Capital flight

“ The man who makes a machine and the man who flies one are the heroes of the epic of flight. Next to them, all credit must be given to the public-spirited financiers and patrons who encouraged flight, especially to those of them who were not deceived, and knew that they are the servants, not the masters, of the conquerors of the air. As a promoter of flight Mr. Holt Thomas deserves more than a passing mention. ”

“ In the three generations since that historic flight in 1903, aviation has grown to become one of America's greatest enterprises; one of its largest employers; a fundamental ingredient in the national economy ”

“ The public character of aviation imposes upon it a dual role. Commercial companies, to advance their private interests and stimulate technical progress, must compete in the realm of operations. At the same time, they must collaborate in the realm of policy to promote the public interest. ”

“ On the other hand, where a new science is struggling into being, commercial competition often retards it by a network of restrictions and concealments, and converts knowledge, which ought to be a public trust, to the darker purposes of private gain. The coming of the war burst these bonds, and immensely quickened the progress of the science of flight. ”

“ This statement, of course, took cognizance of the rapid progress in America where, following the development of the air-cooled engine, the controllable-pitch propeller, the Boeing and Douglas transports, the Sikorsky boats, and Lindbergh’s epic flight, commercial aviation had flourished. These products now became Tom Hamilton’s stock in trade and he peddled them most successfully to independent customers whose decisions were dictated by economic considerations rather than those of national prestige. ”

“ The establishment of this little fleet may well be a proud reflection to those shareholders who, if they have no dividend in specie, have another species of dividend in the swelling gratification with which the heart of every one must be inflated, as, on seeing one of the noble craft dart with the tide through the arches—supposing, of course, it does not strike against them—of Westminster Bridge, he is enabled mentally to exclaim, “There goes some of my capital!” ”

“ The makers, remembering that progress in aviation had come chiefly by way of private enterprise, feared the paralysing effect of official control, and the habitual tendency of officials, especially of competent officials, to extend their ambitions and their powers. ”

“ The airplane has now advanced to the stage where the demands of commerce are sufficient to warrant the building of planes without regard to military usefulness. And with the advent of the purely commercial airplane comes an economy of operation which places operating organizations on a sound financial basis. ”

“ Thus it has come to be that the transforming consequences resulting from the pervasive industrialization of life find the Commerce Clause appropriate, for instance, for national regulation of an aircraft flight wholly within a single state. ”

“ And if the government, after having reduced the market value of the airlines by its own mismanagement, then takes possession of them, it becomes guilty of expropriating the capital of private investors, some of whom had risked their savings in an enterprise they deemed secure because it was government regulated. ”

“ America's aerospace industry has experienced enormous growth and development since the Wright brothers' first flight. It has strengthened our economy, created new business and recreational opportunities, freed us from many of the limits of time and distance, and made our Nation's aviation system the finest in the world. ”

“ I will meet every expense of making a first-class full-sized airplane like the Sky-Bird, and pay you, John, a wage equal to that which the government allowed you as a pilot, if you three young men here will do the construction work secretly, and if Robert may be allowed a one-third interest in the venture, both in the plane to be made, and in any future benefits to be derived from the patent rights. ”

“ The flight spanned 120 feet and lasted just 12 seconds, yet it ushered in a new era of unimaginable advances in aviation and aerospace technology. Today, air travel is vital to our country, helping bring people together and sustain our security. In addition, the aviation industry strengthens our economy by supporting millions of jobs. ”

“ Fred went on to develop the vast difference between the volume-producing industries, where low first cost was the incentive, and the aircraft industry, where low operating cost was the real criterion. The airline operator could afford to pay a high price for high quality aircraft, provided he reduced his operating costs enough to absorb the first cost in a reasonable time. The whole character of the two types of industry differed, and neither could expect to do the other’s job. Technological development was the key to the economic security of an enterprise like aviation. ”

“ To the extent that the passengers are not on productive missions, but are gratifying their own wants, a passenger-car is in Economic contemplation Wealth in process of ultimate consumption to satisfy wants; to the extent that its passengers are on productive missions it is Wealth devoted to the Production of more Wealth, and therefore in the subcategory which is distinguished as Capital. ”

“ The answer was that the only way to know how it felt to fly was to try it.
Because a plane was an expensive machine and because it took considerable funds to buy gasoline, the charge for a short sky-ride had to be five dollars.
After one brave native son took his courage in his hands and went up for a flight, others usually crowded in, anxious for their share of the thrills. Once a whole village, out on the gala event of an annual picnic, “took to the air.” That night Maben and Hal found they had taken in a hundred and seventy-five dollars. ”

“ To us aircraft manufacturers who, five years earlier, had covenanted to cooperate in the public interest where policy was concerned, while continuing to compete with each other in operations to our own—and likewise—the public interest, it appeared that a precarious existence under government economic regulation had blinded the operators to the broad public interest, and hence, to their own enlightened self-interest. ”

“ Aviation was still new—interest in it had been stirred up by war flying, and all sorts of men, young, old, every kind, bought up old planes from the government and went barnstorming around the country, taking people up on flights, stunting, flying in air circuses, balloon jumping, and doing anything they could to make money with their tubs. ”

“ When you consider the number of organizations operating commercial air routes, the increasing number of companies engaged in the manufacture of airplane parts, the widespread number of smaller companies engaged in aviation, it is easy to understand that there is a chance at the bottom of the ladder now. And the industry is growing so rapidly that every day sees that chance assuming larger proportions. ”

“ So far as we are able to read between the lines of the letter we have traversed, the meaning of it all is, that all the necessary experimental work is to be carried out by private firms at their own risk and cost, and that the State, which must ultimately benefit, should placidly stand aside and wait until private enterprise has accomplished the perfection of the machine. Never mind what is being done in other countries or what lead they may have or hold, let no penny of public money be spent on the development of aviation, but rather let that be left to the fools and the patriots. ”

“ Upon our entry into the war, I found myself president of United Aircraft Corporation. In the razzle-dazzle of the wartime Washington merry-go-round, I watched the expansion of air transport until it became a decisive factor in the war. Hurdling the Himalayan Hump and leapfrogging submarine-infested sea lanes, it delivered important persons and critical cargoes to decisive points inaccessible to other forms of transportation. Believing that this performance presaged the advent of expanding air commerce, we manufacturers began investing our earnings in bigger and better transports. ”

“ In the near future perishable foods and other merchandise, which heretofore have taken several days to cross the country, will make the trip overnight.
With the coming of peace, air transport and commercial aviation will grow by leaps and bounds. All the leading airlines and many new ones are planning expanded schedules and looking forward to a great boom in air travel. New transport planes are going into production in the plants of all America’s well-known aircraft manufacturers. ”

“ Out of the background of the airplane story to date, one might argue the other way around, namely that once the rigid controls and restraints are imposed, the growth pattern becomes stabilized. Mr. Norden went on to argue with persuasion:
“Aviation is relatively a new business. Air freight, as distinguished from other forms of aviation business, is in its infancy. Yet the entire aviation industry is hedged about with red tape, the like of which has never been encountered in any other form of American industry. One has merely to look at legal payments made by some of the certificated carriers. ”

“ Not only had some of the companies made money on operations, but some of the leaders had become rich as a result of the increased values of their stocks. This was the beginning of the end of that mad period of speculation in which all sorts of mergers and consolidations had prompted the public to get into the market and make a killing. In the aircraft industry, Curtiss and Wright had led off with a merger that had brought together two of the greatest names in aviation and had put two of the biggest operations under the same tent. ”

“ Here is concentrated the capital that puts in motion the power of steam and the strength of muscle in the remotest districts—that stretches the iron track and impels the rapid engine to the extreme verge of civilization. ”

“ In no branch of human activity is private enterprise for gain more mischievous than in transport, and in no field of transport has private enterprise shown itself more wasteful and futile than in air transport. During the war flying was everywhere a State enterprise, and enormous progress was made in every development of air science. ”

“ On the other hand, an airline organized without [196] regard to an external income is in a position to expand along with the demands for service. If the traffic becomes great enough to require more or bigger planes, a larger profit ensues, instead of an increased subsidy being required or the fare being raised to hold down the demand. ”

“ The construction and perfection of a commercial aeroplane, a machine which can be used for the transport of passengers, mails, and goods, represents largely a question of time and of money.108 Technical problems still need to be solved. But none of them are insurmountable. All should be overcome by an expenditure of money and in the process of time—granted of course that research is directed upon the right lines. A sufficient amount of money for experimental work, which in aviation is very costly, was one of the prime difficulties before the war. Capitalists were chary of aviation ”

“ Flying will become a business, a trade, and the advantages derived from it for industrial purposes will be wonderfully great. New channels of employment will be opened to thousands, yes, millions of starving fellow-beings. A new era will be inaugurated in history; and great as has been the destiny of our race, it will be quite outlustred by the grandeur and magnitude of coming events.
Traveling at a speed of over one hundred miles an hour, distance will become comparatively annihilated. ”

“ Q Hey, Ari. Continental Airlines announced this morning that it's cutting 20 percent of its flight schedule, laying off 12,000 people, which is about one-fifth of its work force. Is the President concerned that the country is inevitably headed for a recession, at least in the short term? MR. FLEISCHER: You know, that's a question that I think only economists can answer. ”

“ It is even harder to accept the decision because the only reason we are given for it is that we don’t have a million dollars. We never had a million dollars and we never needed a million dollars to perform our operations, but we do have almost all the dollars we started with. We feel that we have successfully demonstrated that an airline can be kept going, at a profit, if hard work, ingenuity, and a desire to make a profit are substituted for lavish spending of other people’s money. ”

“ This secured, there are many interests that might be fostered to the great profit of both labor and capital. How to induce capital to employ labor is the question. The subject of cheap transportation has occupied the attention of Congress. ”

“ But as it was, business men, who are quick to form conclusions, said that people would never be induced to pay to see aeroplanes fly. But here they failed to reckon with the fact that, though public interest in flying has been of very slow growth, yet at the same time it has been a steady and continuous growth. ”

“ Bill Boeing, for instance, might have continued to use the war-surplus Liberty-engined DH’s indefinitely, had not competition for the air-mail contract forced him to risk a low bid and then build new aircraft to meet his own standards. And so price competition, which many were beginning to think was cutthroat and destructive, was over-all, the key to progress in aeronautics.
The engine manufacturer, for instance, must experiment with new ideas, conduct research into strange fields, and come up with something [Pg 111] so economical that the airline operator can’t get along without it. ”