Introduction Statement of the
Problem Marketing Finance Profit Potential Curtiss-Wright
Management Governmental
Context Conclusion
Air-IPRO
Curtiss-Wright Corporation
Final Report
Table of Contents:
Introduction
Statement of the
Problem
Marketing
Finance
Profit Potential
Curtiss-Wright
Management
Governmental
Context
Conclusion
Introduction
The Illinois Institute of Technology introduced, during the Fall 1997 semester, a new program into the undergraduate curriculum. The program, known as the Inter-Professional Project (or IPRO), is designed to bring together students from different major degrees to work, as a team, on a common goal. In the university's words, IPRO is "InterProfessional projects allow students to learn teamwork, leadership and project management skills, while working in multidisciplinary teams on a project sponsored by industry. The projects go beyond the purely technical to consider ethical, environmental, economic, public policy and legal issues." They are a way for students to "Learn the way you'll work". IPROs are independently structured with students from all class levels and majors. There are no set course meetings other than what is established by the newly formed group as necessary to complete the project.
IPROs for the first semester were all technically oriented. Most of the colleges and departments within the technical side of the university sponsored a project. In the Spring 1997 semester, the university allowed the Lewis Department of Humanities to sponsor a project. This project (the first of its kind) became known as Air-Ipro. The team was lead by Dr. Paul Barrett, a history instructor, at the university. The team was comprised of nine undergraduate students majoring in Electrical Engineering, Computer Engineering, Aerospace Engineering, Product Design, and Computer Science. The team also had one graduate student who lead the technical sub-team, and one undergraduate student who developed and maintained a page on the World Wide Web detailing the progress and events occurring over the course of the semester.
The goal of Air-Ipro was to design, market and sell (for a profit) a jet powered transport using late 1940's to early 1950's technology. The group assumed the role of engineers and marketing professionals employed by the Curtiss-Wright Corporation. The financial, plant, and technical assets of this company were the basis of the group's research and planning. The idea was to 'become' Curtiss-Wright during that period in time and attempt to accomplish the goal. The group quickly separated into two teams: the technical group, concerned with the design and physical production of the aircraft, and the non-technical group, which was concerned with other areas of aircraft development such as marketing, financing, company management, and government regulations. Once separated into two teams, the project was able cover all aspects that a company today examines before embarking on a massive project such as this. The nature of the project meant that the two groups could not work completely independent of each other and required frequent interaction and information sharing on a weekly basis. Some of the areas that were researched, and thus are discussed in this paper, include: available technology such as engines and air frame materials, company assets and available financing, the potential for profit on the part of the company (Curtiss-Wright) and its customers (airlines and military), corporate management, available facilities such as runways and airports, and government regulation.
This paper serves as a supplemental document to a presentation (refer to presentation slides as Appendix F) made before a simulated panel of stockholders. In reality, the panel is a group of university faculty and staff who evaluate the performance of the group and assign a grade based on the final presentation. Included with this report are comments from the students and professor on the successes and merits of the project as well as the difficulties encountered and the drawbacks of a such a project.
Statement of the Problem
As mentioned earlier, several constraints were placed on the project simply by the selection of Curtiss-Wright as the model company. During the late 1940’s and early 1950’s, the Curtiss-Wright company underwent a series of changes that led to the company’s exit from the plane-making business in 1953. Curtiss-Wright had access to technology that if produced and marketed could possibly have saved the company. The engine used in the group’s design was superior to all jet engines of the time. Its direct descendant is still in use today on British Airway’s Concorde. Why a company with access to this caliber of products could not survive is interesting, but not the direct focus of this paper. Instead, a solution to the original problem of designing a jet transport in the late 1940’s which could have saved the Curtiss-Wright company, is the topic of the paper.
The solution is the C-W Conqueror; a jet engine transport capable of carrying up to 70 passengers at 470 miles per hour a maximum distance of 5500 miles. The aircraft meets or supercedes the performance characteristics of every aircraft in operation at the time. A transport such as this would revolutionize commercial aviation. It was faster, had higher range and payload capabilities, and was cheaper to operate that it’s direct competition, the de Havilland Comet. Appendix A contains the complete technical specifications of the C-W Conqueror.
A project of this nature has obvious implications. Curtiss-Wright faced major aircraft production plant closures during this time period. As a direct result, thousands of skilled workers were laid off, and the company was terminated. The development, production, and marketing of the C-W Conqueror might have delayed, if not prevented the closure of the plants, lay-off of the workers and cessation of operations by the company. The following sections describe in detail what would have been required of the Curtiss-Wright Company to successfully turn itself, as a company, around and resume its pre-World War II position as the producer of superior aircraft.
Marketing
Existing Market Conditions
There are three aircraft markets in commercial aviation: short range, long range, and international. The C-W Conqueror’s efficiency at longer ranges dictate that it would be best suited to be utilized in a long range domestic or international service. 110 million dollars were brought in by the major U.S. based international airlines during 1950. (Straszheim, p. 12). It was predicted that this trend will increase with time as more people realize the importance (economic, business, communication) and convenience of air travel. The short-range service was not targeted because turbo-prop aircraft were more efficient for short range service. It would not be economically viable to operate the Conqueror for distances under 300 miles.
At this time (1950-51), everyone (air carriers) seemed to think that commercial jets could not be operated economically for some time to come (Caves, p89). The president of National Airlines declared: "We do not plan to buy jet transports until one is available with which we can make money, unless we are forced into purchasing uneconomical equipment by the competition." American Airlines president voiced the view that United States' airlines should wait for a jet with lower costs than the Douglas DC-6B and with a transcontinental range, specifications not met by the D.H Comet I. Further, both Ralph Damon (refer to Management Section) and Robert E. Hage (then a senior group engineer for Boeing) stated for various reasons that jet engine transports would could not be operated with any economic gain.
The characteristics of the competition were examined closely to seek the ones upon which the Conqueror could improve. The Lockheed Super-Constellation had a range of 4,890 miles with a cruising speed of 331 m.p.h. It carried 48 passengers and was considered to be the leading aircraft in its field. The maximum speed of the DC-6b, which was the primary competition for the Conqueror in the United States, was 310 m.p.h., but it only had a range of 3000 miles. The British Comet topped out a cruising speed of 470 m.p.h. with a range of 1,750 miles. The Comet was considered the fastest and most technically advanced aircraft at the time. (Thayer p.85) The Conqueror had to improve upon these speed and range parameters in order to revolutionize the market. It was successful in this endeavor. Air carriers based in the United States would buy the Conqueror because it was the best aircraft available at the time.
The public wanted to get to their destinations faster. They wanted fewer stopovers and less time in the air. With the top four international airlines controlling 55% of the industry (Cohen, p. 48), the Conqueror would meet the requirements of the public while catering to the long range carriers, specifically the top international airlines, which controlled the majority of the market.
Potential Customers : Major Airlines - Domestic
Air carriers based in the United States had both domestic and foreign destinations. As the C-W Conqueror is proven to be most efficient over long distances, it would be marketed to airlines which offered international destinations as well as transcontinental flights within the United States. In 1951, there were six major domestic carriers that served international routes (Northwest, TWA, Braniff, Eastern, Pan American, and National). These six carriers had a total of 140 aircraft, each having an average of 46.6 seats and an average groundspeed of 224 m.p.h. (Straszheim, p.12) The Conqueror, with its 470 m.p.h. cruise airspeed and 70 seat capacity, would obviously revolutionize this market. As for the domestic routes, 71% of the passengers traveling within the United States, traveled distances of 1,000 miles or more (S. G. Tipton, Air Transport Association to U.S. Senate committee on foreign and interstate commerce, Hearings, Revision of the Civil Aeronautics Act, 1954, p. 960). This is the point at which the C-W Conqueror becomes efficient enough to compete with the propeller driven aircraft, but with its much faster speed and higher passenger capacity, it would outperform any aircraft operating in the current market.
The Civil Aeronautics Board would not allow price competition, and thus indirectly forced the airlines to compete by providing better service to their customers. (Vietor, p.4-27, 431) The Conqueror can provide faster and better service, which in turn will attract more customers to the air carrier which provides the Conqueror to its passengers. In a market where prices can not attract customers, the Conqueror and its superior capabilities can. Pan American Airways, an air carrier with extensive international routes, great size, substantial profitability and focus on product and quality would be an ideal target as it was frequently the first carrier to order a new design. It would in effect, set the standard for the remaining airlines to follow as it had for the previous 20 years.
Potential Customers : Major Airlines - Foreign
The International Air Transport Association (IATA - See Regulation : The IATA) encouraged air carriers to meet the public’s demands. At the time, people wanted to fly farther distances in a shorter amount of time. In 1948, the number of flights conducted across the North Atlantic was approximately 120 per week (Cohen, p.86). In order to assist the airlines in serving their customers, the IATA usually passed any proposed amendments made by the airlines, and granted new certificates or changes in certificates with relative ease. Previously, a new route certificate had to be approved and issued if something as simple as a single stop were removed from the original certificate. Several cases taken from the United States’ Civil Aeronautics Board’s reports substantiate this claim.
1) EL-Al (Israel Airlines Limited) wanted to change its European route to provide faster service to the Netherlands, Belgium, Luxembourg and Turkey. The resulting route was one stop shorter than the original. The certificate was approved six days after filing. (CAB Reports V. 11, p209)
2) British Overseas Airways Corporation filed for an amendment to its route certificate to allow it the option of different flight termination points.
3) Pan American Airways, Inc., filed for and was granted the termination of service on its Cat Cay Bahama Islands route. Pan American Airways filed this because it was carrying only 6 passengers per flight and was loosing money which would have to be made up through federal air mail payments. This demonstrated an increasing willingness on the part of the Board to permit service adjustments in keeping with passenger demand.
Potential Customers : United States Government
The United States’ Government, in particular the Department of Defense and all branches of the military, might be Curtiss-Wright's largest customer and partner on the Conqueror project. The United States’ military turned to Curtiss-Wright to supply many of its warplanes during the First and Second World Wars, and it would have good reason to have faith in such a loyal and established supplier. The Berlin airlift of 1949 and the outbreak of the Korean War in June of 1950, alerted the government to the need for a large, fast fleet of troop transports. The Conqueror is such a transport.
The aviation industry urged government to support the development of the jet engine. On May 17, 1950 H.R.8536 was introduced. This bill called for government support in the "testing" and "minor experimental modifications" of aircraft, with an annual budget of 12.5 million. In a hearing on August 7, 1950, Admiral DeWitt C. Ramsey, president of the Aircraft Industries Association of America, INC in Washington D.C., testified on behalf of the bill. He stated, "In its report published in March 1948, the Congressional Aviation Policy Board stated: ‘The cost of design and prototype development of modern air transport types is so high that neither the manufacturer nor the air carriers can today afford to invest the sums involved. Transport-type aircraft of materially better operating and utilization characteristics than any transport now being built are needed in order to provide the low operating cost and high performance that will make possible commercial employment for large numbers of such aircraft.’"
Admiral Ramsey thus urged development of aircraft such as ours as a pressing defense necessity. Support for the bill and government assistance in the production and purchasing of new aircraft continued in Santa Barbara, California, where the board of governors of the Aircraft Industries Association, consisting of the chief executives of the leading manufacturers, arrived at a common position on the question. "Accordingly, the Industry recommends that the Government embark upon a program of purchasing prototypes of advanced aircraft. We feel that such a program should be administered by an existing Government agency." (H.R. 8536)
House interstate and foreign commerce committee chairman, Congressman Lindley Beckworth (D. Texas), simply wanted to know why the British were already three years ahead in producing jet aircraft technology, and how they did it with their limited resources for such endeavors. About the same time, the Air Force proposed a bill that would provide funding for a jet powered transport. The support the government voiced for jet technology is there. The Cold War was raging ‘full steam ahead’, and the Korean War had just begun. This was a time in American history when the United States had to be second to none in any scientific or technology related field and the government would ensure that the country remained there.
Finance
Curtiss-Wright : Company Assets
Curtiss-Wright was financially well off at the start of the decade. The company had just over $90 million in cash, which could have been raised to over $120 million if most of the company’s assets were sold. Shipments for Curtiss-Wright aircraft were up 90% over the previous year (1950), but profits were down $600,000 from $7.5 million over the same period. This was attributed to higher taxes, $19 million spent for a new jet production plant (900,000 square feet at Woodridge, Cladwell and Garfield, NJ), and a backlog of jet engine orders ($1.25 million compared with $.34 million). Despite the declines in profit, the company was in excellent financial health and could easily afford the Conqueror project.
Curtiss-Wright : Production Costs
Two basic resources were used in determining the cost of producing the plane: the Illinois Institute of Technology’s Materials, Mechanical and Aerospace Engineering Department’s MAE 434 course notes provided by Mr. Peto and a 1974 RAND document entitled "Determining the Cost and Development of Aircraft". Equations used in this document are many and complex. Mr. Peto’s source is easier to use but did not account for many of the variables the RAND document does, such as inflation over a five year period, difficulty in obtaining parts, and in depth testing. However, a common finding from both documents was that the initial prototype would cost a great deal more, about 2.7 times more, than the production line models (i.e. costs will decrease after the prototype). The stages of plane cost are development, testing, and production. Each section has further breakdowns to help determine cost. The work for these calculations can be found attached to this document as Appendix C. Mr. Peto’s notes yielded a total cost of $2,074,282.53 while the RAND document showed a total cost of $2,342,049.17. The cost of a Comet is approximately $1,260,000 and the cost of a Super Constellation is $1,200,000. (All prices are sale prices and include the costs of testing, development, production, and profit.) The C-W Conqueror is competitive in its pricing for what it stands to accomplish.
Curtiss-Wright : Financing It
How does the company pay such a huge initial production cost? It would not need the money up front, but in monthly increments (Interview with Ms. Mary Carroll). It was decided that a five year financial plan was the best course of action. To determine the monthly cost, we used a financial plan provided by Prof. Prabhaker K. Tourk. Each month shows the company’s project-specific cash inflows and outflows. If the outflows are greater than the inflows, the difference is the amount of funding from outside sources the company would need for that month. If the inflows are greater than the outflows, then the company requires no funding and can roll that amount over to next months expenses.
Accurate calculation of the costs involved was difficult due to the many factors considered. Project cash inflows are generated from spin-offs of the project such as producing the engine under license from the Bristol-Siddeley Company, a new form of landing gear, and possibly, necessary modifications to airport terminals to accommodate the new aircraft. Once these spin-offs were produced and tested, these products could be sold to assist in funding the project further. Inflows are also generated by pre-production sales of the aircraft. Project outflows come from obvious sources such as purchasing materials, paying worker salaries, product testing, etc. The resulting plan is a general overview, but gives a fair idea of how much money is needed and when.
The question of how the cost of production is paid for still remains. Funding can come from a variety of sources. First, Curtiss–Wright must commit resources of its own to this project. It would take approximately 10% of the company’s operating budget (total funds spent annually for all production, advertisement, and management) to completely fund the project. Numbers were taken from a 1949 company financial report. Management would have to decide the amount of company resources used to fund the project. Another possible source of funding would be the United States government, specifically, the military. The C-W Conqueror would be the fastest, longest range plane in use. This has significance to the military as it is always striving to have the best available forces and equipment. Loans are another option. Curtiss-Wright’s long-standing, solid reputation as an aircraft manufacturer should address any concerns about the ability of the company to acquire loans. Despite some slowdown, the company’s financial situation is healthy and no reasonable banking institution would turn down a request for a loan. Pre-production orders for the aircraft from both industry and the government would further increase our credibility and financial standing.
Commercial Airlines : Acquisition and Operating Costs
Curtiss-Wright would sell the Conqueror for the average of 11% above cost to the airlines. The total for each aircraft would be $2,074,282.53. This price assumes Curtiss-Wright absorbs all costs associated with the initial development of the aircraft such as research, flight tests, etc.
Before purchasing a new plane (as with any product), the customer wants to know how much it is going to cost its new owner while being used. The operating cost of the C-W Conqueror was determined from a document entitled "Determining the Operating Cost of Aircraft", published by the Society of British Aircraft Constructors in 1949. Operating costs include all known overhead, depreciation, maintenance, and flight costs such as fuel, and crew salary. Calculations performed from the document produced an operating cost of 5.96 cents per passenger per mile for a typical flight from New York to London. Note that the given operating cost is for this particular route only; it will vary with other routes. Aviation Week (April 1953, p.72) quotes operating costs for other aircraft over the same route as high as 6.82 cents per passenger per mile. For the given New York to London route, this could be as much as $163,400 per one-way trip, assuming 50 passengers. With the C-W Conqueror carrying up to 70 passengers, the aircraft is clearly competitive in the international arena. For shorter length routes (typically short domestic routes less than 1,000 miles), the difference in operating costs between propeller aircraft and the C-W Conqueror increases, as the Conqueror is less efficient over short distances. The DC-6 (the most common propeller driven transport at the time) had an operating cost for a 1050 mile route of 4.8 cents per passenger per mile. (Frederick, Air Transportation, 141, 174).
Profit Potential
Curtiss-Wright
Curtiss-Wright is a healthy company, but lacks the vision necessary to continue as a profitable company. A new vision could increase profits while assuring a long-term future. Typical return rates on investment in business in the early 1950’s was about 11 to 12 percent. This equates to a $205,559 profit from the sale of each Conqueror. The company would need to sell 48 aircraft in order to generate enough profit to cover the initial production and testing costs.
The sale of aircraft is the primary source of profit for the manufacturer, but there are other sources than can be developed. One such source is the Curtiss-Wright-Dehmel Simulator. The simulator reduced the cost of pilot training by allowing the pilot to train on the ground (Aero Digest, Jan. 1950, p.32). A model would be produced for training pilots to fly the Conqueror. These simulators would be sold to all airline companies purchasing and operating the new Conqueror. Specific aircraft components, such as the landing gear, braking system and engine could also be marketed to other aircraft manufacturers. In addition, such items necessary for the operation of the aircraft or those which improved the efficiency of the airplane while on the ground, such as fuel trucks, passenger boarding ramps (jetways), and improved baggage handling systems could be developed, marketed and sold.
Profit Potential : Commercial Airlines
As may be expected, the profit commercial airline operators generate will come from the sale of passenger tickets. Industry averages in 1950 vary widely due to various factors such as new equipment surcharges and ticket agent discounts (CAB Reports, #266). The profits that the airline industry stands to make can be developed by taking two factors into account: 1) the published ticket price and 2) the load factor.
The ticket prices were set by the Civil Aeronautics Board (CAB) to provide the airlines with a 12% return on their investment (William O'Connell (CAB) to U.S. House, Airline Industry Investigation, 1949 p. 101). William O’Connell also stated that "It is not to be expected that the airline will be able to operate profitably at any rate below 5.5 cents per passenger per mile in the foreseeable future." The average charges for a domestic flight were 5.76 cents per passenger per mile while the international rate was about 6.8 cents per passenger per mile. (G. H. Frederick, Air Transportation, p.141, p.174 and G. H. Frederick, Principles of Air Transportation, p121.) Load factors (percentage of seats filled on flights) were about 68% for domestic flights, with the factor rising to about 80% for international flights. (Aviation Week 51 #24 December 12, 1954 p. 117).
From the above information, it is possible to determine how much profit the airlines can expect to see and when they can expect a complete return on their investment. Assuming a full load factor of 100% (70 passengers) for an international flight, and the established ticket price of $270 one-way per passenger for a New York to London flight (Aeurbach, p.869), each flight would yield a $777.00 profit per flight. This profit does not include the possibility of carrying freight. Such cargo operations would decrease the amortization period for the aircraft. A detailed calculation including all assumptions made can be found in Appendix C. Further, the amount of time it would take a carrier to see a profit can be found by multiplying the above profit by 14 one-way trips per week. This results in 3.66 years before the airlines would see a return on their investment. For the first class fares of $470.00 and a full load of 48 passengers, each flight would yield a profit of $1,1154.40. Making the same 14 one-way trips per week, the airlines would see a return in 2.5 years. The two cases are the extremes. The C-W Conqueror would be able to accommodate either method or a combination of the two methods to best suite the airlines. Factors such as increases in fares would increase profit, but would be offset by increases in fuel and maintenance costs.
Origin
Destination
Coach Price (First Class)
West Coast Honolulu $160.00 (241.75) New York Miami $58.00 ($78.70) Miami San Juan $64.00 ($96.70) New York London $270.00 ($470.00) Table I - Typical ticket prices for selected routes (Aeurbach, p. 870)
The CAB forecast in 1944 that "Airlines shortly after the war will be performing between 5-10 billion passenger miles a year". Curtiss-Wright predicted that a total of 60 million passengers would be carried each year by 1956 along with 110 million ton-miles of cargo. Air carriers posted their first gain of 6.1% (given as a return on initial investment) without the aid of government subsidy in 1949. In 1950, this figure increased to 11.2%. (Wolfe, p.114)
Curtiss-Wright Management
Existing Management
At the end of the 1940’s, Curtiss-Wright underwent a series of managerial changes. Unfortunately, this lead to the termination of the company’s aircraft making division. The current situation of the management of the company is important to the Conqueror because it is only with managerial support that a project of this size can be accomplished. Most of the information in the following section is taken from Robert W. Fausel, the former Assistant Chief Test Pilot and later Military Liaison Manager for the Curtiss-Wright Airplane Division. He wrote a book in which he interviewed a number of prominent former Curtiss-Wright employees to explore the demise of the corporation.
In 1948, T. Roland Berner, a dissident stock-holder and Wall Street lawyer, charged that Curtiss-Wright had outgrown it’s management’s abilities. Berner called upon the then Chairman of the Board, Guy Vaughn, and president, William C. Jordan, to distribute the company’s $75 million retained earnings. He also called for changes in order to "revitalize" management with new people and give stock holders more board seats. Vaughn refused Berner’s proposals and started a proxy war. By the end of April 1948, Berner had enough proxies to evict Vaughn from the company, but failed due to a technical error. At the same time, Curtiss-Wright lost a contract with the Air Force. This was unrelated to the proxy war, but an untimely incident none the less. In the Fall of 1948, Vaughn called in an investment banker by the name of Paul Shields to fix the problems the company was experiencing.
In February of 1949, Vaughn and two vice-presidents retired, and Shields bid for the takeover of the company, claiming that it should pursue "re-identification with actual plane-making" (Aviation week 50 #6 (2/7/49) pp. 13-14). At the same time, Berner was nominated to the board along with three new people. In March, the top management went on a barnstorming tour to seek stock holder support. Over 94,000 stockholders were appealed to. Most were concerned with the company’s assets totaling $76 million, and wanted more of a return on their investment. The management tried to convince its shareholders that the company was a research company. "Research costs money, and therefore it makes no sense to siphon off much of the company’s resources in dividends." (Business Week 3/16/49 p.96-99).
In the Annual Meeting on 20 April 1949, Shields became Chairman. President Jordan presented a well studied plan for corporate objectives based on interviews with prominent military officials and airline executives. His report was not well received: he threatened to resign if his plans were not approved. He resigned less than six days later. Shields promptly laid off 850 R&D engineers, many of whom were working on a Wright jet engine. His attitude: "let the Government pay for its own damn research and development"
Six months later, Roy T. Hurley of the Ford Motor Company was elected president. Shields described him at a Security Analysts Luncheon in January 1950, "Mr. Hurley has made a tremendous contribution to the company by the introduction of practical business methods into an industry that, in my opinion, has been dominated by development engineering thinking. The result is that manufacturing has been carried on very largely under the direction of the development engineers, who by the nature of their training are not businessmen: they are not profit-and-loss conscious. They have tremendous pride in their work. But we have attempted – and, I think, successfully – while taking the stand of businessmen, to use an approach that has stressed quality rather than quantity in development work’" At that same luncheon, Mr. Hurley remarked, "In general, along with that planning and scheduling, we are watching our operating ratios very carefully. By ‘operating rations’ I mean such things as the amount of floor space we occupy, and what is produced from every square foot of that space every month, as well as the utilization of our equipment, and its relation to manpower, our indirect labor ratio and apportionment of indirect dollars to our head count. All those ratios are being carefully watched. We are setting up our organization to enable management in the various divisions to be guided by the results. Frankly, I think Curtiss is out in front right now"
Many of the long-timers at Curtiss-Wright felt that Hurley was a major factor in the company’s demise. "In the 1950s Hurley appears to have developed for Curtiss-Wright an image as one of the country’s leading makers of jet engines and the one who was pushing hardest along new lines. But the results belie that image. Hurley worked from 1949 onwards to divest the company of experimental activities and the production of airframes, both of which he regarded as marginal activities". In the summer of 1950, Curtiss-Wright and its thousands of employees stood at a cross-roads. Hurley was leading the company to a path of short-term profit which would destroy the jobs of thousands and squander immense talent and resources. It is this fate from which the Conqueror could have saved the company and its workers. But only under a different, visionary leadership could the Conqueror become reality.
The Need for New Management
[A plea to the stockholders of the Curtiss-Wright Company in 1950]Ralph O. Damon has expressed some interest in leading Curtiss-Wright into the jet age through the Conqueror project. For those stock holders who entered the Curtiss-Wright community in recent years, a few words may help to explain why this is the leader Curtiss-Wright requires to bring the company back to its rightful place as the leader in American commercial aviation.
Mr. Damon was born in 1899. At 51, he is at the peak of his career. It has been a career which any aviation leader might envy. Beginning as a lathe operator for Curtiss-Wright in 1922, Mr. Damon worked his way through the ranks to chief engineer and, by 1930, president of our distinguished company. It was Damon's leadership which led Curtiss-Wright in the creation of the Curtiss Condor: the first real transcontinental transport. This four-engined wonder of its age spanned the continent with the first all-air service coast-to-coast. A few may recall how Mr. Damon led our engineering force in 1929 and 1930, testing the berths of this sleeper plane by jumping into them from every possible angle. Mr. Damon's enthusiasm for detail and his compelling dedication to the completion of a revolutionary aircraft should, in themselves, be sufficient to recommend this nationally known corporate leader as the man to bring Curtiss-Wright back to its appropriate position at the fore-front of commercial aviation.
But there is far more. Damon left our company in 1934 precisely because another corporation had invested talent and capital in the creation of a plane which revolutionized aviation. He went, not to our competitors, but to the airline industry. Ralph Damon led American Airlines between 1934 and 1942--the years in which American moved from 3rd to first among U.S. air carriers. Between 1942 and 1945 he led Republic Aviation in the creation and production of the P-47 fighter aircraft which rivaled the C-W P-40 in the war against Fascism. All of you know what Republic was before Ralph Damon. All of you must know what it is today.
But Mr. Damon remained dedicated to commercial aviation. After the war he returned to American Airlines as President. We now enter recent history. The battle with Juan Trippe and Pan American over Trippe's drive for monopoly in international commercial air transport is recent news. Almost single-handed, Ralph Damon turned back the monopolistic movement in international commercial aviation. When American Airlines rewarded him by simply selling its overseas division to Pan American, Damon left American and joined TWA, to compete against entrenched and un-imaginative management at American and Pan American by leading an "outsider" airline, TWA, to international status.
Everyone remembers Mr. Damon's performance during the necessary down-sizing of TWA in 1948-1949. His travels around the company's system, in which he identified what he called "productive work" from "dead wood" have become a business legend. Of the 7,000 persons Mr. Damon had to dismiss, 69% were middle managers. As a result, TWA is today the leanest, most productive airline in the industry--and the airline with the best labor relations in an otherwise troubled field.
Equally familiar is Ralph Damon's on-going struggle with Howard Hughes to introduce flexible coach-oriented travel to commercial aviation. His plan, as yet un-implemented due to regulatory restrictions, to combine coach and first class service on a single aircraft has been the talk of the industry for months. The combination of Ralph Damon and Curtiss-Wright is both ideal and natural.
The Curtiss-Wright Conqueror, if you, the stock-holders, choose to build it, will create the kind of revolution in air transport that Ralph Damon has been fighting for at TWA. His engineering background makes Damon an ideal leader for an engineering oriented project. His wide experience with Curtiss-Wright, from production worker to president, makes Ralph Damon an ideal chief executive for this critical period in Curtiss-Wright history.
We need --we require-- leadership that understands both engineering quality and the hard bottom line of business. We need someone who understands Curtiss-Wright from top to bottom: that is Ralph Damon. We need a man who takes risks and stands up to challenges whether from labor or from entrenched management. We need a man who sees air travel as a limitless horizon, one which Curtiss-Wright is suited, better than any other aviation company, to conquer.
The Conqueror, with it's astonishing power and flexibility, can transform commercial aviation. To make this possibility a reality, we could do no better than to retire the present, short-sighted, banking-oriented management and to seek out real aviation leadership.
We do not have far to look. Ralph Damon, one of our own, is the ideal man to lead Curtiss-Wright to its proper place as the leader in U. S. Commercial aviation.
Governmental Context
Regulation : The Civil Aeronautics Board
The Civil Aeronautics Board was created by the Civil Aeronautics Act after the original regulating authority, the Civil Aeronautics Authority, was transferred to the Department of Commerce in 1940. All economic duties and some of the safety concerns of the Civil Aeronautics Authority were transferred to the CAB. These duties included prescribing rates, issuing route certificates of convenience, decreeing regulations and maintaining standards of safety (maintained through the Bureau of Air Safety, which made recommendations for the CAB to implement), and investigating accidents. The CAB could also suspend certificates of operation at any time.
Airlines were required to file for a certificate in order to operate between given locations. Prior to 1946, competition between carriers on a single route was rare. The CAB restricted competition in part because federal air mail payments made up the deficits of carriers which lost money. However, after World War 2, some air carriers could post a profit without the need of the federal air mail payments. The Board realized that by allowing multiple airlines to serve the same routes, it would increase the level of service offered to passengers. The CAB regarded economic ‘soundness’ as a requisite for safety. For this reason, it established the certificate of operation system and a fee/rate schedule. Rates were proposed by the airlines and then granted or denied by the Civil Aeronautics Board. The Board forbade price competition between airlines, and indirectly forced the carriers to compete through better service.
But better planes did not necessarily mean greater profits. This was especially true when they were put in service after the competition had instituted equipment which appealed strongly to the public. Equipment decisions based upon competitive strategy are abundant. In the early 1950’s, National Airlines ordered what was considered to be an inefficiently small fleet of brand new DC-7s to match the competition from Eastern Airlines Constellation aircraft already in service. (Caves, p183) A little later, Western Air Lines secured long-range Boeing 707s to use on its short range routes in order to meet competition from United Air Lines. (Caves, p183) New aircraft were purchased and put into service because the public wanted faster and better service. Coach service had to be offered on some airlines because their planes operated a mere 30 mph slower than the competition.
Regulation : The International Air Transport Association
Economic regulation in the international arena was established by the International Air Transport Association. The IATA was comprised of member nations and airlines. All major domestic airlines serving international routes and foreign airlines were members of the IATA. Every year, the IATA held Tariff Conferences in which the fares for major air routes were set. Setting a fare required a unanimous vote of all members concerned with the route in question. The IATA could not possibly set the fare for all routes (several hundred), so it established the fares for major routes and left it up to the members to establish similar fares for the other routes.
In 1947 the economic regulation of the international airlines was based on three factors: 1) right of entry as governed by bilateral agreements, 2) frequency and capacity as determined by the airline and its government (this must be approved by the destination government), and 3) rate regulation rested with the airlines through conferences of the IATA and had to be approved by all.
All fares prior to 1948 were based on first class. In October of 1948, the IATA set an experimental coach fare in action. By September of 1950, this fare had been so successful that the rates for coach fares were raised from 4 cents per passenger mile to 4.5 cents per passenger mile. A coach ticket to London from New York would cost $166.50.
The Bermuda Agreement, the 1946 Draft, the 1947 Draft, and the Geneva Draft in 1947 were agreements of all IATA members on how to conduct international flights. Specifically the agreements dealt with the voluntary limit of the total number of seats (on all aircraft) available for international flights. Competition was the basis for this. The Agreements were established to dissuade the use of large capacity aircraft on routes where aircraft with much less seats were operating. Capacity agreements are one hurdle the high density C-W Conqueror must face. As it wins acceptance, however, the aircraft may render all such agreements obsolete.
Safety and Infrastructure : Safety
Both the Civil Aeronautics Board and the International Air Transport Association established regulations to ensure the safe practices of all air carriers. The IATA set regulations which were less stringent than those set by the CAB, so all domestic air operations essentially followed those regulations set by the CAB. The regulations governing manufacturers were fewer and less stringent than those affecting airlines. Those that concerned the manufacturer involved the range of the aircraft (fuel capacity) and to a lesser extent, the life of the aircraft. Aircraft range was established based on the route taken. An aircraft had to have enough fuel on board to 1) reach its destination under a sustained 50 mph headwind, (many planes have not made their destinations due to this very reason), 2) fly to the most distant alternate airport, and 3) loiter at that alternate airport for at least 45 minutes. This calculation is different for each route, as it depends on the distance to the alternate airport, which varies from route to route. Given the typical New York to London route, the C-W Conqueror could make the trip with Shannon, Ireland as its alternate and still have two hours of fuel left.
The life of the aircraft was set by the Civil Aeronautics Board at seven years. This ‘life’ was based on depreciation. Aircraft technology, which was growing at the rate of a new advance about every seven years, played a key role. Aircraft became obsolete every few years. The Conqueror would be technologically viable for at least the given seven years, if not longer, if the plane were to be updated. The Conqueror could be expanded with periodic updates such as new, more efficient engines, and airframe enhancements (wide body, longer body, etc). With these updates, the CAB would let the airlines depreciate at a more flexible rate.
One further regulation affecting the C-W Conqueror is the CAB requirement for a flight engineer on all aircraft with four or more engines and/or weighing more than 80,000 pounds. This requirement affects all the competing craft, Comet included, as all weigh more than 80,000 pounds and have four engines. The Conqueror is functionally more efficient than the others and so can better make up for the additional crew member that all the competing craft have to carry.
Safety and Infrastructure : Facilities
Introducing a new, high speed aircraft into the world introduces several concerns which must be addressed in terms of airport facilities. The main concern is whether the C-W Conqueror would be able to land at current airports given the longer runway requirements of the aircraft. Fortunately, the late 1940’s and early 1950’s heralded a major upgrade in existing runways (strengthening, lengthening, and widening). The table below lists some of the major domestic and international airports and their longest runway. Most of the world’s major airports, as evidenced by the table, would have been able to accommodate the longer runway lengths required by the Conqueror. Those airports that could not accommodate the Conqueror (Atlanta, Chicago - Midway, Los Angeles, Seattle, and Rome) could be persuaded to increase their lengths. Airports lengthened their runways to usher in the use of the Constellation and the Boeing Stratocruiser. Adding an additional 1,000 feet or so to accommodate the C-W Conqueror and the jet age would be a price gladly paid by every city wishing to participate in the jet age.
Airport
Runway Length (feet)
Domestic Airports
Atlanta
4800
Chicago Midway
6547
Denver
7000
Los Angeles
6000
Miami
7000
New York International
8200
New York La Guardia
6000
San Francisco
7750
Seattle
6100
International Airports
Amsterdam
8500
London Gatwick
9316
Paris Orlay
7800
Rome
6600
Zurich
8250
Conqueror Runway Requirements
Take Off : 4,100 Landing : 5,500
Table II: Current Airport Facilities as of 1948.
In addition to runways, further modifications to airports would be necessary to accommodate the larger size of the Conqueror. Additional equipment would also be required. The primary advantage of the Conqueror is its speed, both in the air and on the ground. In 1946, the turnaround time (time taken to taxi to the gate, unload passengers and baggage, and reload) in New York, which was typically longer than most other airports, was 40 minutes. This was considered too long (Airports and Air traffic in the New York Area v. 1, Traffic, New York: City of New York, 1946, p 29-30). The following improvements would decrease the ‘turnaround’ time to acceptable levels.
Major modifications would include increasing the ramp size and spacing between gates to accommodate the larger wingspans, and bi-level ramps (today known as jetways) would need to be installed to facilitate the loading and unloading of the aircraft. By 1950, bi-level terminals were recommended to speed the handling of baggage ("Terminal Airport Types Expanded to Meet Tomorrow's Requirement," National Association of State Aviation Officials, Proceedings, 1950, page 6; among others). Tractors would be needed to push the aircraft away from the gates as the Conqueror has no way of backing itself away from the gate.
Another concern is the factors a jet engine introduces on the ground and in the immediate airport vicinity. A jet engine produces significant backwash compared to propeller aircraft. Jet wash deflectors (‘blast deflectors’) would have to be installed in the run-up areas as well as at the departure ends of all runways to prevent the blast from interfering with equipment and personnel on the ground. Jet engines also produce a significant amount of noise compared to a propeller engine. The Air Force experienced some dissidence by the residents around its bases in the early 1950’s because of the noise created by the jets. Noise abatement procedures would need to be established by the airport operators to quell any concerns expressed by the residents surrounding the airport. This could be as simple as altering the direction taken after takeoff so that the ground track of the aircraft would be over a non-residential area. A more complicated plan such as prohibiting certain thrust levels during certain hours, or prohibiting a jet aircraft from operating at that airport at all during certain hours might be necessary.
The jet engine would introduce new factors in the construction and operation of airports. However, the current facilities are more than adequate to accommodate the Conqueror until updated facilities could be provided.
Safety and Infrastructure: Navigation and Communication
Jet aircraft would seem at first to be incompatible with existing air navigation and communication facilities. However, these would still be usable with the C-W Conqueror. Existing radio navigational aids (VORs) and current radios (VHF) were sufficient to accommodate jet transports (Turbine Transport, p 110). Constant air traffic control near the majority of airports was a requirement with propeller planes. The addition of higher speed aircraft in the same area of operation as the slower planes would not change this. Advanced training of traffic controllers would be required to educate them on the requirements of high speed aircraft, but the basic system would not need to be changed. In addition, constant air traffic control was not needed at high altitude; only positive control and separation were needed. Navigation and communication facilities skyrocketed during the early 1940’s as a result of a U.S. government project to expand the system on a national level. The radio and navigation system was expanded to Alaska in 1939 and was established on an intercontinental basis (New York to London) in 1940. By 1944, there were over 400 range and communication systems and about 200 VHF fan markers throughout the country. The C-W Conqueror would take advantage of the current system in place and no additions would be necessary to operate the aircraft.
Conclusion
This paper has addressed the major concerns about producing and marketing a commercial jet transport using the technology available to one of the world’s leading aircraft manufacturers. In almost every case, the concerns of 1950s aviation manufacturers and airline officials were found to be based on one of two factors. Most feared the high fuel consumption of jets. At the same time, they did not imagine a mass passenger market for air travel. These tow factors: fear of "overcapacity" and of high-cost, fuel inefficient jet engines, held back jet transport development.
The Curtiss-Wright Conqueror resolves this dilemma by combining the most powerful and efficient jet engine of the time with revolutionary jet-age seating which allows maximum passenger capacity. Because of its long range, the Conqueror can leap the Atlantic at a single hop and link Britain and American in no more than eight hours.
The combination of higher density with higher real (non-stop) speed introduces the jet age and mass air-transportation. In the "real world," the manufacturer which owned the engine, which could have made this revolution happen lacked the vision to use it. Hedged in by conservative, banking oriented management as well as protective (sic) regulation, the real Curtiss-Wright built only engines, while other plane-makers fumbled in search of government support or tried their best to innovate without re-conceiving air travel.
This project had the invaluable advantage of hind-sight. At the same time, it is clear from our research that a viable jet transport could have built within the technological and regulatory constraints of 1950. Only the insistent human tendency to conceptualize the future in terms of the past held back, not only Curtiss-Wright, but the aviation industry as a whole. Thus innate human conservatism, combined with the perpetual nemeses of the business community, risk aversion and obsession with the short-term bottom line, staved off technological innovation and, in the case of Curtiss-Wright, undermined a fine company and unnecessarily displaced thousands of worker and their families.
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Copyright © 1997
by Lewis Department of
Humanities.
Revised : May 08, 1997.