therefore, the most importantsingle element of the civilian market layin the sale of multiengine aircraft to com-mercial carriers or airlines. To under-stand the character of this key civilianmarket, so important to the generalhealth of the aircraft industry, one mustlook for the factors contributing to thesale of transport aircraft in the between-wars period.

By 1938 regularly scheduled commer-cial airline operations in the UnitedStates were "big business," even if far be-low the railroads in capitalization, ton-nage carried, and almost every other basisof comparison. In that year some twenty-odd domestic airlines operated along30,000 route miles crisscrossing the en-tire nation. Something of the scale ofoperations attained by these carriers isindicated in the fact that they employedalmost 10,000 people, including 1,135 pi-lots and copilots, to handle well over amillion passengers a year. Revenue fromthese operations totaled 40-odd milliondollars. And this, it should be noted, in-cluded domestic carriers only. Two

units produced, the other listing units sold, includingitems from inventory. Moreover, some items listedas export sales represented aircraft sold to buyersin the United States; the same items were listedagain in the compilation of export sales.

14 During the twelve-year period from 1926through 1937, civilian aircraft sales exceeded militarysales (dollar volume) during two years only: 1929and 1934. In 1930 sales were about equal. See n.13, above. See also Barron's (February 3, 1936), pp.7-10, table.

15 Bureau of the Census, Statistical Abstract of theUnited States 1939, p. 433.

16 CAA, Statistical Handbook 1948, p. 51.17 Aviation Industry in the U.S., p. 80.

12 BUYING AIRCRAFT

United States international or overseascarriers employed 4,000 more people tocarry 100,000 passengers over a world net-work of 35,000 route miles.18 By virtu-ally any measuring stickroute miles, pas-sengers carried, or mail ton-milestheairlines of the United States stood farabove those of the other powers.19 Theseachievements stand out more vividlywhen one recalls that only a decade ear-lier the nation's entire air carrier busi-ness involved 34 operators of short linesemploying 1,500 people, including 300pilots, to handle an annual total of 48,000passengers.20

In the decade of rapid growth between1928 and 1938, the airlines became animportant customer of the nation's air-craft manufacturers. For the student ofmilitary aircraft procurement problems,the question of airline sales is significant.Not only did airline sales contribute tomaintaining a high gross for the aircraftmanufacturers and hence foster a healthyindustry, airline purchases of big multi-engine transports also stimulated produc-tion of a character involving technicalproblems closely akin to, if not preciselythe same as, those encountered in theproduction of military aircraft.

Certain critical factors fostering thegrowth of the air carrier industry standout. They can be readily identified, andeven if one cannot assess their relativevalue in promoting airline growth, mere

recognition provides a useful impressionconcerning some of the types of variablesdetermining the sale of aircraft to airlineoperators and thus contingently affectingthe production of military aircraft.

The Air Mail Act of 1925, often calledthe Kelly Act after its congressional spon-sor, opened the door to private contractmail carriers that replaced the govern-ment-operated carrier system in use since1918. Designed as a virtual subsidy tostimulate the development of airlines,the Kelly Act along with its subsequentamendments achieved its objective, andby 1927 contract carriers handled all air-mail. It was, however, in the administra-tion of the act that the aircraft industryfelt its full impact. Since the Post OfficeDepartment established rigid require-ments of financial responsibility in let-ting airmail contracts, only contract op-erators with the greater capital resourcescontinued to bid.21 Thus, while the KellyAct may be said to have marked the in-ception of a substantial system of sched-uled carriers, from its very passage theadministration of the act tended to en-courage the few, well-financed operatorsrather than the many, struggling, small-scale operators lacking financial support.To the aircraft manufacturers both theact and its administration spelled goodnews. Private contract carriers, seekinglower operating costs in order to under-bid, would demand from the industryaircraft of increasingly higher perform-

18 CAA, Statistical Handbook 1948, pp. 61-83.19 Great Britain Air Ministry, Department of Di-

rector-General of Civil Aviation, The Civil Avia-tion Statistical and Technical Review, 1938 (London,His Majesty's Stationery Office, 1939), Table IV, com-pares British, French, Russian, German, and U.S.airlines.

20 CAA, Statistical Handbook 1948, pp. 61-83.

21 Henry Ladd Smith, Airways: The History ofCommercial Aviation in the United States (NewYork: A. A. Knopf, 1942), pp. 94ff. This readablevolume contains a running account of the growth ofairlines. The author's generalizations and interpre-tations, although often unsupported by the evidence,are both interesting and provocative.

AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 13

U.S. MAIL PLANE LOADING FROM MAIL TRUCK, September 1922.

ance, whereas earlier the Post Office hadoperated its own depot for rebuilding andrepair, keeping the few available aircraftin operation as long as possible, havinglittle incentive to replace equipment fre-quently.22 Moreover, the stipulation offinancial reliability imposed by the PostOffice increased the probability of airlinecredit arrangements satisfactory enoughfor aircraft manufacturers to risk exten-sive production outlays on transport air-planes for airline operators.

A second landmark appeared in 1926with the passage of the Air CommerceAct. Encouraged by the precedent offederal aid to seaboard navigation, airlineoperators and aviation enthusiasts per-

suaded Congress to assume a similar bur-den for aerial navigation in the form ofradio stations, emergency landing fields,and beacons under Department of Com-merce sponsorship. Freed from the obli-gation of facing the heavy capital chargesinvolved in these necessities, the air car-riers could devote more capital to aircraftdevelopment.

The regulatory agency established bythe Air Commerce Act of 1926 was theBureau of Air Commerce, a unit withinthe Department of Commerce. Legisla-tion in June 1938 transferred the func-tions of this bureau to an independentexecutive agency, the Civil AeronauticsBoard (CAB) although its administrativeorganization, the Civil Aeronautics Au-thority (CAA), remained in the Depart-ment of Commerce. At the same time,

22 F. A. Spencer, Air Mail Payment and the Gov-ernment (Washington, Brookings Institution, 1941),p. 25.

14 BUYING AIRCRAFT

Congress substantially enlarged the scopeof the agency's powers. Whatever itsform or title, the appearance of a federalagency to regulate air traffic had a pro-found impact on commercial aviation.

Broadly speaking, the Air CommerceAct of 1926 was a piece of organic legis-lation, collecting the fundamental lawsof air carrier operations into a singlecomprehensive system.23 While its pro-visions for aids to navigation gave the aircarriers immediate and substantial finan-cial relief, the act's other sections involv-ing uniform traffic and air safety regula-tions as well as licensing, registration, andinspection requirements, also contrib-uted toward the establishment of a sta-ble, healthy, and vigorous airline indus-try in the United States.

The tendency toward consolidation re-ceived substantial encouragement in 1930when the McNary-Watres Act amendedthe Kelly Act in such a way as to give evengreater discretionary powers to the Post-master General in awarding mail con-tracts. Since the incumbent PostmasterGeneral favored a system of integratedairlines, many small lines combined intonetworks until a handful of powerful op-erators dominated the field.24 By 1934three airlines flew 65 percent of the na-tion's route miles, carried 90 percent ofthe mail, and received 88 percent of thefederal mail subsidy.25

A third landmark in the history of thenation's airlines was the precipitous risein passenger traffic that coincided withthe era of consolidations. Between 1928and 1934 airline operations moved off ona new tangent as passenger traffic beganto replace mail as a major source of rev-enue.26 Passenger volume increased fromless than 50,000 in 1928 to almost 500,000in 1934, climbing steadily thereafter.27

A number of factors probably contrib-uted to this new trend. A steadily im-proving safety record may have helped towin the public to air travel.28 A some-what more measurable contributory fac-tor was the sharp decline in fares. From12 cents a mile in 1929, the average pas-senger fare tumbled to 5.7 cents a milein 1935. Just how far the air travel farehad to fall in order to challenge the rail-roads competitively is indicated in the1929 air rate, which was three and one-half times higher than the average railfare per mile in that year.29 Yet anotherelement apparently contributing towardthe rise of passenger traffic on the airlineswas a provision of the McNary-WatresAct of 1930 changing the method of com-puting mail payments. The pound-per-mile formula gave place to a new com-putation based on the amount of spaceavailable. This made it advantageous for

23 Air Commerce Act (44 Stat 568), May 20, 1926.For evidence of federal aids to navigation, see AirCommerce Bulletin (April 15, 1935), statistical tabu-lations on airways.

24 For a general discussion of airline mergers, seeSmith, Airways, ch. 11, especially p. 243.

25 Ernest Gugelman, The American Aviation In-dustry (New York: D. D. Magruder, Inc. [1934]). p.15. Between 1928 and 1934 the number of domesticairline operators dropped from 34 to 24. By 1938

the number had been reduced to 16. CAA, Statisti-cal Handbook 1948, p. 61.

26 J. A. Frederick, Commercial Air Transportation(Chicago, 1945), p. 375, Figure 42. Passenger rev-enue exceeded mail revenue for the first time in 1935.

27 CAA, Statistical Handbook 1948, p. 70.28 Ibid., p. 93. Passenger fatalities dropped from

28.2 per 100 million passenger-miles to 4.7 between1930 and 1935. See also, M. J. Meehan, "Progress inthe Aeronautical Industry," Survey of Current Busi-ness (March 1936), pp. 16-18.

29 Aviation Industry in the U.S., p. 41.

AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 15

operators to acquire new and larger air-craft, which, when not filled with mail,invited passenger traffic.30 Such types asthe Ford Trimotor, the Curtiss Condor,and the Douglas DC-2, appearing in suc-cession, did much to popularize air travel.

The appearance of passenger revenueas a major element in the air carrier busi-ness marked a definite turning point inthe history of air transport. It came justin time to cushion the airlines when thefederal government abruptly canceled allprivate airmail contracts in February1934.

The airmail scandals of 1934 with theirinvolved interplay of political and eco-nomic competition cannot be recountedhere at length, but it will be useful totake note of the episode since it shedlight upon the peculiar antagonisms be-hind the record of military aircraft pro-curement discussed in a subsequent chap-ter. In February 1934 the Presidentissued an Executive order canceling allairmail contracts and transferring opera-tions to the Army.

When Army airmen attempted to flythe mails on short notice, lacking ade-quate equipment and training for thetask, they were beset with disaster. Aftera week of midwinter flying and almostdaily crashes, the score of catastrophesstood at five pilots dead and six seriouslyinjured. Soon afterward the Presidentrescinded his ban and began negotiationsto return the mails to the private air car-riers. It was against this setting that Con-gress passed the Air Mail Act of 1934,which abandoned the subsidy character ofprevious airmail legislation and revertedto rigid emphasis on low bids regardless

of responsibility, reliability, or pioneer-ing investments, all considerations fa-vored in previous awards. As one writersubsequently declared, the 1934 airmaillegislation as finally passed had a "puni-tive aroma." 31

The airmail carriers must have felt thatthe 1934 legislation really was "punitive"since their airmail subsidy fell from 23million dollars in 1933 to 12.5 millions in1935. Nevertheless, the airlines did notcollapse. The volume of mail carried byair mounted rapidly throughout the thir-ties and by 1939, even under the less fa-vorable legislation of 1934, mail revenuesto the air carriers exceeded the sums re-ceived before the subsidy legislation hadbeen annulled.32 More important, how-ever, was the rising volume of passengertraffic, which had turned upward beforethe 1934 legislation was enacted andwhich was further stimulated thereby.Had the subsidy cut come earlier, for ex-ample in 1928, it might well have beenfatal, but in 1934 mail revenues no longerconstituted the predominant percentageof air carrier income. By 1938, passen-ger revenue constituted 57.6 percent ofthe carriers' income, and the potentialmarket had scarcely been tapped sinceairline passenger-miles amounted to but6.8 percent of Pullman passenger-miles.33

30 McNary-Watres Act, April 29, 1930, sec. IV.

31 Hugh Knowlton, Air Transportation in theUnited States (Chicago, University of Chicago Press,1941), p. 10.

32 CAA, Statistical Handbook 1948, p. 80.33 CAA, Statistical Handbook 1945, p. 33, and

CAA, Statistical Handbook 1948, p. 79. The charac-ter of the potential passenger volume for air carriersin 1938 is suggested by the fact that ten years laterthe airlines were carrying 48.5 percent as much traf-fic as Pullmans. In 1938 it was estimated that lessthan one-half of one percent of the population fleweach year. Air Commerce Bulletin (October 15,1938), p. 98.

16 BUYING AIRCRAFT

The transition of the airlines to a pri-mary interest in passenger traffic had aclearly discernible effect upon aircraftmanufacturing in the United States.Many carriers bid on mail contracts at aloss rather than lose their routes, hopingto combine mail and passenger volumefor a profit. Faced with almost certainloss unless costs could be pared, operatorswere more than ever anxious to procureaircraft with improved performance.Engines that could be operated 200 hoursrather than 100 hours between overhaulsmeant increased services at lowered costsand a possible profit. In the same fashion,the transition to passenger traffic fostereda still greater interest in high perform-ance aircraft since airlines studies re-vealed that improved equipment had amarked influence on passenger volume.34

Speed in particular had sales appeal. Be-tween 1934 and 1938, the average airspeed of the airliners advanced from 127to 163 miles per hour as one carrier afteranother secured new equipment withwhich to hold or capture passengertraffic.35

From two directions, then, cost cut-ting and passenger transport, the carrierswere induced to procure new equipment,and four out of five of the biggest opera-tors sold stock in the mid-thirties to raisethe necessary funds.36 That this meantlife-giving business for the aircraft manu-facturers is clear from the fact that thefive largest carriers at that time main-tained fleets ranging from fifteen tonearly sixty units.37 Replacement of any

substantial portion of these fleets openedthe possibility of true production lineoutput of multiengine aircraft for thefirst time.

The shift to passenger traffic and thedeclining mail subsidy might in them-selves have effected something of a boomin aircraft manufacture, but by a pecu-liar coincidence a technical revolutionappeared on the very eve of the airmailfiasco. The last transcontinental airmailrun before the private contracts werecanceled was flown in a Douglas DC-2 onher maiden record-breaking trip acrossthe nation in thirteen hours and fourminutes. With successful completion ofthe record transcontinental flight, the14-passenger 200-miles-per-hour Douglasairliner rendered obsolete virtually everyother airliner in the country. The tech-nical revolution, as embodied in theDC-2, like most revolutions, did notcome from any single drastic step forwardin design but rather from the cumulativeeffect of several significant innovations.By coincidence, the development ofmonocoque, all-metal structures replac-ing the wood, wire, and fabric structuresof the previous decade appeared justwhen a series of major innovations in de-sign provided power plants with vastlymore output per pound of engine. Theappearance of the DC-2 incorporatingall these advances in a brilliant new syn-thesis forced one carrier after another todiscard existing equipment, often longbefore its actual usefulness had gone, infavor of the new and markedly superiorDouglas airplane. There followed a prof-itless prosperity for the carriers, who wereforced to pour the earnings of their grow-ing passenger traffic back into new equip-ment. The cost of replacement mounted

34 Aviation Industry in the U.S., p. 55.35 CAA, Statistical Handbook 1945, p. 31.36 Barron's (February 22, 1937), p. 9.37 Aviation (April 1937), p. 77.

AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 17

sharply, rising from approximately $30,-000 per unit before the technical revolu-tion to something in the neighborhoodof $60,000 after the appearance of theDC-2.38 The process of replacing equip-ment was so expensive the airlines con-tinued to show deficits until 1939 despitesubstantial increases in revenue.39

Perhaps the clearest index to the im-pact of the technical revolution on theairlines is to be found in the size of thetotal air fleet maintained by the carriers.From a peak of 497 units in 1930, thenumber fell to 260 in 1938; there wereactually fewer units licensed in 1938 thanin 1928 despite the enormous increasesin passengers, mail, and express carriedby the airlines. Not only did the precipi-tous renewal of almost the entire carrierfleet result in a growing emphasis on pro-duction but it also brought to a head allthe contingent problems of the technicalrevolution in aircraft manufacturing.Larger, more expensive, and technicallynovel aircraft required enlarged facilities,new financing, and extensive tool re-placement, all within a very short periodof time.

In sum, then, down to fiscal year 1938there were three outstanding factors con-ditioning the airline market for aircraft:the Air Mail Act of 1925, the Air Com-merce Act of 1926, and the shift from mailto passenger traffic as a primary source ofrevenue. Each in some measure encour-aged the growth of air carriers as custom-ers for aircraft and in varying degreestrengthened the aircraft industry as an

element of national defense. The carriermarket was, however, only one aspect ofthe three major market areas, domestic,export, and military, that occupied theindustry in the late thirties.

The Export Market

In terms of sheer numbers of units,sales of aircraft abroad were by no meansinconsiderable. From a mere 37 ex-ported in 1922, the year of doldrums fol-lowing World War I, exports mounted,erratically and with annual fluctuations,to a total of 631 units in 1937. Aircraftengine exports climbed from 147 in therock-bottom year 1922 to 1,048 in 1937.Foreign sales in spare parts, replacements,and accessories tell a similar story, grow-ing from $250,000 in 1922 to somethingover $12,000,000 in 1937. Taken to-gether, aircraft, engines, parts, and acces-sories in the export trade represented asizable volume of business for the na-tion's aircraft industry, in all, over $39,-000,000 in 1937.40

As an important attribute to nationaldefense, aviation was subsidized in oneform or another by all the major powers.For this reason, none of the great na-tions offered much in the way of marketsfor aircraft exported from the UnitedStates, at least not in normal times ofpeace. The bulk of the peacetime ex-port market went to lesser states. Almostany year chosen at random demonstratesthis distribution. In 1929, for example,

38 Aviation Industry in the U.S., p. 80. Barron's(February 22, 1937) gives a somewhat higher figure,running from a pre-1934 cost of approximately$85,000 to a post-1934 figure around $120,000.

39 Barron's (January 15, 1940), p. 25.

40 Aviation Industry in the U.S., p. 90, based ondata compiled from The Aeronautical Chamber ofCommerce of America, Inc., and the Bureau of AirCommerce sources. After World War II the name ofthe chamber was changed to Aircraft Industries As-sociation. See also, CAA, Statistical Handbook 1945,p. 123.

18 BUYING AIRCRAFT

only 12 aircraft were exported to Europe,but Latin America took 196. In 1936,when 61 units went to Europe, 192 wentto Latin America.41 Moreover, since themajority of aircraft were exported to thelesser states and smaller powers, the totalnumber of units in any one contract wasalmost necessarily small and credit ar-rangements were frequently involved, ifnot actually precarious.42

Regulations conceived to protect thenational interest by restricting the exportof military secrets constituted a seconddeterminant in the aircraft export trade.These regulations, applying to militaryaircraft only, required a two-year time lagin the release of current aircraft designsto foreign states. After the passage of theneutrality legislation of the mid-thirties,the export license requirements providedan even greater measure of control thanhad existed theretofore. In favor of thesesecurity restrictions, it was argued thatthe nation's technical secrets and marginof design superiority were safeguarded.Critics, especially aircraft manufacturerswho suffered from the curb, raised a num-ber of points in opposition to the securitymeasure.43 Restrictions on exports, espe-cially those on export of military aircraftalready on contract, reduced the numberof units of any one design that could beproduced in a single production run.

Perhaps the most important of all the ar-guments against export curbs on militaryaircraft was the contention that mere ex-port curbs would not prevent foreignstates from securing the most recent mili-tary aircraft design details and incorpo-rating them in their own aircraft designsat will. Since the development of facili-ties and productive capacity was, in thelong run, probably as vital to the nation'ssecurity as any particular design detail,the export curb to all intents and pur-poses encouraged or reinforced the crea-tion of productive capacity in foreignstates. Finally, there can be little doubtbut that restrictions on the export of mostrecent military designs placed manufac-turers in an unfavorable competitive po-sition when pitted against other export-ing nations.44

Military officials, confronted with fre-quent proddings from manufacturers,attempted to liberalize the export re-strictions as far as possible in order toencourage a healthy aircraft industry.Nonetheless, they continued to insist onthe principle of a time lag before releas-ing current production models for theexport market.45

A less tangible but no less influentialdeterminant of aircraft exports is to befound in the political and diplomaticsphere. This type of influence on exportsmay be illustrated best by the case of the

41 Aviation, March 1930, p. 596, and April 1937,pp. 84-85.

42 For some revealing insights on the subject ofaircraft export sales, see Special Com Investigatingthe Munitions Industry, U.S. Senate, Hearings (pop-ularly called Nye Hearings), pt. III, 73d Cong, Feb-ruary 24, 1936, and pt. IV, 73d Cong, Exhibit 304,p. 894.

43 For an instance of a manufacturer's protestagainst curbs on exports, see D. L. Brown, "ExportVolume and Its Relation to Aviation Progress andSecurity," Aerodigest (December 1934), pp. 15ff.

44 Competition in the export market between thetwo wars was sharp. British exports topped those ofthe United States down to the early thirties, andpressed close behind thereafter. See Air Ministry,Dept of Civil Aviation, Civil Aviation Statistical andTechnical Review 1938; Aviation (October 1938),p. 35; Automotive Industries (March 1939), pp. 574-75.

45 See ch. IX, below, for a fuller discussion of theexport ban.

AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 19

neutrality legislation of the middle thir-ties. From the aircraft manufacturer'spoint of view, considerations such asthose raised by the discretionary powersgiven the President in the neutrality leg-islation for invoking the ban presentedimponderables against which it was vir-tually impossible to plan. The characterof this difficulty becomes evident when itis observed that China was the most im-portant single buyer of aircraft exportsfrom the United States. In the periodfrom 1925 through 1934 the Chinese pur-chased 6,986 aircraft, while between 1935and 1938 the number reached 12,406. Inboth periods the Chinese accounted forsomething over 13 percent of the nation'stotal export volume.46 Had the Presidentfound it politically and diplomatically ex-pedient to elevate the China Incident tothe rank of a war, by the terms of theneutrality legislation much of this impor-tant export trade would have dried up.Thus, the aircraft manufacturer's exporttrade no less than his sales to domestic aircarriers was ultimately and most vitallysubject to political decisions often far be-yond the scope of any individual manu-facturer's ability to influence or even topredict.

In the face of all the imponderablesand complexities confronting aircraftmanufacturers who pursued the exportmarket, one might well be inclined to askwhy they continued to show such aggres-sive interest in the field. A cursory analy-sis of aircraft exports in almost any year

may reveal the answer. With the crash of1929 and 1930, the total value of aircraftproduction fell from $91,000,000 to ap-proximately $61,000,000. In this sameperiod, however, exports fell off onlyabout $250,000, providing between eightand nine million dollars' worth of busi-ness to the industry.47 Expressed in termsof payrolls and employment, the impor-tance of this volume of business in thedepression is easily recognized. In 1937exports amounted to approximately one-third of the nation's total aircraft produc-tion, but this third accounted for an esti-mated 50 percent of the industry's netprofits.48 Unhampered by statutory profitlimitations in pricing, export items re-turned a larger profit than could be ex-tracted in the domestic trade.

While the above illustrations refer toaircraft exports, virtually the same con-clusions could be drawn with regard toengines, spare parts, and accessories. Infact, engine exports outstripped aircraftsales annually by almost two to one. Dur-ing the two worst years of the depression,1932 and 1933, when aircraft sales rangedbetween 300 and 400 units, engine salestotaled 2,356 and 2,901.49

In short, despite serious obstacles, theexport business was extremely worth-while to aircraft manufacturers in theUnited States. It might even be arguedthat the export business was essential tothe health of the nation's aircraft indus-try. By raising the volume of output it

46 Elsbeth Estelle Freudenthal, The Aviation Busi-ness: From Kitty Hawk to Wall Street (New York:Vanguard Press [1940]), Table IX, p. 141, and TableXIX, p. 271; Harding, Aviation Industry, p. 3; Bu-reau of the Census, Statistical Abstract of the U.S.1938, p. 458.

47 L. W. Rogers, "Analysis of Aviation Exports,"Aerodigest (April 1931), p. 45; CAA, Statistical Hand-book 1948, pp. 43, 58.

48 Aerodigest (July 1938), p. 34; Aviation (April1938), p. 31; Denis Mulligan, Aircraft Manufacturein Chicago (Chicago, 1939), p. 8.

49 Air Commerce Bulletin (15 May 1938), p. 280.

20 BUYING AIRCRAFT

increased the probability of mass produc-tion and strengthened the nation's posi-tion of readiness for war. But even attheir best, the domestic carrier and ex-port markets were less important to thecause of national defense than the mar-ket for military aircraft in the UnitedStates.

The Domestic Military Market

A simple statistical presentation of thetotal military and commercial aircraftmarket, both as to numbers and value,should provide a useful point of depar-ture in an analysis of military sales.(Table 2) These figures reveal a gooddeal about the market for military air-craft in the United States. The dollarvalue of military sales exceeded that ofcivil sales by a considerable margin des-pite the lower total number of militaryunits sold. On the basis of continuityand high dollar volume, the militarymarket would appear to have offered anattractive field for aircraft manufactur-ers. Further detailed study, however,confutes the impression.

Aircraft average unit costs were risingsharply throughout the period of thetechnical revolution:50

The average unit cost of military aircraftwas far in excess of the civil aircraft aver-age unit cost. Several factors contributed.The air arm was building an increasingly

larger percentage of bombers, whichtended to drive up the average. Wherethere had been but one bomber to everyfour pursuit planes in 1926, by 1937 therewere eleven bombers to nine pursuits, andthe bombers were in many cases four-engine rather than two-engine craft. Thecomplexity introduced with the technicalrevolution sent engineering costs aloneup some 48 percent in the transition fromwood to tubular metal structures; withthe coming of monocoque structures, en-gineering costs mounted another 50 per-cent. Many of the heavy charges encoun-tered in military aircraft were not foundin most of the civilian types. The earlyB-17, for example, contained more than$10,000 worth of instruments, not tomention armament and other specialmilitary accessories.51

The higher average unit cost of mili-tary aircraft stemmed not alone fromsheer size or complexity; rather it wasmore directly the result of military em-phasis on high performance. Inasmuchas engine horsepower is an important fac-tor in high performance, a comparisonwill explain the relationship between thehigher costs of military aircraft and per-formance requirements. In 1937 civilaircraft engine production amounted to2,289 units, but 1,393 of these fell in theunder 50 horsepower category and all therest save 88 were below 600 horsepower.52

Military aircraft, on the other hand, usedno engines in the 50 horsepower categoryand from a total of nearly 1,800 enginesproduced for military use, 1,276 were in

50 Aviation Industry in the U.S., p. 71.

51 Testimony from Hearings before the Subcom ofthe Com on Appropriations, House, 75th Cong, 1stsess, 1938 Military Establishment AppropriationsBill, March 1937, pp. 520-22.

52 CAA, Statistical Handbook 1948, p. 51.

AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 21

TABLE 2COMPARATIVE IMPORTANCE OF MILITARY AND CIVILIAN MARKETS

Source: Figures for first three years are from Automotive Industries (February 23, 1935), page 295. Figures for last three years are fromAviation Industry in the United States, page 70, based on Aeronautical Chamber of Commerce sources.

categories above 700 horsepower.53 Thus,aircraft manufacturers who wished tocompete for the military market wereforced to operate with an ever larger capi-tal structure to carry the charges involvedin the exceedingly high average unit costfor military aircraft and engines. In ad-dition, the necessity of turning out air-craft of progressively superior perform-ance to meet the tactically competitiverequirements of the military market in-volved the annual investment of largesums for research and development incontrast to the civil aircraft market,where a single basic design occasionallycontinued to amortize initial develop-ment costs over a period of several years.

As a result of the characteristics de-scribed above, the market for militaryaircraft tended to remain in the hands ofa comparatively few manufacturers. In1937, for example, all Army aircraft pro-curement was with 10 manufacturers, allNavy with 8. And this was from a field of98 aircraft manufacturers of whom 48were in active production. In the case ofengines, the concentration of business inthe hands of a few was even greater. From

a total of 23 aircraft engine manufactur-ers in 1937, the Army's entire procure-ment came from 3 concerns and theNavy's came from 2.54 Expressed insomewhat different terms, the concentra-tion of the military market can be seenin the fact that less than a dozen firmsmanufactured all but 200-odd of the 4,977aircraft produced for the Army and theNavy between 1931 and 1937.55 From1931 through 1937 seven of the largestmanufacturers could account for the fol-lowing percentages of their businessthrough government contracts:56

53 Automotive Industries (February 26, 1938), pp.262ff.

54 Air Commerce Bulletin (15 May 1938), p. 280;Aviation in the U.S., pp. 100-101.

55 Aviation Industry in the U.S., app. VI. Basedon Aeronautical Chamber of Commerce figures.Four firms produced three-quarters of this total forthe period: Douglas produced 1,194 aircraft for theArmy and the Navy between 1931 and 1937, Boeing684, Curtiss-Wright 681, and North American 551.

56 Freudenthal, Aviation Business, Table VI, p.128, based on Com on Naval Affairs, House, Hearingson Investigation Into Certain Phases of the Manu-facture of Aircraft and Aeronautical Accessories . . . ,February 2-March 8, 1934 (hereafter cited as DelaneyHearings), and Subcom on Aeronautics of the Comon Naval Affairs, House, Rpt on Investigation IntoCertain Phases . . . , April 10, 1934 (hereafter citedas Delaney Report), items 18 and 37, respectively, inSundry Legislation Affecting the Naval Establish-ment: 1933-1934, 1st and 2d sess, 73d Cong (here-after cited as Sundry Naval Legislation, 1933-34).

22 BUYING AIRCRAFT

From these observations a few generalconclusions may be drawn regarding themilitary aircraft market. In dollars, itwas the predominant aircraft market,though profits in the field were subject tostatutory limits in some cases. In addi-tion, the insistent requirement for everbetter performance in military aircraftmade the military market probably themost difficult to enter in the technologicalsense. The need for continuing researchand development along with the growingcomplexity and size of military aircraftmade of the military market a costly busi-ness, a veritable bottomless pit for funds.And all this, of course, was expense in-curred in addition to the investments thatall aircraft manufacturers, whether seek-ing the military market or not, had toface in securing the new facilities and thenew tools required by the technical revo-lution in aircraft structures. As a conse-quence, the seemingly attractive militarymarket was confined more or less to adozen manufacturers specializing in mili-tary types, and even within this group,four firms received the bulk of the busi-ness, largely because they were capable ofpursuing a thoroughly aggressive policyof research and development.

Research and Development

In the aircraft industry, the injunction"design or die" has always been virtuallyaxiomatic. Superior performance ex-

pressed in higher speeds, greater ceilings,heavier loads, and longer ranges winscontracts. To stay in business, manufac-turers soon learned that they must main-tain engineering staffs capable of exploit-ing the latest findings of aeronauticalscience, translating theory into practicaldesigns. Where there had been but 30aircraft design groups in the industry of1918, by 1939 there were 125 differentresearch and development staffs special-izing in aircraft, engine, and accessorydesign work.57

The competitive pressure for improvedperformance made flux in design well-nigh continuous, research and develop-ment an unending process. The phraseresearch and development is glibly re-peated in discussions of military appealsfor higher appropriations, but one seldomfinds it concisely defined. In the aero-nautical field, as elsewhere, research is oftwo kinds, fundamental and applied; theformer is the peculiar province of thescientist, the latter the task of engineers.Where one deals in abstract theory, theother must make practical application.Thus research and development has cometo be a shorthand expression for the wholespectrum from the most theoretical explo-ration of fundamental theory down to themost practical attempts to solve designproblems in particular instances.

In aviation, as with other scientificfields, the quest for underlying scientificprinciples has been carried on extensivelyin the universities. During the first twodecades of flying, few universities offeredcourses specializing in the aeronauticalsciences, but after 1926 the Guggenheim

57 AAF Hist Study 50, Materiel Research and De-velopment in the Army Air Arm: 1914-1945, p. 78.

AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 23

Fund greatly strengthened fundamentalresearch in the aeronautical sciences withlarge endowments to nine universitiesstrategically dispersed over the nation.58

Yet, despite the presence of excellent fa-cilities in several universities, in 1939only one-seventh of one percent of theAir Corps' research budget, or approxi-mately $15,000, went directly to univer-sity research contracts. While indirectcontracts and industrial utilization ofuniversity facilities increased this figuresomewhat, the universities did not matchthe volume of activities in fundamentalresearch carried on by the federal govern-ment.59

Among the federal agencies concernedwith aeronautical matters, one, the Na-tional Advisory Committee for Aeronau-tics (NACA), stood pre-eminent in thefield of fundamental research. This ex-ecutive agency, established by Congressin 1915 to supervise and direct the scien-tific study of flight, had grown by 1938into the nation's leading center of funda-mental research. The initial appropria-tion of $5,000 in 1915 increased duringthe between-war years until it annuallytotaled nearly $2,000,000. Following thecurve of appropriations, NACA grewfrom a small group of scientists to a tech-nical staff of more than 500 people ad-ministering and operating an elaborateinstallation of research facilities locatedat Langley Field, Virginia. This researchplant included laboratories for engineand instrument tests, machine shops, aflying field, and wind tunnels. All to-gether, the NACA boasted 11 wind tun-nels, among which were a 60 by 30 foot

full-scale tunnel, an eight-foot, 500-miles-per-hour tunnel, and other equipmentsuch as vertical and refrigerated tunnelsfor specialized types of aerodynamic re-search.60

Although in many respects inferior tothe research facilities available to Euro-pean powers, the equipment for funda-mental research in the United States, bothfederally and university sponsored, repre-sented a marked increase over the inade-quate equipment of 1918. Over thetwenty-year period between the wars, thenation acquired perhaps a dozen centersof advanced aeronautical research, ofwhich the NACA facilities were the best.These research centers were significantassets, not only for scientific achievementbut also as training schools for the vitallynecessary aeronautical engineers of indus-try. Science may calculate the ultimatelevel of aircraft performance, but it isapplied research and development car-ried on by the industry's engineering anddesign staffs that regulate the actual paceof technical progress.

Army policy on aeronautical researchwent through several phases in thebetween-war years. From the armisticeuntil 1926 there was a certain amount ofwavering between a policy of support forboth fundamental and applied researcha