ATW Editor's Blog

Norwegian becomes the new “Gulf” target in the transatlantic battle

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Perhaps not surprisingly, last month’s announcement by the US Department of Transportation that Norwegian Air International (NAI) should be granted a foreign carrier permit has so far not unclogged the way for NAI to begin transatlantic services.

Rather, opponents of NAI have used the period given for objections to be filed – which was originally scheduled to close May 6– to restate their objections and to extend the objection period by 10 days.

In addition, four US lawmakers have joined forces to create a bill seeking to prohibit DOT from issuing a permit.

The extension request was made by ALPA, and followed up by labor groups on both sides of the Atlantic, and means that the deadline for objections is now May 16. A further seven-day period will follow for responses, so the earliest the docket could close is May 23.

Meanwhile, two Democrat House Representatives - Peter DeFazio and Rick Larsen – and two Republicans - Frank LoBiondo and Lynn Westmoreland -- have introduced a bill that would prohibit DOT from issuing a foreign air carrier permit to any European Union airline unless the US Secretary of Transportation finds that granting a permit would comport with “intent” of Article 17 bis, a hortatory labor provision in the US-EU Open Skies agreement that has been at the center of the case for those opposing NAI’s application.

So far, opponents appear to have raised no new legal basis that would dismantle DOT’s decision that NAI “appears to meet DOT’s normal standards for award of a permit and … there is no legal basis to deny NAI’s application”.

DOT specifically addressed the labor issue, stating the provision in the US-EU agreement that addresses labor does not form a basis for rejecting an applicant that is otherwise qualified to receive a permit.  In other words, DOT is not empowered by the agreement to sit in unilateral judgment on a European carrier’s compliance with European labor standards, just as a European country could not deny a permit to an American carrier because it doesn’t like US labor practices.

NAI, an Irish-flag subsidiary of Norwegian Air Shuttle, would operate its US services out of Cork and Shannon – a fact that led labor groups to charge the company with “flag of convenience” operations. But NAI applied for its permit well over two years ago; it stretches belief that the lawyers of ALPA or other unions could now find a legal loophole in 10 days that they did not unearth in almost 30 months of digging.

So is this merely delaying tactics? Perhaps. Although a few extra days does not seem much, given the long, drawn-out process thus far, low-cost carrier NAI’s target market is very much seasonal and leisure-based. Reach the end of May, as now seems inevitable, and the airline’s first summer season is significantly shortened, potentially making it harder to establish a foothold in its all-important launch period.

More likely, however, the unions and opponents are buying time to gain congressional support. Congress is out this week, so the extension helps compensate for that and may enable some momentum to build behind the DeFazio bill. 

But to what purpose? The rhetoric from unions and the DeFazio bill supporters is broadly based on American jobs protection and, more worryingly, on what ALPA calls “serious flaws in US aviation policy”.

That points to a fundamental questioning of US Open Skies, a policy that has opened doors and international markets to US airlines on a scale unimaginable before they were conceived. And with that access, created thousands of jobs for US pilots and flight attendants – including far better career opportunities on long-haul, international routes.

For newcomers such as NAI to come along and try to enter the market is neither surprising nor bad. If they operate by the rules – and in this case DOT has decided after a significant and lengthy investigation that they do – then the point of Open Skies is, let them play. To be sure, the established players on either side of the Atlantic still hold all the advantages with their immunized joint ventures (thanks to Open Skies), massive networks, loyalty programs and inherited slots at some of the most coveted hub airports on the globe.

It’s therefore a brave company that chooses to launch a low-cost carrier in that market, but Open Skies was a courageous, pioneering concept and none has benefited from it more than American, Delta and United.

The campaign against NAI now looks increasingly similar to the almost-fizzled campaign against the Gulf carriers. There, too, the opportunities were available to both sides – in the US as well as in the UAE and Qatar – through Open Skies agreements with those Gulf countries. In this case, of course, the opportunity was seized by “the other side” until their surprising success prompted the US carriers and their union groups to cry foul.

Many believe the tipping point for US airlines was when Dubai-based Emirates launched its Dubai-Malpensa, Italy-New York service, valid under the Open Skies rules but putting a Gulf carrier into the transatlantic market.

That, some would say, was when the gloves came off because the transatlantic market is so profitable to the three US international majors (and, for that matter, to their alliance partners in Europe). So the fight began in earnest. With recognition that little headway can be made, at least in this election year, on revising the Open Skies with the Gulf countries, the focus swung to the US-EU agreement and Norwegian.

But existing players on both sides of the Atlantic would do well to remember one thing. They are all doing well in the transatlantic market because of, not despite, Open Skies.

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