Tedder was born the son of Sir Arthur John Tedder and Emily Charlotte Tedder (nee Bryson) at the Glenguin Distillery (now Glengoyne) in the Campsie Fells, north of Glasgow. His father was distinguished as the Commissioner of the Board of Customs who devised the old age pension scheme. His father's occupation meant that the young Tedder saw different parts of the British Isles, spending 1895 to 1898 in Lerwick on the Shetland Isles and 1899-1901 in Elgin, in the County of Moray. In 1902 the family moved to Croydon in Surrey and Tedder attended the Whitgift School until 1909, when he went up to the University of Cambridge.

Tedder was promoted to lieutenant in the Dorset Regiment on 14 October 1914, and arrived back in Britain in December. He was posted to a reserve unit at Wyke Regis on the Dorset coast where he seriously injured his knee in February. Following his injury Tedder was unable to carry out full infantry service and, although he briefly carried out duties at a base camp in Calais, he pressed for a transfer to the Royal Flying Corps.  In January 1916, Tedder was accepted into the Royal Flying Corps and he was asked to attend the No. 1 School of Aeronautics. in Reading. He was promoted to captain on 21 March 1916. In April he attended the Central Flying School where he learned to fly and gained his 'wings'. In June 1916, Tedder served as a pilot with No. 25 Squadron RFC flying the Bristol Scout C on the Western Front. On 9 August 1916, Tedder was given additional responsibilities as he was made a flight commander with 25 Squadron. The first day of 1917 saw Tedder promoted to major and appointed officer commanding No. 70 Squadron RFC. Tedder remained on the Western Front and his new squadron was equipped with the Sopwith 1 1/2  Strutter. He was awarded the Italian Silver Medal for Military Valour on 26 May 1917.  Tedder was appointed officer commanding No. 67 Squadron at RFC Shawbury on 25 June 1917 and became commander of the School of Navigation and Bomb Dropping in Egypt the following year. Another change soon followed and on 24 June 1918 Tedder was appointed officer commanding 38th Wing, also based in Egypt. He was promoted to the temporary rank of lieutenant colonel on 23 July 1918 (rank relinquished on 2 April 1919).

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