In 1838, the SS Great Western, owned by the British Great Western Steamship Company, crossed the Atlantic in 15 days and heralded a new age in the transatlantic trade. Two years later, the British & North American Royal Mail Steam Packet Company, commonly known as Cunard Line, began transatlantic steam packet service between Liverpool and Halifax, after winning the tender for subsidies from the British admiralty. In 1840–41, four ships were delivered to Cunard for this service, with two additional ships following in 1844.
Dissatisfied with the dominance of British companies in the transatlantic mail packet trade, the US Congress decided to begin a state-subsidized service of their own in 1845. The United States Postmaster General Office invited tenders from US-based shipping companies for a service from New York City to ports in Northern Europe. Four companies, including a group led by Collins, submitted their proposals. A five-year tender of carrying mail from New York to Bremen was eventually awarded to the Ocean Steam Navigation Company, led by Edward Mills, which began service in 1846.
In 1849, the US Postmaster General Office invited companies to submit bids for a ten-year federal government-subsidized mail service contract between New York and Liverpool, in direct competition with Cunard, which had opened a similar service in 1848. Collins submitted his ambitious plan to operate a weekly service on the route with five ships superior to those of Cunard in every way. Collins' proposal convinced the authorities and the tender was awarded to his New York and Liverpool United States Steamship Company, commonly known as the Collins Line. Due to the financial constraints of building five ships, the service was eventually scaled down to a bi-weekly operation using four ships. Collins hired the young George Steers, who later designed the famous yacht America, to design his new ships. Named Atlantic, Arctic, Baltic and Pacific, the new ships were superior to those of Cunard Line in many ways: at nearly 3,000 tons, they were twice as large as Cunard's largest ships; at their maximum speed of 12 knots, faster; and they included many new innovations such as steam-heating, running water and a ventilation system in all accommodations. Other features included bathing cabins, a hairdressing salon and separate lounges for men and women.
The Atlantic was the first ship in service, beginning her maiden voyage on 27 April 1850. With the crossing from New York to Liverpool taking 10 days and 16 hours, the ship clipped 12 hours off the existing Cunard record. Atlantic and her sister ships consistently bettered the crossing times of the Cunard ships, and the Baltic became the first mail ship to cross in less than ten days. However, due to their high speeds, the Collins steamers were also extremely uneconomic, with fuel consumption at 87 tons of coal per day (compared to 37 tons for Cunard ships). Additionally, the ships required constant expensive repairs due to structural damage to their wooden hulls caused by their excessively powerful engines.
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Within two years of its initial oceanic voyage, the Collins Line was in financial trouble. The annual federal subsidy of $385,000, which its organizers and major investors first believed was sufficient to assure profitability, appeared seriously inadequate. Collins and his backers, in viewing the profitable and expanding operations of their transatlantic competitor, Cunard Lines, believed there was both need and justification for a substantial increase in the subsidy, especially in light of additional support Cunard was receiving. Cunard's annual subsidy had been considerably more than doubled—from £55,000 ($275,000) to £145,000 ($725,000) between 1839 and 1846—and by 1852 it had been increased to £173,340 ($866,700). To make matters worse, by 1852 Cunard was offering at least twice as many sailings to North America as Collins. This was especially the case during the unprofitable winter season when the Collins Line ran only one steamer per month across the Atlantic, while Cunard—now operating from New York as well as Boston—maintained a weekly schedule by providing alternate bi-weekly services between both New York and Boston and its British terminus at Liverpool.
As a consequence, in early January 1852, the Collins Line, with the support of both the Postmaster-General Nathan K. Hall and the Secretary of the Navy William Alexander Graham, petitioned Congress for a major increase in subsidy. Notwithstanding the popularity of its huge, fast and luxurious vessels, Collins had been losing money steadily. Shareholders had not received a cent in dividends and the stock was selling far below its initial offering price. And now the US government was asking the line to increase the frequency of its winter sailings simply to match the current Cunard schedule between New York and Liverpool. In those circumstances, Edward Collins maintained, the subsidy would have to be more than doubled just to break even. He therefore sought an increase to $858,000 per year.
Discussion of the subsidy persisted until a compromise was hammered out, under which Congress after December 1854 would be free to terminate the increase upon giving Collins six months' notice.
