In NJ(Edited to add: Ah, was writing this while others had similar ideas before me. Anyway, I've left this unchanged.)
Maybe a reflection of internal light fixtures?
If so I think the witnesses would become aware of this pretty quickly.
Had a look at Grumman HU-16 (formerly SA-16) Albatross cabins on the net and they appear to have a row of circular lights in the aft cabin ceiling. They look almost flat or recessed, though.
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Last pic posted by Eric Friedebach on flickr, with some background information
link here.
Wikipedia page on Grumman HU-16 Albatross,
https://en.wikipedia.org/wiki/Grumman_HU-16_Albatross
It seems quite a few of these aircraft were sold onto civilian owners, so it's hard to tell which pictures on the net show "authentic" cabins as used in service and which show tarted-up civilianized interiors.
Other light sources on-board I've seen include an oscilloscope-type device (see topmost pic, for maritime radar?) and in one or two cabins, desktop-style lamps.
Were disposable moulded transparent plastic containers a thing in 1954? The things in the photo look a bit like something you might have over a shop-bought cake or trifle. I'm wondering if something of that type might have been, um, accidentally stuck over a light within the aft cabin. Or maybe a rather ornate bulb cover (or two) found its way onto the aircraft.
I was originally confused by references to the Republic of The Philippines in the USAF report, as the aircraft was said to be 100 miles (approx. 161 km) southeast of Galveston Bay on its way to Alexandria Air Force Base, Louisiana (Jan. 1954).
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-But no real mystery; it would seem the report was made by the relevant airman some months later while serving in the 13th Air Force, which was based in the Philippines throughout the Cold War
https://en.wikipedia.org/wiki/Thirteenth_Expeditionary_Air_Force
If the airmen concerned genuinely believed they were seeing powered flying craft, I find it difficult to believe- in the context of 1950s media coverage of flying saucers- that the guy who belatedly reported the sighting, Staff Sergeant Donald R. Andrus,
External Quote:
...was unaware of the intelligence value of the information
(USAF Captain Bryant, on 1st page of the Air Intelligence Information Report), particularly when he had a rather striking photo.
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When the photo was developed, it seems strange (to me) that SSgt Andrus didn't bring it to the attention of his seniors.
And maybe show his evidence to the guys who took "a humorous view of the whole subject", with the support of his fellow witnesses.
Lucky that he took the photo to the Philippines so it could be submitted when he decided to make a report.
Screen clippings above are from AF Form 112, Air Intelligence Information Report IR-31-54 28, July 1954,
posted by OP Giddierone