The United States aircraft manufacturers were heavily dependent upon the US Government for their business during the 1930s. Government sales were often the key to success during the industry’s infancy of the 1910s and 1920s and later their survival during the 1930s Great Depression years.
Post World War I
The end of World War I saw United States aircraft government sales declined dramatically as orders were cancelled with no other government procurements in the offing. Unlike their European counterparts the United States in the 1920s did not subsidize the nascent commercial airline industry. Additionally, European governments continued military aircraft development and procurement post World War I.
Air Mail and the Rise Of Commercial Airlines
Although not initially seen as significant as commercial airline subsidies the US did subsidize air mail where manufacturers such as Boeing were able to survive the interwar years. In 1927 Boeing won the Chicago to San Francisco air mail route. Their bid was a third lower than their competitor, Western Air Express. But Boeing based their bid on not only carrying the mail but using these routes for paying passengers as well. Thus, Boeing figured out how to springboard air mail delivery service into a commercial airline business. Other airframers and airlines soon followed suit and a thriving industry emerged.
Even without commercial airline subsidies United States aircraft manufacturing grew annually by 74.5% from 1923 (263 units) through 1929 (6193 units). However, the Great Depression reversed that trend with an annual growth rate of -29.6% from 1929 (6193 units) through 1933 (1324 units). By the late 1920s the US military market by dollar volume was larger than the commercial market.
In 1928, the last full calendar without any great depression impacts, 3,582 civil aircraft were sold valued at $17,194,000. During the same year 1,219 military aircraft were sold valued at $19,066,000. With the onset of the great depression both the military and civil markets plummeted. The military market over the next eight years average 60% of their 1928 total units sold whereas the civil market only averaged 34% of their 1928 total units sold. By 1936 the military market recovered to 94% of their 1928 units sold level while the civil market was just starting to rebound and was at a 44% level of their 1928 units sold.
Late 1920s profits on air mail and military sales soared resulting in public outcry. Pratt & Whitney made 36% on Navy aircraft and Boeing’s profits ranged up to 25% on Army and Navy procurements. Congress acted with the Vinson-Trammell Act of 1934 limiting profits on Navy orders to 10 percent. It took another five years before Congress limited profits on Army aircraft at 12 percent.
Late 1930s Market Valuations
By 1937 ninety-eight US aircraft manufacturers competed in the market space. However, the military market required higher levels of performance, engineering, manufacturing complexity, and investment. Thus, less than a fifth of the ninety-eight manufacturers produced military aircraft. The military market in the late 1930s accounted for 70% of the marketplace valuation and the larger aircraft manufacturers became more dependent upon military sales.
Aircraft Manufacturers Percentage Sales to US Government 1931-37 Data
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Source: Holley , Irving Brinton, Jr. “United States Army In World War II Special Studies Buying Aircraft: Materiel Procurement For The Army Air Forces.” 1964, Page 22, Center of Military History United States Army, Library of Congress Catalog Card Number: 64-60000, https://history.army.mil/html/books/011/11-2/index.html, Data accessed on July 12, 2022
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