Civil Air Transport

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Embry-Riddle Aeronautical University

13. The SaJ,e of Southern Air Transport, Inc. Southern Air Transport Incorporated (SAT) is an American air carrier, incorporated in the State of Florida on October 31, 1949. From its incep~ion until. its purchase in 1960 by the Central Intelli-gence Agency, it was privately owned. It was purchased by the CIA on August 5, 1960, and owne<;l by the CIA through December 31, Mi11.ini and points in the·Caribbean arid South America. Its associated .company owned the four acre property on w.hich SAT was located. Moreover, it operated at a modest profit ttnd hnd no long term debts. 1973 when the Agency sold the firm back to one -0f its original owners. The dec~sion to aequir~ Southern Air Transport was trj~gered by n . O' the ·~natd gf M1_l1to ril" ~ir t:tA Negotiations for the purchase of SAT were .s11ccessfnl and on Au-gust 5, 1960, the CIA exchanged $~07 \506.l.Q for a 11 outstanding shares of capital stock of SAT a~d its real property ~wning nffilinte. The Agency owned these shares m the name of n former board )'riember of Air America. a ......... ~ Under CIA management Southern Air Tra1isport operated with two semi-autonomous sections: the Pacific and Atlantic Divisions. The Pacific Division .(>8rformed the MATS contract and supported Agency "he.avylift" reqmrements in East Asia. The Atlantic Division con-tinued t-0 operate in the Caribbean and South America: doing the ra s ort · ,llOnkra'fi§· On Apr{ 1, 1960, Air America ha begun ying a seven month A TS contract" operating out of Tachikawa Air Force Base in Japan, to other Pacific locations. In June of 1960, the Department of Defense and the Civil Aeronautics Board changed the regulations governing the awarding of MATS contracts to require that bidders hold at least a Supplemental Certifi-cate of Convenience and Necessity for an air carrier and that they participate in the Civil Reserve Air Fleet Program. Air America di~ not ~eet either of these new criteria and could not obtain appro-priate waivers. The Air America heavy airlift caJ?ability represented an American nsset for use in future operational contingencies throughout the Far East area. Loss. of the :MA. TS contract would result in underutiliza-tion of aircraft and air crews, and the revenues were needed to sustain these assets. Therefore, the CIA proposed that either Air America s'!lould obtain the necessary certification, or that the Agency should buy another commercial firm that already held these certifi-cations. The October 1, 1960 contract date, the need for public hear-~ngs, and lengthy proceedings militated against Air America apply-: mg for the certificate. In order to avoid leng1:h:v public hearings, which would be time-consuming and generate public exposure, it was decided that the ownership of the company to be acquired must be kept completely separate from Air America. This solution was con-curred in by the CAB, DOD, the CIA, and Air America management. It was anticipated that if the new companv were awarded an on-going MA TS contract, it would actually per.form the fh-ing service but would use equipment under conditional sale from Air America ·~ .. same sort of flying SAT had done· prior to Agency acquisition. The Atlantic Division was also able. to furnish sup!!ort for certain sensitive operations. At the peak of its activities, the ~AT fleet, comprised of . both owned and leased aircraft, included Doug!~ DC-6: Boeing 727, and Lockheed L-100 Hercules aircraft. The Sak In 1972 it became apparent tha.t the Agency's air capabilities ex-ceeded its needs, and that political realities and future operntional re-quirements · in the post-war era of Southen.st Asia would not require large~ir proprietary assets. Qn April '21, 1972, the Dire~tor of Central Intelligence authorized the d1vest.ttnre of CIA ownership and control of the Air America complex and Southern Air Transport. He approved recommendations calling for: Air. America to be retained until the end of the war in Southe~t Asia; the immediate elimination of the Pacific Division of SAT; the sale of two 727 aircraft lensed to SAT by Air America; and s~bsequent divestiture. of Agcnc~· ownership and .control oft.he remainder of SAT."' Specific not.e wn~ made that conflict of interest should be avoided and that no employee shoulrl rec.eive a windfall benefit as a re.c;u]t of these transactions.•• · In May 1972, two Agency officials met with the Chairman of the Civil Aeronautics Board nnd his Admhiist.rative Assistant. to !'.eek informal advice as to the best wa.y to disengage from SAT. Three eel alternatives were discussed: ( 1) dissolve the company and sell the ... assets; (2) sell the assets to the <;urrent opera.tors of tht> company; ~nd would employ personnel transferred from Air America. Under mter-company agreements Air America would proYide all mainte-nance work, ground handling. and other services for which it would be reimbursed by the new company. In this wav, Air America would share in the revenues generated -by the MA TS contracts. The pro-~~ ~ posal to purchase a supplement.a] carrier and operate it under the • ahove arrangement was approved by Director of Central Intelligence Allen Dulles on .Tuly 15, 1960. Funds from the Clande,:tine Services A(3) ~ell SAT to, or merge SAT into, one of the other supplemental :..!., carriers. · ~ fl"... . he CAB chairman clisconraged option (3) because it ~would .in.-a. volve public hf'.arinu.1nd wonlrl be subjec:t to criticism by Ult' other C \. r Siipplempnfals: Orrum ( 1 >, alt hough lt'ast trouble.some from the legal buduet for FY 1 !!62 were made available for the purchase. • iij After 'Vorld War II there had been over 200 supplemental carrier~ (J)f'-1,t • m existence. By 12§.0 only l tJXff:iYl i!erMi!i Air America mai:-. agement made :t survev of t e an &?ermme that Southern Al Trai:is:1<_>rt in :Mi~orida. «'tis the most attractive as a purchase · poss1b1hty. It operated two C-46s-one owned, one lensed-between C~:~ ,r-~~~- / 9 ~ 9 u 5 ~),,i A.L_.C-..~ C'flL't.~~G(~~ .. -<-7--/ft-1.~\-d'..- I Av;f:.1.I:.!v A 4 l'v~~ f-i, .11..u:..L a.Ji j.,, -~ . <~~ .d CL &1.1L_ ~0 0:..w~~. Ua.i:;~~ /~4<r-G~a,, a.v ... A . -Lv~-£~,~c ~-IL rf-P~ , ~~-~~~t~ l s~ /I £...\..z-..,a..- /YU..._;:_ de zz~~ ~ 'iw~ .l~ ,0 .. ~ r .. !1}.i, a_~ °to~~ ".p'-7.JAR CIA ' -•The Director determined that "we no. longer ehould rl'taln nlr prnprietarle11 purrly for contlnitent· reqnlrement.11 onrl thot on. the rl'Cord, therl'fnre ... the .Agency "hould divest lti<Plf Of the i-;01\thf'rn Air Trnn~pnrt complf'X entirely. He "tnted that the dP.Rlrnble couri;e of nctlnn " '0111<1 111, cll~:o:olntlnn. althnngh he .renltted th:it the prohlf'mi> were mnny 0111! rnmp•ex. Al··n, hf' dill nnt rnle out othPr snlntinn" whl<'h ml2ht nrhleve the P.nrl nncl ;ret hf'lt.f'r i;ntlRf,\' tht> lnterei>t" nt oil con("{'med. •A condition lmpnRt>d hy fhe DCI ?:o:o: thnt. "In thl' dl11pnllltln11 of any of the ns11et.R lnvnlvf'fl . nothl'ng inure to the hf'nf'ftt. of A11:<'nry l'ml'lny<'f'R or fntmrr I'm· plnyreA or Pf'r!'nn" wb0Re ·relntlnn,.hl11 ~Ith the Agl'TI<'Y ~as been nr 111 of such n nature ns might rnlee a que11tlon oi conflict of Interest. , . vh ~ ~ ~ 14cµ- cf~~ A~,..Oh~ OM<)_  ~ · ~~b ~ Jl1l- ~-"'~ 11f L0uz. t:!.JA· · · I 1510 Boardwalk• Ocean City, NJ 08226 • 609-399-8812 FAX 609-399-0387 • 800-334-4546 . I 

The Sale of Southern Air Transport

https://commons.erau.edu/cgi/viewcontent.cgi?article=1093&context=aviation-pioneers-association

The Sale of Southern Air Transport

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