The financial debacle that struck Wall Street in October 1929 not only set America on a downward path to economic ruin, but threatened to swiftly clip the wings of Wichita’s thriving aircraft industry.
As the “Roarin’ Twenties” came to a close, the United States was riding what appeared to be an unstoppable wave of prosperity. By 1929, Americans were earning more money and spending it freely on everything from radios, automobiles, new houses, bootleg whiskey and airplanes. A look back in time reveals that the annual average income for a blue collar worker was about $1, 221, a new house cost $3,900 and new cars rolled off the showroom floor for as little as $750. A gallon of gasoline was only twenty cents, and a ticket to the “talkies” was only one cent more. For the first time, electricity was illuminating millions of rural homes across the country. Unemployment seemed like a thing of the past.
The sound of Jazz was all the rage. William Faulkner’s “The Sound and the Fury” was published and Earnest Hemingway penned “A Farewell to Arms.” Ex-lawman Wyatt Earp died in his sleep at age 80. Albert Einstein revealed a new, revolutionary theory about gravity and electromagnetism, and Universal Airlines offered in-flight movies to passengers. As with many good times, there was a dark side to America’s prosperity. As millions of Americans sat down to breakfast on February 15, many were horrified to read in the newspapers about the bloody St. Valentine’s Day Massacre that had occurred the day before. In the public conscience, organized crime had gone too far, and society began to deplore the “tommy gun” exploits of gangsters such as Chicago’s Alfonse Capone and “Bugs” Moran.
Regardless of how it was measured, 1929 was a fast-paced time and Wall Street was largely responsible for the surge of good fortune that benefitted the masses. Everyone who had some spare cash was playing the stock market, which was no longer a bastion of the wealthy and the intellectual. Since 1925, it had become all the craze to buy and sell stocks like a professional in the pit. “Buying on margin” made it all possible. Someone could go to a broker and purchase a certain amount of stock by plunking down some greenbacks and making monthly payments. Collateral for the deal was ownership of the stock.
As “playing the margin” became increasingly popular, millions of people got into the game and prices began to soar. There were profits to be made and it seemed as though nobody could lose. All of that activity on Wall Street and within the walls of broker’s offices had been good to Wichita, too. People had money, and those with a thirst for flight were buying and flying airplanes. For example, by the end of the “Lindbergh boom” year of 1927, Wichita boasted seven airframe companies: Travel Air, Cessna Aircraft, Stearman Aircraft, Swallow, Swift, Lark and Laird. Of these, however, only the first three were major factors in the city’s aircraft industry, and by late 1928 these three major airframe companies had built and delivered more than 800 airplanes. As if that were not sufficient good news for investors, leading aviation businessmen such as Walter H. Beech were predicting that production would double to more than 1,600 airplanes.
Travel Air’s secretary and office manager, Miss Olive Ann Mellor, reported that the company order books were not only fat, they were bulging at the seams as customers sent in deposits to secure a delivery position. According to company records, Travel Air was averaging about $12,000 per day in new sales – a clear indication that the dealers and distributors were doing a good job of drumming up business in the field. In June 1928, sales for that month alone hit $350,000 and by the end of the year, total sales stood at the astounding sum of $2.1 million. Although the factory was swamped with orders, the workforce still struggled to build five airplanes per day using two shifts, six days a week.
Across town at Clyde V. Cessna’s company, construction workers were laboring overtime to complete a new factory complex and equip it to manufacture the Model AW, and north of the city, Lloyd C. Stearman was overwhelmed by demand for the C3B biplane and the M-2 “Speed Mail.” It was a great time to be in the airplane business. The potential for profits drew more and more would-be airframe manufacturers into the marketplace in an attempt to reap the benefits of a booming economy. Just how “booming” the economy truly was is reflected in the recorded minutes of a stockholder meeting held at the Stearman factory in May 1929. Not only did shareholders reelect Lloyd Stearman as president of the company, but they must have had smiles on their faces when Lloyd reported sales for the past fiscal year totaled more than $1.1 million, yielding a healthy profit of more than $65,000.
By early 1929, Travel Air’s management was in the process of expanding the factory from two to five buildings, while Lloyd Stearman was barely keeping pace with demand at the small Bridgeport facility. Clyde Cessna’s factory at First Street and Glenn Avenue on the west side of Wichita was proving totally inadequate. The tiny workforce and the facility’s lack of square footage restricted production to only one monoplane per week. Demand for Cessna airplanes was high and growing stronger every day, but without adequate financing Clyde could not hope to build the 10 airplanes per week he needed to meet existing orders.
After a lengthy search for funding, in March 1929 financing was secured to construct a new, much larger factory on an 80-acre site that was part of the “California Section” east of the city. Cessna and his associates had inspected 19 different airframe facilities before plans for the factory were finalized. Clyde’s highest priority was to build a production line that could complete monoplanes as fast and as efficiently as possible. Six buildings would be constructed totaling 55,000 square feet of manufacturing space, all at a cost of about $220,000.
Meanwhile, back at the First Street and Glenn Avenue site, 50 workers continued to build the Model AW and prepared to begin production of the six-place DC-6 cabin monoplane. Thanks to hard work by Cessna’s employees, they had managed to increase production of Warner-powered Model AW from one ship per week to five by June 1929 when a mass exodus of men and equipment began as manufacturing was relocated from the old facility to the new one on Franklin Road. If plans worked as Cessna hoped, production would begin at two monoplanes per day and increase to four by late summer when as many 25 ships would roll off the assembly line.
Clyde would need all the production capability he could muster, chiefly because he was not meeting his contractual obligations to supply the Curtiss-Wright Flying Service with 545 airplanes, chiefly Model AW ships, worth more than $5.5 million! The Model AW was so popular that Curtiss-Wright salesmen were selling the airplanes much faster than the factory could build and deliver them. It was not until August that Cessna Aircraft Company’s Franklin Road factory was able to boost production to 25-30 ships per week – still short of the 45-50 per week required to meet demand from Curtiss-Wright.
While Clyde’s company was struggling to meet customer demand, over at the Travel Air Company, Walter H. Beech and the entire workforce of more than 600 men and women were celebrating a victory. In September 1929, the company’s so-called “Mystery Ship” (formally known as the Type “R”) had whipped the competition at the National Air Races (NAR) held in Cleveland, Ohio. Designed by engineers Herbert Rawdon and Walter Burnham, the Type “R” was a low-wing monoplane with fixed landing gear, powered by a specially-built R-975 (J6-9), nine-cylinder static, air-cooled radial engine producing 420 horsepower. It is important to note here that in August 1929, Travel Air became a part of the Wright Aeronautical Corporation’s group that already included the Keystone and Loening aircraft companies. The Type “R” easily took first place in Event No. 29, the free-for-all race, beating the best biplanes the United States Army and Navy could offer. Pilot Doug Davis flew the sleek red racer at an average speed of 194 mph and easily exceeded 200 mph on the straightaways between pylons.
Walter Beech had always had racing in his blood, but his early experiences with “stunt” flying while working for E.M. Laird were necessary to help spur sales of the “Swallow.” By 1929, his views of “stunting” had changed from that of an asset to a liability. While attending the NAR, he disapproved of all the stunt flying that occurred between race events. His displeasure was reflected in a letter he wrote in August to a respected aviation magazine:
“If aviation is to become a means of transportation and is to be taken out of the realm of the spectacular so that the businessmen of the country will have an appreciation of its possibilities and an acceptance of it as a means of safe and quick transportation, it seems to me that all manufacturers who are honestly interested in the furtherance of aviation will be very much against any stunting and circus flying at future aeronautical expositions. Although we are often asked to take part in acrobatic demonstrations and races and meets, we turn down these offers because we do not believe them to be [in] the best interests of aviation. We will not enter competition of this kind, and if necessary to continue with the airplane business to keep in step with programs of this nature, I am looking forward to the day when I can resign from airplane activities. The writer believes that the airplane circus days are over, and these competitive races should be put on with the thought in mind that we are selling aeronautics to the general public who must be sold on the safety of aircraft, and not to a few who want nothing but speed. If you agree with the position we have taken, we know that you can, through your good magazine, help foster the cause of sanity and safety in aviation, and we will be very grateful to you for anything you can do to promote this cause.”1
As the sizzling summer of 1929 continued to bake Wichita, back east in New York City the stock market was hotter than ever. It was a raging bull market; the likes of which nobody had seen before. The frenzy to buy low and sell high fueled profits, but also blinded would-be investors to the fact that a day of reckoning was coming. There were people who realized the “crash” was fast approaching, but did nothing to sound the alarm, preferring to fatten their bank accounts while they could and leave the ignorant to suffer the losses. It was becoming increasingly clear, however, that the value of stocks inevitably had to drop – the bubble had to burst sometime. As for the federal government, President Calvin Coolidge rigidly maintained a position of laissez-faire and did nothing to intervene.
About the same time that Travel Air was absorbed into the Wright Aeronautical Empire in August 1929, the Stearman Aircraft Company was ripe for the taking by eastern financiers. The National City Bank of New York had expressed interest in bringing Lloyd Stearman’s company into the fold of United Aircraft & Transport Corporation (UATC). The giant conglomerate was created in 1929 as a holding company. It controlled the stock of key aeronautical enterprises including Boeing Airplane Company (manufacturing commercial airframes), Pratt & Whitney (radial engines), Chance-Vought Corporation (military airframes), and the Hamilton Aero Manufacturing Company (propellers).
One month earlier UATC acquired the Sikorsky Aircraft Corporation and quickly set their sights on Stearman Aircraft. Following a series of negotiations between Stearman company officials and the bank, Lloyd Stearman announced that the company would exchange stock with UATC, but control would remain in the hands of Stearman’s existing management team. A press release read:
“The desirability of the merger on the part of the United group was that it wanted a strong, strictly commercial-producing company. It especially desired Stearman because of the belief that Lloyd Stearman and Mac Short, in their respective abilities, stand at the top in aircraft production circles. On the Stearman side, there was a desire for a combination with the strong financial, technical and manufacturing power found in the United Group.”2
During the merger between Stearman’s company and UATC, work at the Bridgeport factory continued unabated throughout the summer of 1929. In September, the first example of the next-generation Stearman biplane was revealed – the Model 4 “Junior Speed mail.” The Model 4 series was designed to fill a gap in the company’s product line between the M-2 and LT-1 transports and the smaller C-3 series biplanes. The handsome three-place C4A was powered by a nine-cylinder, Wright Aeronautical R-975 radial engine rated at 300 horsepower.
As the end of 1929 approached, Walter Beech, Clyde Cessna and Lloyd Stearman were proud of their company’s achievements. Thanks to a strong stock market and an abundance of available cash, Wichita’s three major airframe manufacturers sold and delivered nearly $6 million worth of new airplanes. Travel Air, for example, reported total sales of $3.5 million (biplanes and monoplanes), fulfilling Beech’s prediction that sales would double from 1928 levels. Stearman Aircraft Company delivered airplanes worth $1 million (an increase of $100,000 from 1928). Workers in Clyde Cessna’s new factory managed to build more than $500,000 worth of cabin monoplanes (chiefly the Model AW), and the venerable Swallow Aircraft Company managed to sell $560,000 new ships (an increase of 15 percent compared with 1928). In addition, start-up companies Lark, Swift and Sullivan reported building experimental aircraft during 1929 that were estimated to be worth about $150,000.3
Back on Wall Street, however, black clouds were forming on the horizon. As early as March there were signs that the bull market was finally reaching its height of success. Soon after President-elect Herbert Hoover’s inauguration, the Federal Reserve Board conducted meetings behind closed doors to discuss what should be done if the stock market suddenly collapsed. They did not have long to wait, because late in March the market suffered a series of tremors as stock values began a downward slide, recovered, then fell, but again rebounded. The Wall Street “roller coaster” continued throughout the summer months, inflicting great anxiety on investors and shareholders alike.
Everyone breathed a sigh of relief in August as stocks seemed to stabilize, but without warning it took another plunge in September as the bear market took control. The beginning of the end came on October 24, when nearly 13 million shares changed hands in one day. The Dow Jones Industrial Average plummeted 20 percent. Ticker tape machines were unable to keep pace with the phenomenal volume of trade and gradually fell behind by as much as one hour. Telephone lines were jammed as thousands of investors panicked, ordering their brokers to sell, sell, sell! Brokers did exactly that. They sold so much that the market took a nose dive. Across the nation people held their breath to see if the bargain hunters would move in and halt the descent. To the deep relief of everyone involved, Wall Street did recover a majority of its losses and on October 25 about six million shares were traded. Out west in Wichita, Walter Beech, Lloyd Stearman and Clyde Cessna monitored the situation carefully and hoped the crisis would quickly pass.
Unfortunately, on October 29, the day of reckoning hit Wall Street with hurricane force. Stock values imploded as more than 16 million shares were traded, driving down the Dow Jones average another 11.5 percent. A mass panic set in across America as stockholders tried in vain to dump their shares whose value was decreasing by the hour. The bloodbath of what came to be known as “Black Tuesday” continued all day until the bell mercifully brought an end to the worst debacle Wall Street had ever experienced. The market had crashed and burned. By the closing bell, it had lost about 40 percent of its value and during the coming weeks there was little or no improvement. The public watched in stark disbelief as the Dow Jones average slid deeper and deeper into the unknown.4
The fiscal ramifications of the “crash” were not only inevitable, but truly cruel. Gradually, banks began to fail, business were forced to close their doors and lay off employees. Unemployment skyrocketed. Worst of all, however, the American people had suddenly lost their purchasing power. Consumers hoarded every cent and hunkered down to hope for better days ahead. The leaders of America’s commercial aviation business grew increasingly worried as the stocks continued to fall during the last months of 1929. The future of the Air Capital of the World was about to become darker than anyone could have imagined.
Notes:
1. Phillips, Edward H.: “Travel Air—Wings Over the Prairie;” Flying Books, 1982.
2. Mac Short was Stearman’s chief engineer, and was highly regarded by his contemporaries for his skill to engineer new airframes. Short, who as with Stearman was a native Kansan, held a degree in aeronautical engineering from the Massachusetts Institute of Technology.
3. Despite having good designs, these three companies quickly fell victim to the financial collapse on Wall Street in October 1929, never to reemerge.
4. During the next three years, the stock market lost 89 percent of its value, falling from a high of 350 to a low of about 50 by July 1932. The “crash” was truly a nightmarish event that would alter the American financial landscape for the next 10 years.
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