Eddie Rickenbacker, Eastern Airlines, and the Civil Aeronautics Board
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A Man Born Out of Season:Eddie Rickenbacker, Eastern Airlines, and the Civil Aeronautics Board W. David Lewis Auburn University Five yearsafter aviationexecutive Edward V. ("Eddie") Rickenbacker died in 1973, the Airline DeregulationAct of 1978 becamelaw. As an outspoken advocateof a free marketeconomy, Rickenbacker would have welcomedthe new statute,which was basedon the premisethat governmentregulation had stifledcompetition on the nation'sairways. Most of all, he wouldhave relished the deathsentence that the act imposedon theCivil AeronauticsBoard (CAB), a federalagency with whichhe had repeatedlycrossed swords during his long careeras chief executive of EasternAir Lines.• Rickenbacker'sattitudes reflected the "ruggedindividualism" of the late nineteenthcentury in whichhe wasborn. He believedthat competitionwas the lifebloodof a free marketeconomy. At most,he was willing to concedeonly a severelylimited role for the governmentto play in corporatewarfare, similar to thatof a refereein a prize fight.Such a role, he believed,should stop well short of meddling,especially by favoringone competitor at another'sexpense. Rick- enbacker'sstormy experience with the CAB causedhim to believethat, in the nameof fosteringcompetition, it rewardedhigh-cost, inefficient airlines at the expenseof larger,better-managed ones, and thusviolated the rulesof fair play. His views were intensifiedby his hatredof FranklinD. Rooseveltand the New Deal, which had spawnedthe CAB. Within a few yearsafter the Civil Aero- nauticsAct of 1938 was passed,Rickenbacker had becomeconvinced that the CAB waspart of a hugeconspiracy against free enterprise.Born whenBenjamin Harrisonwas president, he despisedFDR andeverything he stoodfor. Rickenbacker'sstrong commitment to a free marketeconomy was evident early in his life. Born in povertyin October1890 to Swissimmigrant parents in Columbus,Ohio, he quickly displayedpronounced entrepreneurial tendencies anda penchantfor risk-taking.As he laterstated, his business career began at the ageof five whenhe collectedrags, bones, and rusty nails and sold them to a junk dealernamed Sam. Findingthat bonesweighed more whensoaked in water,he swishedthem aroundin mud puddlesbefore selling them. Suspecting that Sam •Fora usefuloverview ofthe nature, background, andeffects of the Airline Deregulation Act, see [ 16]. BUSINESS AND ECONOMIC HISTORY, Volume twenty-five,no. 1, Fall 1996. Copyright¸1996 by theBusiness History Conference. ISSN 0849-6825. 154 A Man Born Out of Season: Eddie Rickenbacker/155 had improperlyset his scales,Rickenbacker bought his own to make sure he wouldnot be cheated out of a singlepenny. 2 Rickenbackerwas also deeplycommitted to the work ethic. He got his first job sellingnewspapers when he was ten yearsold. Every day, he got up early in the morningand walkedtwo milesto get copiesof the earliestedition of the ColumbusDispatch so that he couldbeat his competitorsto the punch.Four yearslater, whenhis fatherwas killed by an assailant,he droppedout of school to supporthis mother.He neverforgot the thrill of giving her his first pay envelope,containing $3.50 he hadearned at a factoryby workingtwelve hours a day, six daysa week. His incomerose as he becameincreasingly resourceful. Gettinga job cleaningrailroad passenger cars for $1 per day, he doubledand tripledhis incomeby findingcoins that had fallen behind the seatcushions. After taking a ride in a Model C Ford, Rickenbackerfell in love with automobilesand thusbegan a long associationwith one of the chief seedbedsof twentiethcentury enterprise. His upwardclimb resembledthe plot of a Horatio Alger story. After taking a janitorial positionat a shop that repairedmotor vehicles,he movedon to the OscarLear Company,a Columbus-basedfirm that actuallymade automobiles. Refusing to giveup whenhis first attemptsto get a job withthe company were rebuffed, he badgeredthe owners into hiring him by grabbinga broom,sweeping the floor, and asking for nothingas an indicationof hiswillingness to work.His diligenceand zeal to learnwere phenomenal. Paying $60 outof meagerwages for a mail-ordercourse in automotivetechnology, he aroseat four o'clockevery morning to studythe lessons. Rickenbacker'szest for achievementcaught the attention of LeeFrayer, a mechanicalengineer for OscarLear who designedracing cars. Under Frayer's guidanceRickenbacker mastered the basicsof mechanicalengineering and showedan instinctive feel for gasolinemotors. When Frayer moved to a manag- erial positionwith a muchbigger car manufacturer,the ColumbusBuggy Company,he put his apprentice,now seventeen,in chargeof its testing department,where Rickenbacker supervised a staff of fifteenor twentyworkers. Continuinghis upwardclimb, Rickenbackerbecame a roving trouble- shooterfor theColumbus Buggy Company. At agenineteen he was put in charge of selling its Firestone-Columbuscars in five midwesternstates, with six sales- men workingunder him. Meanwhile,Frayer, who not only designedbut also droveracing cars, chose Rickenbacker to be hisriding mechanic, a demanding job callingfor steadynerves and quickreflexes. Rickenbacker never forgot Frayer'sreaction when, after the latter had spent an entire year building a racing car for the VanderbiltCup Race,the vehicleoverheated and had to leavethe coursein the first eliminationrun. Takingthe setbackcalmly, Frayer turned to Rickenbackerand said, "Try like hell to win,but don't cry if youlose." SoonRickenbacker himself became a racingdriver. Taking death-defying risks that other drivers shunned,he became one of America's foremost racers. 2Biographicalinformation about Rickenbacker provided throughout this essay is taken chieflyfrom [8]. Forfurther information see [11], which is not always accurate, and [2]. W. David Lewis / 156 His first significantvictory came in a 300-milerace at SiouxCity, Iowa in 1914. More championshipsfollowed over the nexttwo years.By 1916, Rickenbacker rankedthird among all racerson theAmerican tour with winningsof $60,000. After the United States entered World War I in 1917, Rickenbacker enlistedand went to Franceas a driver on GeneralPershing's staff. Impressing suchpowerful persons as air chief Billy Mitchell with his mechanicalability, he schemedhis way into the Army's fledglingair serviceand becamea combat pilot. In this role he againshowed his deepcompetitive instincts and zest for takingdeath-defying risks in aerialdogfights on the WesternFront. By shooting down twenty-six German aircraft, he becameAmerica's "Ace of Aces." His leadershipskills won him commandof the 94th Aero PursuitSquadron, famed for its Hat-in-the-Ringemblem. Cominghome in 1919as a nationalhero, Rickenbacker was adulated by throngsof admirersin New York, Chicago,Los Angeles,and other cities. Soon he launcheda businesscareer. Intending at first to becomean aircraftmanufac- turer,he sawthat the time was not ripe for sucha movebecause postwar markets weresaturated with surplusplanes. Falling back on the autoindustry, he secured fundingfrom Detroitmillionaire Barney Everitt and created a high-speed,low- slungcar, the Rickenbacker,named after himself. Rickenbackerpoured vast amounts of energyinto makinga car that was notablefor technicalinnovations and imaginativestyling. These features, how- ever, were not well conceivedfor the mid-pricedmarket niche he aimedto fill. Salesfell whena recessionstruck in 1925.Rickenbacker borrowed heavily to savethe company,but it wentbankrupt in 1927,leaving him in $250,000debt. Showing unboundedfaith in free enterprise,Rickenbacker plunged immediatelyinto new ventures.He designedand promoteda lightweightfive- cylinderradial engine to powera "flyingflivver" that he conceivedboth as a car and an airplane.After this venturefailed, a Detroit bankhelped him buy the IndianapolisSpeedway, which he developedinto a major testingground for automotiveinnovations. Soon thereafterhe borrowed$90,000 to acquirethe Allison EngineeringCompany, which he sold at a substantialprofit to Fisher Brothers.In 1926he andone of hiswartime comrades founded Florida Airways, whichflew air mail betweenAtlanta and Miami. When it went bankrupt,he becamevice presidentof a GM subsidiary,Fokker Aircraft, and negotiateda deal throughwhich GM acquiredthe PioneerInstrument Company - later to become better known as Bendix Aviation. He used his finder's fees to retire his debts,despite the fact thathe wasno longerliable for themas a resultof going throughbankruptcy. The onsetin 1929 of the worst depressionin Americanhistory did nothingto diminishRickenbacker's faith in free enterprise.When GM moved Fokker to Baltimorein 1932, he left a securepost to becomevice presidentof the AviationCorporation (AVCO), a ricketyfirm whoseair routesran mainly from east to west.Although AVCO was near bankruptcy,Rickenbacker fear- lesslyadvocated a mergerwith EasternAir Transport,another ailing company whoseroutes ran mostlynorth and south. Trying to implementthe idea,AVCO's A Man Born Out of Season: Eddie Rickenbacker/157 chief investors,Averell Harrimanand Robert Lehmann,got into a proxy fight with Wall Streetoperator Errett L. Cord.Rickenbacker picked the losingside by backingHarriman and Lehman, and was once more unemployed. As usualhe plungedahead, persuading GM to acquireNorth American Aviation,a bankruptconglomerate that owned a numberof potentiallyvaluable assetsincluding Eastern Air Transport(EAT). When GM reorganizedNorth American,Rickenbacker became general manager of EAT. Its main assetwas a vacation route from New York to Miami, but its fleet was obsolete and its future extremelydim. As