By the early part of 1926, contract airmail carriers flew most of the airmail, but government airmail pilots in government airplanes still flew the transcontinental route connecting San Francisco, Omaha, Chicago and New York. This transcontinental line was divided into two segments in 1927. Boeing began contract service on the western sector, between Chicago and San Francisco, on July 1, 1927. National Air Transport took over the eastern sector, between New York and Chicago, on September 1, 1927. Now, all airmail operations had shifted to private companies flying with their own pilots and aircraft.
Other changes were made too. Most of the airfields on the route system had been paid for and managed by the Federal Government through the Post Office Department. They were now handed over to the local government near each airfield to pay for and manage, except for the important mail centers of Omaha and San Francisco and possibly Chicago. In July 1927, the Department of Commerce took over the construction and maintenance of the still-incomplete transcontinental lighted airway. In addition to hundreds of light beacons, the airway's facilities included 95 emergency landing fields and 17 radio stations that had been built since 1921 to provide pilots with weather information.
Improved aircraft technology helped increase the volume of mail and freight that could be carried. Some airplanes could carry passengers, baggage, and airmail. Air-cooled engines replaced water-cooled engines. Some of the new engines generated more than 450 horsepower (336 kilowatts) and helped airlines improve on the average speed of 110 miles per hour (176 kilometers per hour).
In 1928, the Post Office gave operators that had been in business at least two years a 10-year contract that excluded any competitors. The mail carriers still favored the shorter routes within their zones but to meet government requirements, airlines began to merge and create longer routes to more cities.
Pilot groups were founded as well as airline companies. In 1928, the National Air Pilots Association (NAPA) was formed, and by 1931, the Air Line Pilots Association (ALPA). By the spring of 1929, there were 61 U.S. passenger lines, and 47 airmail lines. Airmail volume in 1926 had been 810,555 pounds (402, 525 kilograms); by 1929, airmail volume had grown to 7,772,014 pounds (3,532,733 kilograms).
Though the aviation industry made money, the Post Office supported growth of the system and lost more money each year. In 1929, airmail subsidies reached $11,618,000, but airmail revenues were only $5,273,000. To keep airmail stamps affordable, the Post Office limited the stamp price to five cents per ounce and made up the difference with tax money.
Airmail carriers learned to use the subsidies to make money regardless of the true public demand for airmail. They sometimes sent postcards to themselves using registered mail, which required a heavy, secure lock. The lock added weight and, therefore, the government had to pay more. Despite such abuses, the postal subsidies encouraged aircraft designers to design aircraft that were more reliable, could fly longer distances, and were less expensive to fly.
Herbert Hoover was elected President in 1928. He would appoint a new postmaster general, Walter Folger Brown, a man who wanted to create a stable and efficient air transport system that served both passengers and the mail. Brown began work on March 6, 1929 and rapidly began to shake up the industry.
