In 1929, while vice-president of Aviation Corporation, his company bought Southern Air Transport which developed into a nationwide airline. In 1930, Aviation Corporation created American Airways as a means of coordinating several operating units into one, and Smith remained as vice-president of the new company.
American Airways, consisting of a sprawling network of badly articulated air routes, soon began operating in the red and was forced to reorganize. In February 1934, a new company, American Airlines, was created and in October of the same year. Smith became its president. Later in life, when asked to recall those early days when he was called upon to devise some way to save the failing American Airways, Smith replied: “One of the first things that we did, as soon as possible, was to go back to system operation and control.” The concept worked, and due to Smith’s straight forward management philosophy, American Airlines became the leading domestic airline in the country.
In 1940, Smith served as an advisor to Ralph Budd, president of the Burlington Railroad, who, in the months before Pearl Harbor, was in charge of coordinating all forms of transportation for the national defense.
In April 1942, Smith resigned as president and director of American Airlines to enter the Army, with a commission as a Colonel in the Air Corps Ferrying Command. In June 1942, the Command was reconstituted and redesignated the Air Transport Command, with two divisions, Ferrying and Air Transportation. At the personal request of General Henry H. Arnold, Colonel Smith was made ATC’s executive officer, thereafter assuming the positions of Chief of Staff and Deputy Commander.
During his tenure as Chief of Staff, Colonel Smith was largely responsible for ATC’s considerable expansion in operations. Especially significant was the provision making ATC the War Department agent for strategic airlift. Colonel Smith wrote a brilliant and solid proposal that maintained, in essence, that if the ATC were given the mission and left alone, it would get the job done. Smith’s proposal specified that all personnel, aircraft, maintenance facilities and spare parts sent to the theater, for the airlift to China, be assigned to the ATC, and nobody else. As Smith put it, “The principal experience of the Air Transport Command is in air transportation, as contrasted with the experience of the theater commander, being principally in combat and in preparation for combat. “After the acceptance of his proposal, strategic air transport functioned under centralized control, without interference from theater commanders except in emergencies.
After being promoted to Brigadier General in October 1942, he activated the India-China Division to provide airlift in support of the Chungking government, and American airmen fighting in China. The airlift conducted from bases in India and designated the “Hump,” because of its air route over the Himalayan Mountains, was the greatest sustained and intensive use of air transport up to that time. General Smith mapped many of ATC’s new routes, and located and developed many of its airdromes.
In 1943 General Smith arranged a special trip for Eleanor Roosevelt. Mrs. Roosevelt toured the Pacific theater, traveling in a Red Cross uniform, to boost the morale of allied servicemen. By the end of 1943, the Command was operating over air routes in the United States totaling 35,000 miles and overseas air routes totaling more than 95,000 miles.
General Smith was promoted to Major General in September 1944, and retired from the service after VE Day in May 1945.
While in the Army Air Corp., he received the Distinguished Service Medal, with a citation calling him “one of the world’s greatest contributors to the development of military and global air transportation,” from General Arnold. Additionally, he received the Legion of Merit for his services as chief of a special mission to French West Africa charged with eliminating custom duties, and the Air Medal for rescue operations in Burma. He also received a Distinguished Unit Citation for ATC’s transportation of supplies to China.