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That autumn two of our £5 per week working shareholders, Lord Ronaldshay and R. D. King, formed a small selling company to take the agency for Airspeed and other products in India and Burma. They bought a Courier as a demonstrator fitted with a more powerful engine to improve the take-off of the machine in tropical conditions, an Armstrong Siddeley Cheetah Mark V of about 300 horsepower,
and Ronaldshay flew this out to India to set up a sales organisation for us in New Delhi while King remained on as our sales manager. In England the Aircraft Exchange and Mart had produced a number of dubious orders for Couriers, most of which were from optimistic newly created airlines with little money who required a hire purchase deal. In the end most of the aircraft that we sold upon these terms found their way to the war which was to break out two and a half years later in Spain.

The second annual general meeting of the company was held in December 1933, and a further loss was announced. This produced no crisis, because the meeting was held in my office in the works at Portsmouth and was attended only by the directors and officials who were working in the company; there were still very few other shareholders. The Air Ministry had just ordered a Courier for experiments with the retractable undercarriage, an earnest of better things to come. The new factory extension was well under way by grace of the Portsmouth Corporation, but already we were talking of another one. Twelve Couriers and six Envoys were under construction at the end of the year.

During that winter both Tiltman and I were elected Fellows of the Royal Aeronautical Society. This is the highest technical distinction that British aviation has to offer and we got it, I think, primarily for the production of the Courier with its retractable undercarriage, though in my case my work upon the R.100 had something to do with it as well. The company, too, was marching on to technical distinction. At that time the firms composing the British aircraft manufacturing industry were grouped in a very tight organisation, the Society of British Aircraft Constructors. After the first war when government orders were few and most aircraft firms were running at a loss, an agreement had been reached between the government
and this trade Society that, in consideration of the firms remaining in being, when bulk orders came to be placed again no orders would be given to newly created firms until the firms in the existing industry were full to capacity with work. This was a reasonable agreement in 1923 when it was made, but ten years later it bore hardly upon us. For years we were to see less competent firms receiving bulk government orders while we struggled on upon the edge of liquidation. The Society was conscious of this position and were not unfriendly to us; first they made us associate members and permitted us to show the Courier at their annual display in 1933, and after several years we broke into their ring and became full members of the Society.

About this time we engaged our first regular, whole time test pilot; previously we had made do with whatever pilots we could find at the time we wanted a machine flown. Now, however, the work had grown to a point when a full time pilot was justified. We could not pay more than a poor salary, however, and we were lucky to get so good a man for our £400 a year. When delivering the second Ferry to John Sword at Inverness six months previously I had met F/Lt. C. H. A. Colman, a retired young R.A.F. trained officer who was joyriding for John Sword with a Fox Moth. Colman was a merry, apparently irresponsible young man and I would have classed him with a hundred other lighthearted benders of aeroplanes but for one thing. He was flying his little aeroplane out of a pasture field, and before taking off I saw him deliberately pace out the distance to the far hedge to make quite sure that he had enough room to get off. I questioned him about the distance and found he had a very clear and accurate idea of the room that he required to get off safely with varying conditions of load and wind and height of obstacles. In these days this approach may seem elementary,
but it showed an attitude of mind that was by no means common amongst ex-R.A.F. pilots in 1933. When he applied for a job with us it seemed to me that our aeroplanes would be safe in his hands, and I was not disappointed. He was killed in 1941 over Northern France, flying a Beaufighter.

In January and February 1934 the question of an issue of shares to the public began to be discussed by the Board. In our continuing quest for fresh capital we had made contact with a City firm who seemed to think that they could place a public issue for us, and in our financial condition the prospect of sixty or seventy thousand pounds of new capital was not one to be treated lightly, whatever the source might be. It was much too early for a public issue. Such orders as we had in hand were mostly from dubious operators on tenuous hire purchase deals; if civil airlines went ahead and these operators prospered the aeroplanes would be paid for in the end, but if the operators failed the aeroplanes would be back on our hands, unsold. It will be understood that the financial houses in the City who announced that they could float us on the public were not the most conservative houses that the City could produce, and even they found our continuing losses something of an obstacle to a successful issue. Our needs, however, were urgent, for the finances of the company had grown to such a scale as to make it impossible for our early loyal supporters to carry the company much further.

Negotiations for this difficult issue dragged on slowly, but I can find no evidence that the lack of money impaired our resolution to forge ahead. We should get nowhere without building aeroplanes and getting them on to airlines, and at the end of February we negotiated a second extension to the factory, again on a hire purchase agreement with the Portsmouth Corporation, still our staunch supporters. We must have had a nerve, because by the
end of March the guaranteed overdraft was again exceeded by £2,267 and the salaries for March were still unpaid. One small airline, as unfinancial as ourselves, had ordered six Couriers and had paid the princely deposit of £5 on each; another had ordered one machine and had defaulted on the first hire purchase payment. There was, however, a prospect that the Air Ministry would place an order with the company for the design of a fighter; we lived mainly on prospects in those days.

Airspeed, however, was now beginning to attract the attention of more conservative City houses. One in particular, a concern of good standing which specialised in shipbuilding and ship-operating finance, had already agreed to advance money to us on firm orders for aeroplanes during construction, though owing to the peculiar character of our orders we had some difficulty with them over a definition of the word ‘firm’. This concern was closely linked with the well-known shipbuilders Swan Hunter and Wigham Richardson Ltd, a great and powerful concern established on the Tyne and with ramifications in many other shipbuilding districts. At that time shipbuilding was depressed and many of the slips were empty, and there was a good deal of unemployment in the shipbuilding cities of the North Country. A proposal that they should take an interest in an aircraft manufacturing concern seemed reasonable, especially as flying boats were then in the ascendant for the major commercial airlines of the world and seemed likely to grow rapidly in size, so that the construction of the hulls, at any rate, seemed to be well on the way to similarity with the hulls of ships.

Negotiations with Swan Hunter, who proved to be directed by hard-headed business men, resulted in an offer of finance in April 1934 which involved writing down the value of our shares to 25% in view of the unsatisfactory nature of our company’s finances. This came about the
middle of the month when we were two months in arrear with salaries and trade creditors for £2,750 were threatening us with writs. I persuaded my Board to turn this offer down flat, though they did not need much persuasion; better to go into liquidation, for such an offer never could have formed a basis for a harmonious partnership. I think it was difficult for the shipbuilders to understand our point of view, which was still one of lighthearted adventure and not wholly monetary; their own concern had been established for over a hundred years and was as stable as a bank, and was administered by directors who had much of the mentality of bankers as is proper to such an organisation. I doubt if any of them had personal experience of working up a business through its early difficulties, as we had no personal experience of running a large scale business to show a commercial profit.

Company finance could only occupy a small part of my energies in those weeks, for we were starting up an organisation, which was to prove abortive, to sell Couriers in Canada, and we were starting up sales concessions in China, Siam, Malaya, and Australia. Any spare time left on my hands was spent in analysing the letters from our creditors, some of which were clearly drafted by solicitors, and doling out what money we had to stave off the writs. I found the City house who were the intermediary between Swan Hunter and ourselves to be both helpful and constructive at this time; they were impressed by our technical achievements and appalled by the condition of our business. The passage of the centuries has made shipbuilding and ship-operating a solid and a predictable business, very different from aviation as it was in early 1934.

By the beginning of June an agreement had been reached with Swan Hunter and Wigham Richardson for a public issue of shares in Airspeed Ltd under their auspices. They would acquire control of the company through an ordinary
shareholding, the existing shares would be transferred at par into ordinary shares, the nominal capital of the company would be raised to £220,000, and an issue of £100,000 in preference shares would be offered to the public. This arrangement was acceptable to us. It meant the formation of a new Company to be known as Airspeed (1934) Ltd. After three years substantial capital was at last in sight, and one might say not before time. Our unsecured overdraft was again about £5,000 and the trade creditors totalled no less than £19,712; again the directors led by Lord Grimthorpe came to the rescue with yet another joint and several guarantee for a further overdraft of £5,000. It must be remembered, however, that at this time I was increasing production to the limit of the finance that was in sight; as the prospect of more capital became concrete I was manning up the shop and buying materials to the very limit in order to get our costs down by an increased turnover. If we were to get in capital from the public it was essential that our first year’s working under the new conditions should be profitable if humanly possible, and this could only be achieved by pressing on with output. As the new capital drew closer, therefore, our debts mounted up, including the debt to ourselves, for at that time our salaries were two months in arrear.

In the month of June I was a great deal in the City, drafting the new prospectus with our friendly intermediaries and with the issuing house for the new issue of shares to the public.

TWO EXTRACTS from the minutes of Board meetings in the last weeks of the old company are of interest. On June the 15th,

And on June 22nd,

At this time I was acquiring a reputation with my co-directors and with my City associates for a reckless and unscrupulous optimism that came close to dishonesty. I think this bad reputation was deserved, for having set my hand to Airspeed and brought it so far up the road towards success I was intolerant of obstacles that seemed to me to be based upon an ultra-conservative and pedantic view of business. For three years the wildest business risks had
been my daily bread and under this régime the company had grown mightily. A cautious and conservative policy could still kill it stone dead, a fact which I think was better appreciated by my Board than by our new associates. Even so, some of the things I was prepared to do shocked my Board and caused them, very rightly, to impose a tactful brake on my activities from time to time.

Because this is a position that many men in charge of growing companies may find themselves in I am going to discuss it a little. Many men drafting a prospectus have taken a quick glance inside the prison door, and some of them have subsequently entered it, but very few, if any, have written about their dilemma.

In the three years since Airspeed had been founded the capital requirements of the aircraft industry had changed vastly. When we started, thirty or forty thousand pounds would have been an adequate capital on which to achieve a profitable business, and this figure had been substantially constant for ten years previously. We had now attained that amount of capital in the form of shares, debentures, and bank guarantees, but profits still eluded us through circumstances due to basic changes in the industry and largely beyond our control. Each year the units of construction, the aeroplanes, were getting bigger and bigger and so requiring more capital for their production; the private owner market had dwindled away to nothing and the all up weight of the Envoy was more than three times the weight of the original three seater on which our first capital estimates had been based. Each year our competitors with their superior organisation lowered the cost of civil aeroplanes, and over all there was now the change from wood construction to metal becoming imminent, with all the vast and incalculable capital expenditure that that change would involve.

A wiser man than I might have foreseen a vast increase
in capital requirements looking forward from the year 1931, but I doubt it. I doubt if in 1934 when we went to the public for £100,000 anybody could have foreseen that by 1954 a capital of ten million pounds would be required for any company that hoped to manufacture civil aircraft. All we knew in 1934 was that the capital requirements of a company in the aircraft business were rising very quickly, and that the only safe course was to gather in as much capital as we could get hold of.