The largest commercial airline in the world.
The Air Mail Act of 1925, championed through Congress by Pennsylvania congressman Clyde Kelly, mandated the U.S. Post Office to award airmail contracts to private companies. These contracts served as an incentive for the formation of numerous fledgling airlines. Among the first successful bidders were four companies—Boeing Air Transport (BAT), Pacific Air Transport (PAT), Varney Air Lines, and National Air Transport (NAT)—that would later merge to form what is now United Air Lines. One of these companies, Varney Air Lines, successfully bid on Contract Airmail Route 5 (CAM 5), from Pasco, Washington, to Elko, Nevada. United celebrates as its birthday the date on which Varney began operating, April 6, 1926, making United the oldest airline in the United States.
United Air Lines was not officially formed until March 28, 1931, when it was incorporated as a management company designed to coordinate the activities of its subsidiary airlines. The addition of National Air Transport in 1930 allowed United to operate the first true transcontinental air route, from San Francisco to New York. The resulting company united the individual airlines into a major power in the air transportation industry.
The driving force behind United Air Lines was William Boeing, whose Boeing Air Transport had in 1929 changed its name to United Aircraft & Transport Corporation (UATC). Under Boeing’s leadership, UATC acquired a number of additional companies, including Pratt & Whitney, Hamilton Standard Propeller Company, and Chance Vought Corporation. As a result, United became one of the three large conglomerates that came to dominate early commercial aviation. Boeing’s manufacturing prowess allowed United to address one of the major problems caused by the merger of the four airlines, each of which used a different type of equipment. United standardized its fleet by purchasing fifty-nine Boeing 247’s. This radical Boeing design employed Pratt & Whitney engines and Hamilton propellers. At the time, it was the one of the largest and fastest transport planes in service, carrying ten passengers at a speed of 160 miles per hour. Because Boeing aircraft was a part of the United family, no other airline was allowed to purchase the 247. Thus, United alone operated the most advanced design aircraft in the world, until the Douglas DC-2 arrived on the scene in 1934.
Because passengers were few and flying was expensive, the survival of early airlines depended on the winning of government airmail contracts. Airlines relied on mail contracts that began at three dollars per pound for the first one hundred miles and thirty cents per pound for each additional one hundred miles. In 1929, airmail contributed almost 95 percent of United’s revenue. The rates were modified in 1930 with the passage of the Air Mail Act of 1930, also also known as the McNary-Watres Act, which amended payment based on aircraft capacity. The postmaster general, Walter Folger Brown, had a vision for the air transportation system in the United States. Convinced that only well-established, well-financed companies such as United should receive airmail contracts, he held a series of meetings in Washington, D.C., at which he awarded the contracts. Because he only awarded contracts to certain airlines, these conferences came to be known as the spoils conferences. United participated in these conferences and was awarded the northernmost transcontinental route, which it had been operating since 1930.
After the Republican Party lost the 1932 presidential election, Walter Folger Brown was replaced as postmaster general, with a devastating effect on the airline industry. The Hoover administration had been very favorable to business interests and had supported the airline cartels through the awarding of lucrative mail contracts. Brown had openly favored large companies at the expense of the smaller airlines.
With the election of Franklin D. Roosevelt, this support vanished. There was an outcry in the press about political favoritism and collusion in the awarding of airmail contracts. There were also a number of disgruntled airline owners who had not been invited to the spoils conferences and did not receive mail contracts. In response to these complaints, a committee was established to review the process of airmail-contract awarding. Although this committee, chaired by Senator Hugo Black, found little that was illegal and no evidence that Brown had violated any laws or profited in any way from his decisions, Roosevelt ordered the cancellation of all existing airmail contracts.
On February 9, 1934, the contracts were cancelled, and on February 20, 1934, the Army began flying the mail. This was disastrous for the airline industry. United president William A. Patterson ordered that the airline continue operating even though projected losses were estimated to be $300,000 per month. The first-quarter losses totaled $852,000. The airline and its 1,400 employees were in dire straits. The airline’s stock suffered, dropping from thirty-five to fourteen points.
It soon became obvious that the Army was not capable of flying the mail. There was outrage over the deaths of twelve army pilots in fewer than two months. The Post Office responded by advertising for new bids on most of the precancellation routes. No company that had participated in the spoils conferences was eligible to bid. United was allowed to submit bids on the condition that three executives who had been at the spoils conferences resign. A technicality in the original mail contract, which had been issued under the name of Boeing Air Transport rather than that of United, made United eligible. In April, 1934, Patterson submitted bids for all of United’s precancellation routes and won back all but one.
Additional difficulties soon arose when Congress passed the Air Mail Act of 1934, which prohibited airlines holding mail contracts from being connected with other aviation-related enterprises. This, in effect, meant that the four airline operating divisions of United had to be separated from the parent company. This resulted in a major restructuring of the organization. United Air Lines Transport Corporation (UALTC) was formed on July 20, 1934, combining the four subsidiary airlines into one organization, which was totally independent of the nonairline subsidiaries.
The separation from the cartel actually had some hidden benefits for United. Because it was no longer connected with Boeing, United was free to purchase aircraft from other manufacturers, allowing the airline’s purchase of the Douglas DC-3, arguably the most successful airliner in history. This aircraft allowed United to develop its passenger-carrying potential and to reduce its reliance upon airmail contracts. United was also instrumental in working with the Douglas Aircraft Company to design the DC-4 and later ordered twenty of the four-engine aircraft. However, World War II intervened before United could take delivery of these new airliners. United did not operate the DC-4 commercially until 1946, when it received twenty-five aircraft.
United, as did every other U.S. airline, served in the war effort by providing transport services to the government. In an effort to separate the military role from the commercial role, a subsidiary, the United Air Lines Victory Corporation, was formed. At the end of the war, Patterson ordered an audit and discovered that an excess profit had been made. United submitted a refund of $296,000 to the government.
United played a major role in air transport services during the war, flying more than 50 million miles and carrying 156,000 passengers and 18,000 tons of freight. In addition to its transcontinental domestic routes, United also operated in Alaska and across the Pacific Rim. The company undertook additional tasks, such as the training of thousands of ground crew and flight personnel for the Army and the Navy. It modified thousands of military aircraft, primarily Boeing B-17’s, at its Cheyenne, Wyoming, maintenance base. By the war’s end, United had modified almost 6,000 combat aircraft.
In addition to military airlift responsibilities, United maintained a commercial schedule with what remained of its DC-3 fleet. By 1944, domestic passenger load factors exceeded 95 percent. By 1946, United was operating seventy-seven DC-3’s and twenty-five DC-4’s. The company required increasingly larger and faster aircraft, and in 1946, placed an order for thirty-five pressurized DC-6’s, of which it eventually had a total of eighty-eight. In order to service long-haul routes, particularly the San Francisco-to-Hawaii route, Douglas DC-7’s were ordered.
Total employment at United increased to over 16,000 by the end of 1946. Within two years, however, the postwar boom had ended, and the airline was forced to reduce employment by 25 percent. Despite the fluctuating economy, United strengthened its route structure by adding service to additional cities throughout the country. After an unsuccessful merger attempt, United purchased a Los Angeles route from the financially troubled Western Air Express in 1947. In 1950, United received a Los Angeles-to-Hawaii route, eventually displacing the once dominant Pan American Airways.
Prior to World War II, United had been the second-largest U.S. airline, behind American Airlines. This situation would change on April 3, 1961, when United acquired Capital Airlines. The acquisition was the largest airline merger in history up until that point, and it transformed United into the largest airline in the world, with 264 aircraft and more than 30,000 employees. United’s route system exceeded 18,000 miles, serving 118 cities. The merger also moved United deeper into the jet age by transferring ownership of Capital’s jet and turboprop aircraft.
Realizing the need for jet-powered transport, in 1955 United placed an order with Douglas for thirty DC-8’s. The cost was $175 million. By the late 1960’s, United was operating more than 270 jet aircraft, including 150 Boeing 727’s. The Boeing 737 was ordered in 1963.
As efficient as the Boeing 737 was, it presented a major problem for United. The aircraft was designed for a two-person crew, eliminating the position of the flight engineer. The pilot’s union, however, was unwilling to accept the elimination of the third crew member position, arguing that it represented a compromise in safety. Management countered that the cost to the company of the third crew member would be $6 million per year. Negotiations were unsuccessful, and a trial using the three-person crew was initiated. Arbitration was unsuccessful, and the three-person crew experiment was extended. This was the beginning of a series of labor-management troubles that would plague United for decades.
By the close of the initial phase of the jet age in 1969, United was carrying 30 million passengers per year. At the same time, another technological breakthrough occurred in the form of the wide-bodied jets, the Boeing 747 and Douglas DC-10. The years between 1966 and 1969 were extremely profitable for the airline industry and especially for United. Profits exceeded $200 million for the four-year period. In 1969, United opted to purchase the Douglas DC-10 wide-body transport, which seated 250 passengers. This was United’s entrance into what has been called the second jet age.
The profitability that had accompanied the original jet age was conspicuously absent from the second. Economic problems, from which United was not immune, plagued the industry. In 1970, United posted a loss of $46 million. Government insistence on lowering passenger fares culminated in the passage of the Airline Deregulation Act of 1978, which changed the face of the industry and had serious consequences for United. Despite its problems, United continued to expand, receiving permission to service Tokyo in 1983. In 1985, United purchased the troubled Pan Am’s Pacific division. By 1987, United had established six hubs and carried 2.5 million passengers. By 1990, United had carried 40 million passengers and had become a truly global airline, with around-the-world service.
Despite these successes, trouble was on the horizon. Increasing fuel prices, low-cost competition, and fears of terrorism led to a revenue loss of $322 million in 1991, followed by a $400-million loss in 1992. More than 60 percent of United’s routes faced competition from low-cost carriers. United’s labor-management problems also continued, with two of the most bitter strikes in the history of the airline industry. Cost-containment policies initiated by management finally resulted in the approval of an employee-ownership plan in which the employees purchased 55 percent of the outstanding stock. This agreement made United the world’s largest employee-owned company.
The new United negotiated partnerships with other major airlines that became known as the Star Alliance. In October of 1994, the Shuttle by United began operating along the west coast and in June, 1995, United introduced the first Boeing 777 service. By 1999, United was operating 612 aircraft flying 125,372 million revenue-passenger miles with total revenues of $1,358 million. United had entered the new century as the world’s largest airline with ambitious plans for further expansion. A proposed merger with US Airways in 2001, however, was terminated following an antitrust investigation by the U.S. Department of Justice.
United’s plans were dramatically shaken by the tragic events of September 11, 2001. On that morning, four commercial jets, two of them from United’s fleet, were hijacked by Islamic fundamentalists and then crashed. United Flight 175, a 767 out of Boston’s Logan Airport, was flown into one of the Twin Towers of the World Trade Center in New York City, causing the building to collapse a short time later. United Flight 93, a 757 out of Newark, New Jersey, went down in a field near Pittsburgh, Pennsylvania, when passengers heard about the attacks by phone and chose to fight the terrorists. Thousands died on the planes and on the ground.
The U.S. government ordered a national ground stop until the situation could be assessed. When commercial flights resumed later that week, air traffic had lessened considerably. The loss of revenue over the following weeks forced United to lay off approximately twenty thousand employees, 20 percent of its workforce. President George W. Bush signed a multibillion-dollar emergency aid package, of which United expected to receive eight hundred million dollars. The measure also limited the airline’s liability in any federal lawsuits resulting from the hijackings. Nevertheless, the future of United Air Lines was placed in doubt.
Christy, Joe. American Aviation: An Illustrated History. 2d ed. Blue Ridge Summit, Pa.: Tab Books, 1994. A well-written overview of aviation in the United States. Davies, R. E. G. Airlines of the United States Since 1914. Washington, D.C.: Smithsonian Institution Press, 1998. An extremely well-researched, well-written, and, arguably, seminal work on airline history in the United States. Johnson, Robert. Airway One. Chicago: United Airlines, 1974. An excellent overview of United Airlines including many details of corporate history and anecdotes.
Airline industry, U.S.