Systems in Transportation: The case of the Airline Industryfor ESD.83 – Research Seminar in Engineering SystemsSummary1 Historical Events (1900-1970)2 The Industry as a System and the Process of Deregulation3 Structure of the Industry and of an Airline4 Economics of an Airline5 Engineering an Aircraft and a Flight6 The Air Traffic Control and Free Flight7 Accidents and Safety8 Relationship to the Environment9 Related University-based R&D10 Synthesis and Conclusion11 Resources UsedSystems in Transportation: The case of the Airline Industryby Pedro Ferreirafor ESD.83 – Research Seminar in Engineering SystemsFall 2001SummaryThis paper discusses the development of the airline industry, as a branch of transportationsystems, and highlights the “systems characteristics” of the sector. The paper starts withan overview of early historical events that opened up the way to the establishment of theairline industry, as we know it today. Emphasis was given to the deregulation process thattook place in the 1970s, since it was the major event that altered completely the way inwhich the industry operated. With deregulation, the industry became physically structuredas a network, and a systems thinking view became the prevailing tool to model and talkabout commercial aviation.The paper also analyzes some sub-systems of the industry, namely the aircraft and theAir Traffic Control, and discusses its relationship to other industries and to theenvironment. This discussion shows that people have been enlarging the system drawingits boundary further away from the center of the industry, which one might argue to bethe technology.The last chapter (before conclusions) provides a brief overview on what university-basedR&D in related fields has looked like in the second half of the 20th century.11 Historical Events (1900-1970)Using the skies has been a dream for men ever since, but it was just in the beginning ofthe 20th century that some experiments were successfully conducted. The first interestingrecords date from 1903, when Orville and Wilbur Wright (later known as the Wrightbrothers) took the first powered flight in a heavier-than-air machine. Before, people hadjust flown balloons and gliders. This was a 120-foot 12-second flight in North Carolina.Eleven years later, the first scheduled air service began in Florida. This was a plane,designed by Glenn Curtiss, which took one passenger at a time across Tampa Bay. Thetrip was 18 miles long and took about 23 minutes, for a price of $5.Many innovations took place during the second half of the 1910s with the advent of theWorld War I, which boosted the demand for aircrafts. These became more powerful andlarger, but were mainly designed for military purposes. In fact, there was no significantcommercial aviation at that time. In England, people used to fly over the English channel,but in the US there was no such natural obstacle isolating major cities and railroads wereenough to transported people comfortably.In the years after WWI, a new and important source of demand for aircrafts came fromairmail. In 1917, the Congress appropriated $100000 for an experimental airmail serviceto be conducted jointly by the Army and the Post Office between New York City andWashington DC. However, by that time, planes could not flight at night and mail had tobe handed off to trains by the end of the day. The next important development was theinstallation of beacons, allowing pilots to do night flights. The first beacon system wasdeployed in Ohio with beacons visible in 10-seconds intervals. Quickly, this systemspread nation-wide and airmail could be delivered within 29 hours eastbound and 34hours westbound (prevailing winds from the west accounted for the difference).In 1925, with the Contract Air Mail Act (later known as the Kelly Act, after its chiefsponsor Rep. Clyde Kelly of Pennsylvania), government moved airmail traffic to theprivate sector, using competitive bids. This was the first major step towards the creation2of a private US airline industry. Five contracts were granted to National Air Transport,Varney Air Lines, Western Air Express, Colonial Air Transport and Robertson AircraftCorporation. National and Varney became later part of United Air Lines, Western mergedlater with other companies to form Transcontinental and Western Air (TWA) and Colonialand Robertson also merged later with other airlines to form American Airways, thepredecessor of American Airlines.Also in 1995, President Calvin Collidge appointed the Morrow board (named after itschairman Dwight Morrow, a senior partner at J.P. Morgan) to recommend a nationalaviation policy. This board concluded that the government should set specific standardsfor civil aviation outside the military. These standards were accepted immediately and putinto practice by the Air Commerce Act of 1926, by which the government stipulated thatairmail should be paid according to weight, which simplified payments significantly.In 1927, two key events altered the history of aviation. First, Henry Ford designed thefirst duralumin aircraft, the Tim Goose. This was the first aircraft designed primarily tocarry passengers. The Tim Goose also had the Ford Trimotor, which allowed it to travel atspeeds of 130 mph. Second, Charles Lindberg completed the first non-stop flight acrossthe Atlantic Ocean. He flew from NYC to Paris in about 33 hours with the Spirit of St.Louis, a 28-feet long plane with a wing-span of 46 feet. These two events brought atremendous momentum to aviation, which became a much more established industry.In 1930, with the Watres Act (sponsored by Rep. Laurence Watres from Pennsylvania),the government authorized again the Post Office to enter into long-term contracts forairmail, with rates based on volume. This decision was a mistake. The Army was notfamiliar with airmail routes at the time and a number of accidents occurred. With the AirMail Act of 1934, the government returned airmail to the private sector under a few newrules. Most notably, the government enforced dismantling vertical holding companies,thus mitigating market power abuse in the industry.3Throughout the 1930s, an entire array of innovations allowed the industry to keepimproving planes: air-cooled engines and lighter material allowed for constructing largerand faster planes; and innovations for the cockpit improved the flight conditions forpilots: better altimeters,