ATW Editor's Blog

Norwegian Air dismissal would undermine EU-US Open Skies

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Some six months after Norwegian Air Shuttle applied for US permission to launch flights of its long-haul, low-cost operation, Norwegian Air International (NAI), between Europe and the US, the company is still waiting for a yes or no from the Department of Transportation. Though a decision was hoped for this week, NAS said today that DOT has announced it needs yet more time.

Latest filings to DOT for and against the application show the two sides digging in. The European Commission and NAI argue there is no basis to deny the application, while unions and some European flag carriers and US carriers have formed an alliance whose objections hinge on where NAI is registered (Ireland rather than Norway) and the oversight questions that potentially raises.

Labor is right to be concerned about setting a precedent for a “flags of convenience” business model creeping into the airline industry. No one wants to see the sort of negligence happening in aviation that this has encouraged in the maritime industry.

However, that is an important but separate issue and it is being used as a distraction to delay or dismiss what is a valid application by NAI under the EU-US Open Skies agreement. While Norway is not an EU member, the agreement allows carriers to operate from any EU country to the US. And under those rights, Norwegian Air Shuttle already operates flights from London Gatwick to three US cities.

It would serve nobody’s interests, least of all those of the Norwegian brands already flying or being planned, to skirt around safety and security obligations, as is being implied by the opponents.

NAI, if it gets the go-ahead, would not operate without regulatory oversight; rather, it has opted for the oversight of another European country. I challenge the opponents to prove that Ireland is “less safe” than Norway as an air transportation regulator.

For sure, NAI is looking to keep its labor costs at a point where it can provide a low-cost transatlantic service and be profitable. In an already highly competitive market, that will be a tough task. Point-to-point long-haul, low-cost models historically have not seen much success. But that is no reason to stop a company from trying the market, and the EU-US Open Skies agreement was forged with the aim of encouraging new entrants.

DOT seems willing to listen to the EC’s argument that the point of controversy – Article 17 of the EU-US agreement relating to labor – does not permit DOT to reject NAI’s application unilaterally. Some further discussion and clarification of that article may be warranted.

But the over-riding issue here is that NAI’s application should not be skewed in a way that could potentially undermine the open skies agreement. That agreement was a major breakthrough for European and US airlines, giving them the freedom to operate in what remains the most important air transportation market. It provided them the opportunity to create a business in what had for too long been a closed market for the lucky few legacy holders. That is especially true of London Heathrow.

NAI should be allowed to access the transatlantic market that EU-US Open Skies clearly permits. And then, as with all business models, the market can decide if it is up to the challenge.

Some six months after Norwegian Air Shuttle applied for US permission to launch flights of its long-haul, low-cost operation, Norwegian Air International (NAI), between Europe and the US, the company is still waiting for a yes or no from the Department of Transportation. Though a decision was hoped for this week, NAS said today that DOT has announced it needs yet more time.

Latest filings to DOT for and against the application show the two sides digging in. The European Commission and NAI argue there is no basis to deny the application, while unions and some European flag carriers and US carriers have formed an alliance whose objections hinge on where NAI is registered (Ireland rather than Norway) and the oversight questions that potentially raises.

Labor is right to be concerned about setting a precedent for a “flags of convenience” business model creeping into the airline industry. No one wants to see the sort of negligence happening in aviation that this has encouraged in the maritime industry.

However, that is an important but separate issue and it is being used as a distraction to delay or dismiss what is a valid application by NAI under the EU-US Open Skies agreement. While Norway is not an EU member, the agreement allows carriers to operate from any EU country to the US. And under those rights, Norwegian Air Shuttle already operates flights from London Gatwick to three US cities.

It would serve nobody’s interests, least of all those of the Norwegian brands already flying or being planned, to skirt around safety and security obligations, as is being implied by the opponents.

NAI, if it gets the go-ahead, would not operate without regulatory oversight; rather, it has opted for the oversight of another European country. I challenge the opponents to prove that Ireland is “less safe” than Norway as an air transportation regulator.

For sure, NAI is looking to keep its labor costs at a point where it can provide a low-cost transatlantic service and be profitable. In an already highly competitive market, that will be a tough task. Point-to-point long-haul, low-cost models historically have not seen much success. But that is no reason to stop a company from trying the market, and the EU-US Open Skies agreement was forged with the aim of encouraging new entrants.

DOT seems willing to listen to the EC’s argument that the point of controversy – Article 17 of the EU-US agreement relating to labor – does not permit DOT to reject NAI’s application unilaterally. Some further discussion and clarification of that article may be warranted.

But the over-riding issue here is that NAI’s application should not be skewed in a way that could potentially undermine the open skies agreement. That agreement was a major breakthrough for European and US airlines, giving them the freedom to operate in what remains the most important air transportation market. It provided them the opportunity to create a business in what had for too long been a closed market for the lucky few legacy holders. That is especially true of London Heathrow.

NAI should be allowed to access the transatlantic market that EU-US Open Skies clearly permits. And then, as with all business models, the market can decide if it is up to the challenge.

Discuss this Blog Entry 3

on Sep 4, 2014

Whilst I respect Karen's views and often agree with her analysis of Industry matters, I disagree strongly with her take on NAI (and its attempts to circumvent European & US Labour laws). Ask yourself the following questions:

1/ Should the banner of "free trade" really be used to justify flagging out, allowing a non EU member carrier to operate on an Irish AOC with crews based in Thailand employed on a Singaporean contract (flying scheduled services between London & the USA)?

2/ Even if this proposal is legal does it comply with the intent of US & EU legislation promoting free trade, and does it actually constitute best practice?

3/ The Irish CAA is small and under resourced (compared to either the US FAA or UK CAA), and it is located remote from any of NAI's proposed operating bases. Does ATW's editor view it as simple coincidence that the Irish register is the preferrred option for so many leasing companies & low cost carriers? Does Karen really believe that regulatory oversight is a level playing field?

If the authorities allow a Norwegian company to circumvent EU & US labour laws so easily this will likely undermine & undercut other responsible airlines (who are complying fully with EU & US labour laws, paying taxes locally, and offering stable & secure employment to thousands of employees).

Open Skies and Free Trade by all means.
But Flags of Convenience? No thanks

on Sep 4, 2014

All the arguments and counter-arguments on the NAI issue just boil down to one thing; discomfort of the labor unions on both sides of the Pond of their positions being under-mined. However, whether one accepts it or not, winds of change are blowing harder every passing day and resistance is going to be futile.

The writing is clearly on the wall; global businesses and not just aviation are driving change towards lowering costs as much as possible to optimize returns for their stakeholders and investors and this process is inexorable, whether one likes it or not.

‘Home country labor regulations’ are fast becoming irrelevant in today’s global environment where organizations are contracting out virtually all processes and showing just a handful of employees on the rolls. This explains why Norwegian’s AOC is Irish, the crew is based out of Thailand on a Singapore contract and will be flying between Europe and the US. How much more global could an enterprise be..?

Those opposing the entry of NAI into the US may perhaps be successful in stalling the process but more sooner than later the edifices of resistance are going to start crumbling…

Finally, whatever decision is taken by the US DoT, it should be thoroughly thought-out and based squarely upon the merits of the application and more importantly, one which it should be able to firmly defend, either which way.

on Sep 5, 2014

NAI request is a clear ''flags of convenience '' issue and I feel it is against the regulatory form of air transport agreed upon between states in the Chicago convention which is the base of all BASA bilateral air services agreements around the world ..and if agreed to NAI this will encourage states to ignore the stable air services agreements and ignore regulation which safeguard air transport for decades and will open the door for flag of convenience which is against the safety and security of air transport in addition to many other reasons

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