In the early days of commercial air flight, airlines struggled to turn a profit and remain afloat. The United States government, hoping to foster the success of commercial airlines, met this challenge by using airplanes to move mail across the country. Initially, the U.S. Postal Office set up air mail routes, flying them first with pilots from the Army, and then their own. However, once the Post Office established a strong economic foundation for commercial aviation through air mail, it turned over delivery to private airlines. 

In 1925 the Post Office began contracting with private airlines to carry the mail. By the summer of 1927, an effective commercial airline system was providing reliable air mail service. The federal government continued to shape the new industry by regulating the airways, guiding aviation's growth, and promoting safety and technology. 

The Contract Air Mail Act of 1925 allowed the Post Office to pay private airlines to deliver the mail. Representative M. Clyde Kelly guided the Contract Air Mail Act through Congress in 1925. A progressive Republican from western Pennsylvania, Kelly felt that the Post Office had accomplished its goals and that it was time to let more efficient private enterprise fly the mail. The legislation became popularly known as the "Kelly Act." 

Through the Contract Air Mail Act of 1925, payments to airlines were based on the weight of the mail carried. The Post Office later added a subsidy to help offset airline operating losses until more efficient aircraft could be developed. 

To guide the development of the new industry of commercial air flight, in 1926 Congress passed the Air Commerce Act, which established the Aeronautics Branch of the Commerce Department, the predecessor of today's Federal Aviation Administration. Aviation legal expert William P. MacCracken Jr. crafted the Air Commerce Act, which gave aviation a sound legal foundation. Under his leadership as the first Assistant Secretary of Commerce for Aeronautics, the Commerce Department pioneered safety regulation, required the licensing of pilots and the certification of aircraft, and encouraged the development of navigation aids.

Both legislative acts were meant to give commercial airlines a foundation with which to thrive, prosper, and innovate—while also delivering the mail. Most airlines prospered from this legislation, but the system was not without flaws.

By the end of the 1920s, private airlines were flying an expanding system of air mail routes. Passenger service, however, remained almost nonexistent. 

“We think it is necessary to give some aid to the passenger-carrying lines, particularly if by giving that aid we greatly increase the air mail facilities in the country." -Walter F. Brown, Postmaster General 1929-1933

While airlines often prospered flying the mail, the system had problems. The Post Office's bidding process for air routes resulted in an unfair payment system, and short-term contracts discouraged airlines from investing in long-term development. 

Airlines that carried only mail favored small, single-engine airplanes. Larger multi-engine aircraft were needed to carry passengers, but such airplanes were too costly to operate. Reform was needed for the airline system to grow. 

Postmaster General Walter Brown helped draft legislation to reform the way airlines were paid, streamline the nation's air routes, and encourage airline growth and innovation.

The most important architect of the nation's passenger airline industry, Brown believed that the large holding companies created by the wave of aviation mergers could provide the economic clout to develop the industry, boost passenger travel, and reduce government subsidies. 

Brown helped draft the McNary-Watres Act, more formally known as the 3rd Amendment to the Contract Air Mail Act of 1925, in 1930, which changed how airlines were paid, made subsidies fairer, redrew the nation's air route system, and provided economic incentives to encourage airlines to carry passengers. 

Specifically, Walter Brown reformed the air mail system in four ways: 

• By exchanging 4-year air mail contracts for exclusive 10-year route certificates, Brown gave airlines long-term stability while allowing the Post Office to reduce its payment rates each year. 
• By extending the route network while reducing the payment rates, Brown tripled air route mileage at no extra cost to taxpayers. 
• By providing bonuses for technological improvements, Brown encouraged the creation of larger, faster, safer, and more efficient passenger airliners. 
• By basing payments on space available in aircraft, rather than on the weight of mail carried, the Post Office was able to spread its payments more equitably among all air mail carriers. 

To promote passenger travel and to rescue several airlines from bankruptcy, Brown created two more transcontinental air mail routes. 

Brown met with airline leaders in May 1930 to implement the newly enacted McNary-Watres Act. When consensus could not be reached, he determined routes and airline territories himself. 

To ensure the survival of well-run passenger airlines, Brown encouraged them to merge with air mail lines, a move that saved many airlines from extinction during the Depression. For example, Southwest Air Fast Express and Robertson won the southern transcontinental route. They merged to form American Airways. He forced other mergers in the interest of efficiency and excluded small, marginal carriers. Critics later labeled these meetings the "Spoils Conferences.” While Brown’s work to reform the air mail system seemed to fix many of its issues, independent airlines pushed back on the new reforms, leading to the air mail crisis in 1934, when small independent airlines accused the system of being corrupt. 

The government was essential to the success of commercial flight in the early 20th century—from contracting with airlines to fly the mail, to reforming the air mail system to encourage passenger flight. While the system would continue to face challenges throughout the 20th century, the early support from flying air mail routes would help ensure the success of commercial flight in the United States.