Profit and loss among aviation pioneers. From big company dreams to SME pragmatism (1890-1913) Jean-Marc Olivier

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EBHA Conference in Vienna (2017-08)

“Profit and loss among aviation pioneers. From big company dreams to SME pragmatism (1890-1913)”

by Jean-Marc OLIVIER University of Toulouse – Jean Jaurès FRAMESPA CNRS Labex SMS

The beginning of the aeronautics industry provides a unique opportunity to perceive the profit motive in a new industry at a time when historical sources were abundant. Correspondance by industrial pioneers reveals that making a profit was as much a spur as daring sports exploits in the design of the first flying machines. In the mid-19th century, in the wake of the work done by the Englishman George Cayley (1773-1857)1, his compatriots John Stringfellow (1779-1883)2 and William Henson (1812-1888) dreamt of setting up an air transport company flying to Egypt and China. In the 1890s, increasing numbers of inventors convinced themselves that the time was fast approaching for fortunes to be made from heavier-than-air machines. Models powered in a variety of ways were up and flying from the mid-19th century onwards, inspiring creation of increasingly efficient gliders, such as those designed by Otto Lilienthal in Germany and Octave Chanute3 in the . Before commercial gain became an incentive, there was a whole range of prizes to be won, leading competitors to risk life and limb along with their capital. Lilienthal paid for his innovative spirit with his life, killed in an accident in 1896 during final trials of his latest glider before an engine was installed on it.

There were two main approaches to the activity, the first being to put large sums of money into making major technical breakthroughs in spectacular fashion, with huge, complicated machines built by teams of engineers. In parallel, a good many craftsmen were busy carrying out experiments with prototypes they were developing in their workshops. Many of these “do-it-yourselfers” were self-taught and some, such as the Pole Jan Wnek, were even illiterate. Any study of the profits made by aviation pioneers must enquire into which of these two very different approaches was the more effective.

1 DEE Richard, The Man who Discovered Flight. George Cayley and the First Airplane, Toronto, McClelland & Stewart Ltd., 2007. 2 PENROSE Harald, An Ancient Air. A biography of John Stringfellow of Chard. The Victorian aeronautical pioneer, Washington, Smithsonian Institution press, 1989. 3 SHORT Simine, Locomotive to Aeromotive. Octave Chanute and the Transportation Revolution, Uraban, University of Illinois Press, 2011.

1 – Large-scale projects vs SMEs

Efforts towards progress were stepped up in the 1890s, with great hopes too often disappointed and synonymous with colossal losses: there was no question of any profit being made during the decade.

1.1 – Timidity on the part of large industrial concerns and the shattering of over- ambitious dreams

Well set-up entrepreneurs such as the Japys and of Pays de Montbéliard were well aware of the possibilities of mechanical engineering and internal combustion engines, and showed no particular interest in heavier-than-air machines. Investment seemed too risky for such well-established companies. The brothers were already wary of turning their hands to development of automobile production, and project promoter Armand, viewed as a crank likely to endanger the company’s financial health, was invited to set up his own firm if he wanted to continue with his projects4. Most large industrial concerns were equally cautious.

But there were a few exceptions among the captains of industry. The most striking initiative was due to Hiram Stevens Maxim, who was one of the first industrialists to diversify into development of heavier-than-air machines5. He invested large sums of money acquired from the machine-gun that bears his name. The weapon was a global bestseller, acknowledged as the best performing and most reliable of its kind, and had made him a fortune. Although American, Maxim had lived in London since 1881, where he nurtured a passion for aviation. His father had already designed a , but had been unable to find a powerful enough engine to fly it. In 1889, Maxim set himself to achieving his ambitions and started on construction of a 44-metre-long multi-wing weighing three and a half tons, propelled by a pair of 360-horsepower steam engines. As a measure of caution, he prevented his machine from taking off before time by adding a third wooden safety rail. Unfortunately, launched at full speed, the machine ripped through the rail and had to be repaired. The experiment was finally abandoned as the machine proved to be unstable and near impossible to control. Prospects of sales and possible profits faded to nothing. Maxim lost a considerable amount of money over the venture, in excess of 100,000 gold sovereigns (the equivalent of over 20 million euros today). He tried to recover some of it by designing fairground rides featuring captive flying machines; this new venture was moderately successful and brought him in a little money, but not remotely enough to make up for his initial investment, which contributed to the Maxim company’s final difficulties. Other less wealthy enthusiasts sought aid from States interested by prospects of putting their inventions to military ends, an approach adopted by Clément Ader and Samuel Pierpont Langley.

4 LOUBET Jean-Louis, La Maison Peugeot, , Perrin, 2009. 5 HAWKEY Arthur, The Amazing Hiram Maxim. An intimate biography, Staplehurst, Spellmount, 2001. Clément Ader was a contemporary of Maxim’s. Although he came from the world of SMEs and small industry, he had the means available to undertake a large-scale project thanks to financial aid from the Military Chiefs of Staff, and therefore cannot really be regarded as a simple SME director. The Ader family seems typical of the late 19th century’s highly industrious local society, in the days when numerous commercial establishments were in full swing alongside the Toulouse region’s rivers, producing flour, fabrics, leather goods, shoes, case-hardened steel tools and furniture. The Ader family had been woodworkers in the Muret region for four generations when Clément was born in 1841. As a boy, he was introduced to mechanical engineering by his maternal grandparents, the Fortanés, who ran a linen-weaving mill in Le Fauga by the Garonne, six kilometres from Muret. The young Ader went on to study at the Assiot Institute in Toulouse between 1857 and 1860, graduating from its “industrial school”, a section imbued with the “Applied Arts and Crafts” spirit. Pierre Lissarrague gives a detailed account of the Muret hero’s career, confirming that he had not attended a great school, but started his working life early, joining the Compagnie des Chemins de Fer du Midi in 18626. Ader was fascinated by the many technical advances of his day and set about improving on them: velocipede, telephone, light steam engine, and so on. Logically enough, his attention progressively turned to aircraft after witnessing various kites being tested out in the Toulouse region in 1870; he obtained aid from the army, which kept a close eye on the experiments he carried out on the city’s Polygone, which had been made available to him for the purpose7. Later on, trials of his three motorised flying machines – Éole, Zéphyr and Avion II – were carried out in the Paris region between 1890 and 18978.

But his aircraft did not have powerful enough engines for their weight and, above all, were next to impossible to control when in the air. Nonetheless, Ader’s experiments were provided with considerable financial support from the Ministry of War under Charles de Freycinet, including a 300,000-gold-franc subsidy (the equivalent of 4 million euros today) in 1892 to build a machine capable of flying at an altitude of over a hundred metres. The final result was disappointing, in no way living up to expectations and with zero return on investment. At one point, Chanute considered purchasing Ader’s latest aircraft and giving it to the , but these latter declined his generous offer, reckoning they were already well ahead of it in technical terms. In point of fact, Kitty Hawk’s two independent craftsmen were concentrating on their competition with the famous scientist and academic Samuel Pierpont Langley, who enjoyed financial support from the army.

Langley was a well-known American physicist and astronomer who had taught at several universities9. He was keenly interested in heavier-than-air machines and flew

6 LISSARRAGUE Pierre, Clément Ader Inventeur d’Avions, Toulouse, Privat, 1990, pp.19- 29. 7 ARIES Lucien, Clément Ader en Lauragais. Terre d’essais aéronautiques, Baziège, ARBRE, 2011, pp.119-133. 8 ADER Clément, La Première Etape de l’Aviation Militaire en France, Paris, Lavauzelle, 1907; CARLIER Claude, L’Affaire Clément Ader. La vérité rétablie, Paris, Perrin, 1990. 9 CROUCH Tom D., A Dream of Wings. America and the Airplane, 1875-1905, New York, Norton, 2002, pp.127-156. gliders and ¼-scale model aircraft10. The United States War Department granted him a 50,000-gold-dollar subsidy (the equivalent of about 3 million euros today) to develop a bigger, piloted flying machine. His impressively large creation was twice catapulted above the Potomac, for the first time on 7 October 1903 and again on 8 December, with the press and officials in attendance. The two costly experiments both ended in resounding failure, with the destruction of the prototype, which plunged ponderously into the river’s waters after being catapulted into the air. In any case, given its design and weight, Langley’s machine would have been impossible to control in flight had it been able to take off successfully, as a single pilot would not have had the required physical capacities. Fortunately, the engineer/pilot Charles Manly survived the two attempts unscathed, but the final outcome, especially considering the cost involved, was an unmitigated disaster and Langley gave up his research, dying in 1906. He had offered to lend financial aid to a pair of bicycle manufacturers if they would join his team, which already included a glider pilot and several experienced engineers, one being Manly, who had developed a suitable engine. The two bicycle manufacturers refused his offer, however – their names were Orville and Wilbur Wright and they had an altogether different approach to heavier-than-air machines.

1.2 – Success emerges from the ranks of the SMEs

Popular aviation history has only preserved the memory of its greatest exploits and more absurd failures, but it should be borne in mind that the triumphs of a few pioneers serve to mask a multitude of often dramatic setbacks. The Wright brothers belonged to a large pool of do-it-yourselfers and theoreticians less efficacious than they were, but they both benefited from the knowledge gained by the many inept or uncompleted experiments. Before 1903, through Chanute, they obtained a great deal of information on the first gliders, Lilienthal’s in particular, as is attested to by the many letters that passed between them11. The Wrights’ family business was spurred to technical triumph by a vision of high profitability in the short term.

The Wright brothers’ only manufacturing facility was a bicycle workshop in Dayton, Ohio, but they had a range of tools and plenty of free time available to them. They also manufactured almost everything themselves, including their engine and the wind tunnel required to test lift. They put bicycle chains, pedal and gear mechanisms, cables and tubes to new uses. Their catapult track, one of the few purchases they made, cost a mere four dollars, a sum in marked contrast to the 50,000 dollars that Langley’s project consumed. Following their first flight in 1903, the Wright brothers armed themselves with photographic proof of their success and set forth in search of high profits. In 1905, they obtained an inventor’s patent for their Flyer III, and went on to fight on all fronts to defend their ownership and exploitation rights. In 1906 and 1907, they gave up flying for a spell and set themselves to managing their business, well aware of the advances they had made. The US army contacted them in 1908 with its own specifications; they developed a two-seater aircraft, the Flyer model A, adapted to demonstrations and

10 “Langley on the Flying Machine”, McClure’s Magazine, Volume IX, no.2, special issue, June 1897. 11 KELLY Fred C. (ed.), Miracle at Kitty Hawk. The Letters of Wilbur & Orville Wright, New York, Da Capo, 2002, 482 pp. qualification flights. They always insisted on a firm commercial contract being signed before any demonstration was made. The Wrights were masters of all technical processes involved in their activity and were literally at one with their machine. They repaired it themselves and slept beside it when away from their home base. Such was the order of the day during Wilbur’s tour of France in 190812, which included Le Mans13, with Orville absent following a serious accident during a demonstration to the American army in September the same year. Wilbur Wright humiliated the Europeans on his own, his machine’s superiority proven once and for all; the sceptics were silenced and attribution of the first flight to Santos-Dumont shown to be overhasty.

Wright aircraft carried off all the prizes and set all the records that year. The brothers made enough money to open a flying school with two French pilots as their pupils: Count Charles de Lambert and Captain Paul Lucas-Girardville from the French army’s balloon fleet. Initially located in Le Mans, the school was moved to Pau on account of the latter’s more accommodating weather conditions. The Wrights left France in early 1909, travelling the world to promote manufacture of their aircraft under licence. But they did not develop the model any further, keeping the “pusher configuration” with propeller mounted behind the engine and the design with short forewings. The absence of wheels also meant that a catapult was required. All these characteristics were obsolete by 1910, with countless other initiatives superseding them. The Wrights’ business went into rapid decline and Wilbur died of typhoid in 1912. Orville sold the company to New York financiers in 1915 and the Wright trademark disappeared, its leadership taken over by other small but tirelessly innovative entrepreneurs.

The Belle Époque pioneers came from a wide range of backgrounds. Some were wealthy dandies and sportsmen, like the Brazilian Santos-Dumont who lived in Paris14. In contrast, the Caudrons15 were well-off farmers while Voisin16 came from the world of industry. The latter’s father ran a small metal foundry and sent his son to a school of applied arts and crafts. Many of them were French or carried out their trials in France, a land prone to showmanship and developing new mechanical-engineering industries with a bias towards sports, such as bicycle and automobile manufacture. Louis Blériot was one of these earliest pioneers of flight, all of whom suffered one failure after another before the money finally started rolling in17. Before adventuring into aviation, Blériot had made his fortune through a small company he had set up at just the right time, manufacturing acetylene headlamps for automobiles, the most expensive of which cost 400 gold francs each and were designed to be removed from the vehicle after every use. By 1901, Blériot’s highly profitable little company was bringing in 60,000 gold francs a year. Struck with a passion for heavier-than-air machines, he set himself to building ornithopters with beating wings; he suffered numerous setbacks – three engines

12 Ibidem. 13 BRÉAU Jules, Comme un Oiseau. Les Frères Wright Conquièrent le Ciel du Mans, Le Mans, Éditions de la Reinette, 2008. 14 BÉNICHOU Michel, Alberto Santos-Dumont. La Demoiselle et la Mort, Paris, Larivière, 2006. 15 HAUET André, Les Avions , Outreau, LELA, 2001, p.7. 16 VOISIN Gabriel, Mes 10,000 Cerfs-volants, Nîmes, Éditions du Palmier, 2011 (1st edition 1960). 17 BLÉRIOT Louis, L’Envol du XXe siècle. Blériot-Aéronautique, Paris, Larivière, 2010. exploded in succession and the trial carried out in Levallois on 31 December 1902 was far from conclusive. Blériot collected a mass of documentation and formed numerous alliances, well aware that many SMEs were not in a strong enough financial position to keep on carrying out inconclusive tests on their own.

2 – Cooperation, or associating for prosperity

The impetus behind the nascent aeronautics industry resulted from a tangled mix of competition and collaboration, not dissimilar to that found in industrial districts and localised production systems involved in “soft industrialisation”. Here however, localisation was of less importance, except, perhaps, in the Paris region. Pooling of experience, advances made and capital went on at global level, improving results obtained by the many small entrepreneurs involved while, of course, raising the problem of profit sharing. In the United States, for example, the Wright brothers’ individualistic philosophy was overtaken by Glenn Hammond Curtiss’ 18 more cooperative turn of mind.

2.1 – The Wrights vs the Aerial Experiment Association (AEA)

While the Wright brothers were embroiled in legal actions in defence of their patents, Glenn Curtiss, a young racing cyclist and bicycle manufacturer who had moved on to motorcycles in 1903, took up aircraft construction in 1906-1907 (after meeting the Wright brothers as it happens19). In 1908, he had the foresight to join the Aerial Experimental Association (AEA) founded by Graham Bell to exchange information on aircraft construction. In 1908, through its good offices, Curtiss made the first officially acknowledged flight in the United States, pocketing the 2,500 dollars that went with the Scientific American Trophy along the way (equivalent to around 130,000 euros today). It did not take long for the Wright brothers to take him to court for imitation of patented technologies – a trial that dragged on for years. Nonetheless, in 1909 he set up a company in partnership with Augustus Herring, who had already worked with Chanute and Langley. Herring, the son of an English cotton broker, supplied most of the Herring- Curtiss Company’s startup capital. But the partnership did not last long; Curtiss’ competitive instinct resurfaced and he returned to financing his development projects by winning the most profitable aviation prizes. Being a good deal more charismatic than the Wright brothers, Curtiss attracted sponsors and won the lasting affection of the crowd.

2.2 – Grand-scale meetings as a source of profit

Aviation competitions provided the most spectacular public entertainment on offer between 1908 and 1910. In those days, aircraft still flew at slow speeds and low

18 SHULMAN Seth, Unlocking the Sky. Glenn Hammond Curtiss and the Race to Invent the Airplane, New York, Harper Perennial, 2002. 19 ROSEBERRY Cecil R., Glenn Curtiss. Pioneer of Flight, Syracuse, Syracuse University Press, 1991. altitudes, and attempts at setting new records were perfectly visible from the ground. Such events were also easy to organise – all you needed was a large flat piece of ground to accommodate aircraft and spectators – and highly profitable, as thousands of people could attend without any need for terraces or platforms. The Grande Semaine d’Aviation de la Champagne, held from 22 to 29 August 1909, is a perfect example20. More than 500,000 people attended and saw Glenn Curtiss carry off the prize for speed ahead of the French. And there were plenty of other prizes to be won elsewhere, providing any successful small aircraft construction business with funds to finance its new projects.

Voisin and Blériot joined forces in 1905, winning prize after prize and selling their creations afterwards. They split up in 1909, the year Blériot flew across the English Channel and won the 25,000 gold francs put up by the Daily Mail, which had initiated the challenge. It was a last-minute success for Blériot, as up until then his flying machines had met with bitter failure one after another. Alfred Leblanc, Blériot’s right-hand man, even had to lend him the money needed for mass production of the Model XI, as the aircraft was much in demand after his Channel crossing. But being a pilot was still a risky business and, in the end, entrepreneurs like Blériot who owned and ran small factories preferred to hang up their goggles rather than continue risking their lives. Consequently, promising young pilots were soon in demand among manufacturers and air-show producers.

So it was that the young Roland Garros was hired by an American “aerial circus” company in 1910 for a tour starting in New York and continuing on to Mexico and Cuba. Blériot aircraft were the triumph of the tour and, as Garros explained, the most competitive machines could be sold for up to 50,000 gold francs apiece to wealthy amateurs across the world21. Blériot’s company made its owner’s fortune in 1909 and the years that followed. He enlarged his workshops and adopted an aristocratic lifestyle, moving into a 16th-arrondissement townhouse with his seven children. So as not to have to deal with the reticence displayed by loan agencies in the face of this burgeoning activity, he became his own banker. With improvement of aircraft performance, aerial meetings became less interesting for spectators as records were now set at altitudes largely invisible to the naked eye. Other sources of financing had therefore to be found, and the army finally stepped in with renewed interest in these now more reliable heavier-than-air flying machines.

2.3 – The return of military orders

In 1909, the Ministry of War assigned 400,000 gold francs to development of an air force, followed by almost 7 million in 191122. That same year, the Wright aeroplane was successfully tested out by the French artillery and its American patents nationalised by contract. In the end, however, the aircraft was not adopted as by 1910 it had been

20 PROCUREUR Jean-Pierre, La Grande Semaine d’Aviation de la Champagne. 22-29 août 1909, Reims, Éditions Dominique Fradet, 2009. 21 GARROS Roland, Mémoires Présentés par Jacques Quellennec, Paris, Hachette, 1966, p.58. 22 CHADEAU Emmanuel, L’Industrie Aéronautique en France. De Blériot à Dassault, Paris, Fayard, 1987, p.38. rendered obsolete by the rapid advances made by the many newcomers to conquest of the air. In addition, the French State was unwilling to allow one company alone to be responsible for design and manufacture of a weapon of war, opting for maximum diversification of suppliers, a policy indirectly favouring SMEs. Consequently, in 1910 the army had a quartet of suppliers – Blériot, Farman, Voisin and REP – responsible for producing some forty aircraft each. By 1911 there were five – Blériot, Farman, , Deperdussin and Breguet – each with 57 orders, while in 1913, there were nine suppliers for a total of 200 orders, i.e. only 22 planes per manufacturer.

As aerial meetings were no longer as profitable and civil aviation was yet to have any real outlets, the economic model ensuring aeronautics industry profitability was restricted to the military market. It was not until the First World War that the various small-scale constructers began to make long-awaited profits. New manufacturers appeared on the scene during the conflict, often from small mechanical-engineering or woodworking concerns, as was the case with Pierre-Georges Latécoère in Toulouse. He was the son of a Pyrenees industrialist, Gabriel Latécoère, who had begun his working life producing beams and planks 23 . Prior to 1914, Pierre-Georges had started diversifying company activities, producing fully-fledged railway wagons, which proved to be a more profitable endeavour. During the Great War, he was contracted to produce shells, and then accepted the challenge of manufacturing 1000 reconnaissance aircraft. He deemed it an interesting affair financially speaking as it was a “guaranteed market”: even if the war ended unexpectedly, the State would reimburse the company’s expenses if they exceeded agreed advances. With the said advances in his pocket, Pierre- Georges set himself to building a new factory in Montaudran, drafting the plans himself, and managed to keep to production deadlines. He made a very considerable profit, enabling him to build a new, ultramodern factory in 1919. But the First World War was only an interlude and, in the 1920s, a renewed lack of outlets for the aeronautics industry meant that profits dried up, with considerable stocks of aircraft to unload. Pierre Georges Latécoère understood the situation well enough and put his leftover Salmsons and Breguet XIVs to use in setting up his postal service to Morocco, Senegal and South America. He only started producing seaplanes in the second half of the 1920s, when military and civil orders started coming in again due to the obsolescence of aircraft dating from 1914-18.

The notion of profit among aeronautics industry pioneers remained somewhat hazy until 1914 and even beyond, as the classic model of profit following investment in production was thrown completely off kilter by such irrational factors as the desire to accomplish feats of sporting daring-do. In addition, setting records was a source of occasional profit from prizes recompensing their holders. This unusual context and the specificity of the product in question separated the industry from its peers. In the first place, you cannot sell an aeroplane that flies poorly or not at all, even if you have the world’s best sales network and most sophisticated marketing techniques; in the second place, before 1914 anybody with half an eye could see which of two aircraft was superior to the other. These two truths were not always so evident for other manufactured products. Innovative SMEs therefore had a major advantage:

23 OLIVIER Jean-Marc, “Latécoère, un industriel visionnaire.”, Midi-Pyrénées Patrimoine, Hors-Série no.2, November 2010, pp.14-25. transparency of offer. In such a system, they were not crushed or absorbed by large industrial concerns. So, in a country like France, although in demographic and economic decline, the highly dispersed structure of production, with a multitude of SMEs involved, was an asset for a new industry like aeronautics. The fact that such SMEs were often family partnerships meant that they had no pressure from shareholders to contend with. In a sector where profit was near impossible to guarantee, a high capacity for risk-taking proved essential to the many SMEs active within it, only one of which triumphed before 1914 – Blériot’s company, which made profits to the tune of a million francs between 1910 and 191324.

24 CHARPENTIER Henri, Il y a Cent Ans Louis Blériot, Biarritz, Atlantica, 2009, p.137.