CARRIERS: Freight by Air?

A strange thing about the young U. S. airline business is that one of its great potential fields of development is controlled by its elderly competitor, the railroads. Air express, by contract with the air lines, is a monopoly of Railway Express Agency. And Railway Express Agency is owned lock, stock & barrel by 70 railroads, which have lost some 10% of their Pullman passenger business to transport planes. With all the passenger and mail business they can conveniently handle, U. S. air lines have paid little attention to express, are glad to pay Railway Express Agency a commission of 12½% and costs amounting to about 20% additional on all the express it brings in. An airline orphan, express is bound by contract never to fly at less than twice the railroad rate. Actually air express rates are five to seven times as high as railroad rates. Result: there is not a single all-express plane flying on U. S. airways today—so no air line can carry a bigger package than it can cram through the passenger door of a DC-3.

For several years this has made less than no sense to oldtime Flier-Designer-Manufacturer Grover Loening, famed for his Navy amphibians of the ’20s. Months ago, full of the profitable all-freight flights of T. A. C. A. in Central America, of K. L. M. in Europe, of the U. S. Army Air Corps (which delivers engines, propellers, etc. by aerial freighter), Grover Loening set out to convince U. S. air lines they should have their own express-freight corporation. He got nowhere until July 1939, when Railway Express Agency, seeking to formalize its monopoly of the business, suddenly asked CAA for a certificate of convenience and necessity as an air carrier. Apprehensive, the air lines protested, were joined by Grover Loening in an able brief on his own hook. Result: Examiner F. A. Law recommended the application be refused.

Last week, while air lines were waiting for CAA’s final decision, top-flight air transport men who went to the National Aviation Forum in Washington to meet old friends, hear speeches, were not surprised to find the name of Grover Loening on the list of speakers. Sitting in the Department of Commerce auditorium, they saw toothy Grover Loening square off behind the lectern, lay down his spectacles, and tell them what they were missing.

Expressman Loening pointed out that for the year ended June 1939, U. S. air lines did a gross business of over $47,000,000, got less than 3% of it from express. Holland’s K. L. M. carried almost ten times as much on a ton-mile basis as big Eastern Air Lines. T. A. C. A., lugging everything from pencils to mining machinery through Central America in antiquated Ford “tin geese,” carried more than twice the freight load of all U. S. domestic lines.

The U. S. rates, cried Grover Loening, “work out at so high a price that it costs just as much per pound to ship a pair of shoes as it does to ship your wife. But with this difference, the box of shoes does not need a stewardess, or heat, or soundproofing or comfortable chairs, cargo needs no electric lights, no toilets, no lunch, and no fancy advertising promotion, elaborate ticket office or copilot. . . . The most important thing is to get the rate down, and at once, and this cannot be done under the present setup.”

To get the rates down, Grover Loening had a plan which he had set forth in bookkeeping detail in his brief to CAA. First step to air-express service, said he, is air-express planes: efficient freight-luggers built without the doodads of passenger craft, thus capable of carrying a bigger payload on the same horsepower. Airline men gasped when he first said that 345 8-ton airplanes could carry all the express now handled by the railroads, gulped when he figured out for them that a fat profit could be made at rates 1½% times rail rates. Urged by Loening was a corporation capitalized at $2,000,000 to $5,000,000 (and 51% owned by the lines), to start out with 50 ships at $100,000 each (financed by equipment loans), a collection system that included pickups by lighter planes from suburban areas.

Slow as U. S. air lines have been to go after the Loening plan, many an airline executive could see a lot of future sense in it last week as the U. S. started working toward a warplane production of 50,000 annually. For when the drain of war production is over, many a factory will desperately need a new market for ships. Air-express planes may be an answer.