In 1920, the Weir Advisory Committee on Civil Aviation found that air transport would require government subsidy to develop effectively. Subsequently, the Civil Air Transport Subsidies (Hambling) Committee recommended the establishment of a monopoly to eliminate unprofitable competition. Imperial Airways was formed through the merger of several civil aviation companies in 1924. It received a government grant of £1 million spread over the following ten years.
A subsequent committee found that Imperial Airways was relatively effective in establishing routes to India, the Far East and South Africa, but had made little impact elsewhere. It found that Britain was being left behind by Germany and France, and recommended further subsidy and aviation research. In 1935, British Airways (not the same entity as the modern British Airways) was produced through a further series of mergers to concentrate on domestic and European markets.
During the late 1930s, the Maybury Committee and the Cadman Committee of Enquiry described 'wasteful' competition and poor services in the sector. They recommended increased subsidy, rationalisation and regulation through a Civil Air Licensing Authority. As war approached, aviation assumed greater significance in the eyes of the government. Accordingly, the 1938 Air Navigation Act raised the civil aviation grant to £3 million. To increase efficiency, Imperial and British Airways were merged by an Act of 1939 to form British Overseas Airways Corporation (BOAC).
During the Second World War, the Coalition Government made plans for the more rigorous development of civil aviation and established a Ministry of Civil Aviation in 1945. A Labour White Paper of 1945 argued for full nationalisation, with no participation by private interests in international services. These recommendations were embodied in the Civil Aviation Act of 1946. The act led to the merger of two divisions of the British Overseas Airways Corporation (BOAC) to form three separate corporations:
The corporations were to be subsidised for the first ten years, after which time they were expected to be self-financing. In 1949, BSAA was incorporated into BOAC.
Nevertheless, private companies continued to provide non-scheduled chartered services and were used extensively for military transport. Succeeding Conservative governments aimed at increasing competition in the domestic market by encouraging private operators and liberalising licensing procedures.