Air America

History of Air America

Air America was an American passenger and cargo airline covertly owned and operated by the Central Intelligence Agency (CIA) from 1950 to 1976. It played a significant role in supporting U.S. covert operations in Southeast Asia, particularly during the Vietnam War. Below is a detailed history of its origins, operations, controversies, and dissolution.

Origins

Air America traces its roots to 1946, when it was founded as Civil Air Transport (CAT) by former American military aviator Claire Lee Chennault, famous for leading the Flying Tigers during World War II, and diplomat Whiting Willauer. Initially named Chinese National Relief and Rehabilitation Administration (CNRRA) Air Transport, the airline was established under the pretense of airlifting humanitarian supplies and food into war-torn China following World War II. CAT supported Generalissimo Chiang Kai-shek and the Nationalist Republic of China Armed Forces during the Chinese Civil War against Mao Zedong’s Communist forces.

CAT primarily flew cargo and passenger services, with many of its pilots being veterans of Chennault’s Flying Tigers. Its aircraft, including Curtiss C-46 Commandos and Douglas C-47s, transported supplies to Nationalist strongholds. By 1949, the Nationalists were defeated and retreated to Taiwan, leaving CAT nearly insolvent as its primary contracts dried up. Chennault lobbied the U.S. State Department, arguing that CAT’s assets and expertise could counter Communist expansion in Asia.

In August 1950, the CIA secretly purchased CAT through a holding company, American Airdale Corporation, to utilize its air transport capabilities for intelligence-gathering and covert operations. CAT continued to operate commercial flights out of Taiwan while taking on clandestine missions.

Reorganization and Renaming to Air America

In 1951, CAT was reorganized under CIA control, though it retained its name and commercial operations to maintain a cover of legitimacy. The CIA’s ownership was obscured through complex corporate structures, including the Pacific Corporation established in 1957, which acted as a holding company for CAT, Air America, and other entities like Southern Air Transport.

In 1959, CAT was renamed Air America after objections from Air France and American Airlines delayed the transition for two years. The slogan “Anything, Anywhere, Anytime, Professionally” reflected its versatile and covert mission profile.

During the 1950s, CAT supported U.S. efforts in the Korean War (1950–1953) by airlifting thousands of tons of war materials under contracts like Operation Booklift for the Far East Material Command (FEAMCOM). It also conducted covert missions, including supply drops to "anti-Communist" forces and intelligence operations in China. In 1954, CAT aircrews delivered supplies to French forces at Dien Bien Phu in Indochina.

Expansion and Role in Southeast Asia

With the escalation of the Cold War and U.S. involvement in Southeast Asia, Air America became a critical asset for CIA operations, particularly in Laos, Vietnam, and Cambodia. The airline operated under the guise of a civilian commercial entity, allowing it to access areas restricted to U.S. military forces due to treaties or political sensitivities.

Air America operated a diverse fleet, including: Fixed-wing aircraft: Curtiss C-46 Commando, Pilatus PC-6 Porter, de Havilland Canada DHC-4 Caribou, Lockheed C-130 Hercules, Fairchild C-123 Provider, Boeing 727, and Boeing 747. Helicopters: Sikorsky UH-34D, Bell 204B, Bell 205, and Boeing CH-47C Chinook. By mid-1970, the airline had approximately two dozen twin-engine transport aircraft, two dozen short-takeoff-and-landing (STOL) aircraft, and 30 helicopters.

Air America operated from bases in South Vietnam, Laos, Cambodia, Thailand, Taiwan, and Japan, with occasional missions into Burma and the People’s Republic of China. Its headquarters were in Washington, D.C., with maintenance facilities in Arizona.

===Operations From 1959 to 1962, Air America supported U.S. Special Forces operations like Ambidextrous, Hotfoot, and White Star, which trained the Royal Laotian Armed Forces. After 1962, Project 404 deployed U.S. Army and Air Force attachés to the U.S. Embassy in Vientiane, Laos, with Air America providing logistical support.

Air America pilots conducted high-risk missions to rescue downed U.S. pilots throughout Southeast Asia, often under the control of the Seventh/Thirteenth Air Force. These civilian-marked aircraft allowed operations in areas where military aircraft were restricted. The airline conducted “rice drops” to deliver food, livestock, and seeds to counter the effects of chemical agents like Agent Orange. It also performed medical evacuations (MEDEVAC) and supported USAID’s "anti-narcotics" programs.

Air America transported CIA operatives, diplomats, and commandos to remote airstrips, including along the Vietnamese-Laotian border. Pilots like Dan Kurtz orchestrated these missions, blending civilian and covert roles. Many Air America employees were unaware of the CIA’s ownership due to strict secrecy. Pilots, often ex-military or civilian-trained, faced extreme conditions, navigating mountainous terrain and hostile areas with minimal navigation aids. Over 240 CAT and Air America employees lost their lives between 1946 and 1975.

Drug Smuggling

Air America has been linked to allegations of involvement in drug trafficking, particularly opium and heroin, during the Laotian Civil War. These claims remain controversial and debated.

• Allegations: Historian Alfred W. McCoy and others, including former CIA paramilitary officer Anthony Poshepny and some Air America pilots, alleged that the airline transported opium and heroin, particularly for Hmong leader Vang Pao, or turned a blind eye to the Laotian military’s drug activities. The Hmong, allied with the CIA against the Pathet Lao, relied on poppy cultivation for income after the Plain of Jars was captured in 1964, limiting access to traditional transport routes. McCoy claimed Air America flew opium from northern Laos to Vang Pao’s headquarters at Long Tieng.

• Denials: Aviation historian William M. Leary, citing physician Joseph Westermeyer (resident in Laos from 1965–1975), argued that Air America did not knowingly transport drugs or profit from the trade. Historian Curtis Peebles also denied employee involvement. McCoy clarified that the CIA’s role was more about “complicity, tolerance, or studied ignorance” rather than direct trafficking, providing transport and protection to drug lord allies.

• Context: The CIA’s covert war in Laos relied on local allies like Vang Pao, whose economic survival depended on opium. The agency’s focus on anti-Communist operations may have led to overlooking drug activities to maintain alliances. The 1990 film Air America, starring Mel Gibson, dramatized these allegations but was criticized for inaccuracies.

The full extent of Air America’s involvement in drug trafficking remains inconclusive due to limited declassified records and conflicting accounts.

Final Years and Dissolution

As the Vietnam War wound down, Air America’s role diminished:

• Operation Frequent Wind (1975): Air America played a critical role in the evacuation of Saigon, using helicopters to extract American citizens and South Vietnamese civilians as North Vietnamese forces overran the city. Pilots’ trip reports detail the chaotic final days of April 28–29, 1975.

• Dissolution: With the U.S. withdrawal from Vietnam, Air America was disbanded in June 1976. Its assets were sold to Evergreen International Airlines, and proceeds were returned to the U.S. Treasury. A brief attempt to continue operations in Thailand under Continental Air Services Inc. (CASI) fizzled out by 1975.

• Legacy: Air America’s story is preserved through archives at the University of Texas at Dallas and the Air America Association, which highlight its contributions and sacrifices. Former pilots continue to seek recognition and benefits for their service.

Connection to Operation Gladio

The 1950s: Roots in Southeast Asia and the CIA’s Drug Trade Model

The origins of the Nugan Hand Bank lie in the post-World War II geopolitical struggles of Southeast Asia, where the CIA forged alliances with local warlords and criminal networks to secure funding for covert paramilitary operations under the guise of containing communism. In 1950, as Chiang Kai-shek’s Kuomintang (KMT) forces fled Mao Zedong’s Communist victory in China, they settled in Burma’s Shan Plateau, a region that would become the heart of the Golden Triangle’s opium production (The Secret History of the CIA, p. 346). The CIA, under the direction of Allen Dulles and operatives like Paul Helliwell, saw an opportunity to fund covert paramilitary operations (Gladio) through the drug trade. Helliwell, stationed in Kunming, China, during the war, observed the KMT’s opium sales to Chinese addicts as a revenue source for their fight against Mao (Operation Gladio, p. 30). With approval from OSS leaders like William Donovan and James Angleton, Helliwell established a model for drug trafficking that would persist for decades: using surplus aircraft to transport weapons to KMT forces and return with opium (Operation Gladio, p. 30; Twilight of the Shadow Government, p. 233).

This model materialized through the creation of Civil Air Transport (CAT), co-founded by General Claire Chennault, a military advisor to Chiang Kai-shek, and Whiting Willauer (One Nation Under Blackmail, p. 16). CAT, initially a private airline, transported arms to KMT troops in Burma, with pilots—described as a mix of former Nazis, expatriates, and mercenaries—flying drugs back to China and Thailand (Operation Gladio, p. 30; The Secret History of the CIA, p. 346).

By 1950, CAT was a CIA proprietary airline, operating under the Airdale Corp (later Pacific Corp), and would evolve into Air America by the 1960s (One Nation Under Blackmail, p. 16). In Bangkok, Helliwell’s Sea Supply Corporation facilitated these operations, delivering weapons and food to KMT forces and shipping opium to markets in Taiwan and Thailand (The Secret History of the CIA, p. 346). This early nexus of intelligence, military, and criminal elements set the stage for the Nugan Hand Bank’s later activities.

Simultaneously, the CIA’s involvement in Vietnam began with operatives like Edward Lansdale and Lucien Conein, who collaborated with the Corsican Mafia to manage Saigon’s opium trade (The Politics of Heroin, p. 15). The French, through Operation X (1946–1954), had already established a precedent for using opium profits to fund anti-communist guerrillas, with Colonel Antoine Savani organizing river routes to smuggle drugs from Laos to Saigon (Whiteout, p. 16). Lansdale, discovering this in 1953, was rebuffed by Washington when he proposed an investigation, highlighting the CIA’s early tolerance of drug trafficking by allies (The Politics of Heroin, p. 140).

The 1960s: The Vietnam War and the Expansion of the Drug Trade

The Vietnam War escalated the CIA’s reliance on drug networks, with Air America becoming a central player. By the early 1960s, the agency was deeply embedded in Laos, supporting General Vang Pao’s Hmong army against the Pathet Lao (The Politics of Heroin, p. 291). Vang Pao’s control over Hmong opium production, facilitated by Air America’s transport capabilities, transformed Long Tieng into a hub for opium and heroin processing (The Politics of Heroin, pp. 304–305; Whiteout, p. 20). Hmong farmers, freed from rice cultivation by USAID rice drops, focused on opium as a cash crop, with Vang Pao’s officers purchasing harvests and flying them to markets in Vientiane and Saigon (The Politics of Heroin, pp. 317–318; Blond Ghost, p. 149).

In 1966, Michael Hand, a Green Beret and CIA operative, began working with Hmong tribesmen to transport opium via Air America, laying the groundwork for his later role in the Nugan Hand Bank (The Great Heroin Coup, p. 274). Hand’s colleague, Bernard Houghton, a CIA-linked figure, operated rest-and-recreation tours for GIs in Sydney, establishing connections with Australian intelligence (Prelude to Terror, p. 36). Both men, under the supervision of Ted Shackley, the CIA’s Vientiane station chief from 1966 to 1968, used Air America to move drugs and launder profits through the Royal Thai Military Bank (Prelude to Terror, p. 36; The Great Heroin Coup, p. 274).

Shackley, a pragmatic operator, prioritized the war effort over curbing drug trafficking (Prelude to Terror, p. 33). His station collaborated with Laotian generals like Ouane Rattikone and Phoumi Nosavan, both deeply involved in the opium trade (Blond Ghost, pp. 148–149). In 1967, during the Opium War, Rattikone’s forces, backed by U.S.-supplied aircraft, seized a 12-ton opium shipment, consolidating his control over Laos’s drug trade (Blond Ghost, p. 149).

The CIA’s complicity was evident when Air America pilots, unaware of the cargo, transported opium from remote Hmong villages to Long Tieng (The Politics of Heroin, p. 304; Whiteout, p. 20). A 1967 USAID initiative to fund Vang Pao’s private airline, Xieng Khouang Air Transport, further streamlined opium transport, with flights between Long Tieng and Vientiane carrying drugs alongside relief supplies (One Nation Under Blackmail, p. 157; The Politics of Heroin, p. 318).

The Corsican Mafia, once dominant in Southeast Asia, faced challenges as costs rose and local warlords like Rattikone gained power (The Great Heroin Coup, p. 132). By 1968, when William Colby arrived as deputy to the ambassador for CORDS in Vietnam, the CIA’s drug connections were entrenched. Colby, who had overseen Laos operations from 1962 to 1966, was aware of Air America’s role but focused on programs like Operation Phoenix, which targeted Viet Cong infrastructure (The Great Heroin Coup, p. 132; Lost Crusader, p. 209). The heroin epidemic among GIs, with 15–22% of U.S. soldiers sampling or becoming addicted by 1970, underscored the scale of the trade (The Great Heroin Coup, p. 134).

The 1970s: The Birth of Nugan Hand and Global Expansion

The Nugan Hand Bank emerged in 1969 as a successor to Helliwell’s offshore banking empire, which collapsed after IRS scrutiny exposed its CIA links (The Great Heroin Coup, p. 274). Frank Nugan, an Australian lawyer, and Michael Hand, now a seasoned CIA operative, founded Australian and Pacific Holdings in Sydney, ostensibly to develop a resort (In Banks We Trust, p. 66). The company’s shareholders included four Air America employees, one from Continental Air Services, and five from USAID, all tied to CIA operations in Indochina (The Great Heroin Coup, p. 274). This venture served as a front, providing loans to Nugan to establish the Nugan Hand Bank in 1973 (In Banks We Trust, p. 66).

Nugan Hand Bank, headquartered in Sydney, offered high interest rates, tax-free deposits, and secrecy, attracting depositors and criminal clients like the “Mr. Asia” heroin syndicate (In Banks We Trust, p. 70). Its branches, eventually numbering twenty-two worldwide, were staffed by former CIA and military officials, including William Colby (legal counsel), Walter McDonald (consultant), and Dale Holmgren (Taipei branch manager, formerly with Air America) (In Banks We Trust, p. 74). Houghton, operating out of Sydney, leveraged his Bourbon and Beefsteak restaurant as a hub for CIA and Australian intelligence activities (Prelude to Terror, p. 36).

The bank’s primary function was laundering drug money, particularly from the Golden Triangle. Air America, despite official denials, continued to transport opium, with pilots like Del Rosario reporting coded shipments marked “diverse” (Prelude to Terror, p. 37; The Great Heroin Coup, p. 134). In Long Pot village, Hmong farmers sold opium to Vang Pao’s officers, who used Air America helicopters to ship it to Long Tieng (The Politics of Heroin, pp. 325–327; Blond Ghost, p. 149). By 1971, Vang Pao operated a heroin laboratory at Long Tieng, producing high-grade no. 4 heroin for GI addicts in Vietnam (The Politics of Heroin, p. 321). The Nugan Hand Bank facilitated the movement of these profits, with clients like Murray Riley smuggling heroin to the U.S. via Australia (The Great Heroin Coup, p. 276).

The CIA’s role in Laos faced scrutiny as the war wound down. In 1971, Alfred McCoy’s research exposed Air America’s drug transport, prompting threats and intimidation from the CIA (The Politics of Heroin, pp. 618–619). A 1972 Inspector General report acknowledged that Laotian officers were drug traffickers but denied Agency involvement, claiming Air America’s policies forbade contraband transport (Blond Ghost, p. 148). However, the report admitted that the CIA relied on these officers’ goodwill, highlighting the moral ambiguity of its operations (Blond Ghost, p. 149).

The fall of Saigon in 1975 marked the end of Air America’s operations, with its assets sold to Evergreen International Aviation, a CIA-linked firm (One Nation Under Blackmail, p. 16). Vang Pao fled to Thailand, later settling in Montana with CIA assistance (The Politics of Heroin, p. 331). The Nugan Hand Bank, however, continued to thrive, expanding into Hong Kong, Thailand, and the Bahamas, serving as a conduit for drug money and CIA black funds (In Banks We Trust, p. 70).

The Late 1970s: Afghanistan and the Bank’s Peak

As the Vietnam War ended, the CIA shifted focus to Afghanistan, where the Soviet invasion in 1979 provided a new theater for covert operations (Charlie Wilson’s War, p. 288). The agency, under Operation Cyclone, funded mujahideen rebels, including Gulbuddin Hekmatyar, a known heroin trafficker (The Politics of Heroin, p. 476). Afghan opium production tripled between 1979 and 1982, capturing 60% of the U.S. and European heroin markets (Whiteout, p. 260).

The Nugan Hand Bank, with its global network, likely facilitated the laundering of these profits, though direct evidence is scarce (The Great Heroin Coup, p. 221). In Australia, the bank’s operations drew attention. Murray Riley’s 1978 arrest for smuggling Thai marijuana and heroin exposed its role in drug money laundering (The Great Heroin Coup, p. 276). By 1979, the bank was under investigation, with Australian authorities uncovering its ties to CIA operatives and drug networks (In Banks We Trust, p. 70).

The 1980s: Collapse and Legacy

The Nugan Hand Bank’s downfall began in 1980 when Frank Nugan was found dead in his car, an apparent 'suicide', amid mounting legal pressures (In Banks We Trust, p. 70). Michael Hand fled Australia, reportedly with CIA assistance, and the bank collapsed, leaving creditors and investigators to unravel its murky dealings (The Great Heroin Coup, p. 276). A 1983 Australian inquiry criticized the bank’s operations but failed to fully expose its CIA connections (Prelude to Terror, p. 179).

The bank’s collapse coincided with the rise of the Bank of Credit and Commerce International (BCCI), which inherited Nugan Hand’s role as a CIA-linked financial conduit (Prelude to Terror, p. 179). BCCI, backed by Saudi financier Kamal Adham, laundered money for CIA operations in Afghanistan and Central America, including the Iran-Contra affair (One Nation Under Blackmail, p. 507). Former Nugan Hand operatives, like Houghton, continued to work with CIA networks, ensuring continuity in the agency’s financial operations (Prelude to Terror, p. 60).

The legacy of the Nugan Hand Bank lies in its exposure of the CIA’s deep entanglement with the global drug trade. From Helliwell’s opium pipeline in the 1950s to Shackley’s operations in Laos, the agency prioritized geopolitical goals over ethical concerns, using drug profits to fund covert wars (Operation Gladio, p. 30; Blond Ghost, p. 147). The bank’s collapse did not end this practice, as seen in Afghanistan and later in Central America, where figures like Felix Rodriguez and Thomas Clines, both tied to Shackley’s Laos network, facilitated drug-funded operations (Blond Ghost, p. 386; One Nation Under Blackmail, p. 157).

Epilogue: A Persistent Shadow

The Nugan Hand Bank’s story reveals a persistent alliance between the CIA, organized crime, and financial networks, operating through covert wars and drug trafficking. From the KMT’s opium fields in Burma to the Hmong’s poppy harvests in Laos, and from Air America’s flights to the bank’s offshore accounts, this nexus shaped global events while fueling heroin epidemics (The Politics of Heroin, p. 476; Whiteout, p. 260). Figures like Shackley, Hand, and Houghton bridged these worlds, their actions obscured by classified records and official denials (Blond Ghost, p. 148; A Look over My Shoulder, p. 255). As McCoy noted, the CIA’s bureaucratic victories silenced critics, but the truth of its complicity endures, casting a long shadow over American intelligence (The Politics of Heroin, p. 260).