From Inauguration to Arbitration: Norwegian Air International’s Brief, Entangled History
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APEX Insight: At the end of last month, European Commissioner of Transport Violeta Bulc confirmed that the dispute surrounding Norwegian Air International’s two-year-old application for a US foreign carrier permit would be moved to arbitration. For all of the arguments against NAI, the carrier hasn’t violated any laws and is optimistic about being granted approval by the DOT.
“At a time when closer bilateral ties are being put into question by many sectors of our societies, we should carefully consider the implications that this long and protracted dispute could have,” wrote European Commissioner of Transport Violeta Bulc in a letter to US Secretary of Transportation Anthony Foxx last week. The dispute in question is that surrounding Norwegian Air International’s (NAI) two-year-old application for a foreign carrier permit, and the commissioner’s words confirm the European Union’s decision to move the issue to arbitration.
“We should carefully consider the implications that this long and protracted dispute could have.” – Violeta Bulc, European Commissioner of Transport
This latest step, sanctioned by a dispute-settlement clause in the EU-US Open Skies Agreement but never before invoked in its eight-year history, is meant to compel the Department of Transportation (DOT) to grant NAI official authorization following the department’s inaction since announcing a tentative approval in April.
It’s Complicated
NAI was inaugurated in April 2013 and received its Irish Air Operator Certificate (AOC) on February 14 the following year, making it a wholly owned subsidiary of Norwegian Air Shuttle (NAS), but an Irish airline nonetheless. The carrier’s hybridity is at the center of the conflict surrounding the long-drawn-out establishment of its transatlantic service. Although most carriers based in EU member states, such as Ireland, are able to secure foreign carrier permits relatively easily, NAI has yet to receive one, despite having applied on December 2, 2013, at which point it also filed for an exemption to begin operations without a permit: It was denied.
Though not a member of the EU, Norway participates in the union’s Open Skies Agreement with the US under the amended US-EU (Iceland, Norway) Air Transport Agreement of 2011. This means that NAS can fly from anywhere in Europe to anywhere in the US without restriction. However, Norwegian carriers are not privy to the same rights when it comes to services from Europe or the US to other international destinations such as South America and Asia – a hindrance that would be resolved once the company’s Irish subsidiary receives approval from the DOT. According to a report by the Centre for Aviation, “Before obtaining a UK license, Norwegian could not operate from the UK to destinations in Asia, South America and Africa … Opening traffic rights with a wide range of nations in this way, under the UK’s bilateral agreements, was Norwegian’s motivation for obtaining a UK license.” Norwegian has also cited Ireland’s adoption of the Cape Town Convention, which provides airlines with optimized aircraft financing and improved creditors’ rights, as a motivation for its choice of location.
“Norwegian Air International will have achieved an unfair competitive advantage over US carriers in the transatlantic marketplace.” €” Delta Air Lines, United Airlines and American Airlines
The Opposition: Don’t Join US
US legacy carriers Delta, United and American have vehemently opposed NAI’s application on the basis that the low-cost carrier (LCC) is using Ireland as a “flag of convenience” to circumvent Norway’s labor laws and hire low-paid pilots and cabin crew through offshore Asian companies, thereby weakening working conditions and bypassing safety regulations. “If Norwegian Air Shuttle and Norwegian Air International are allowed to exploit the US-EU agreement to avoid otherwise applicable labor laws, Norwegian Air International will have achieved an unfair competitive advantage over US carriers in the transatlantic marketplace,” they said in a joint response in January 2014.
“Too many questions have been raised about Norwegian Air International’s practices and plans.” €” Hillary Clinton, Democratic Presidential Nominee
Even Bernie Sanders and Hillary Clinton have joined in, recently entreating the Obama administration to rebuff the airline’s application. “The US Department of Transportation should reverse its tentative decision to approve this permit. We should be working to expand, not cut, good paying jobs across both the United States and the European Union,” Sanders said. Clinton concurs: “Too many questions have been raised about Norwegian Air International’s practices and plans.”
Blue Skies Ahead?
However, Norwegian’s CEO, Bjorn Kjos, insists that the carrier would only employ EU or US citizens to operate transatlantic flights, and that it has no intention to skirt labor laws. For all the arguments made against the airline’s motives, NAS hasn’t violated any laws by establishing another airline in Ireland, which it expects to legally benefit from the traffic rights afforded by the EU-US Open Skies Agreement. The carrier’s confidence in its legitimacy is evidenced by an order placed last month for 30 A321neos, which seat approximately 220 passengers and boast an extended range of 4,000 nautical miles, ideal for the long-haul routes its subsidiary plans to undertake. The purchase follows a statement made by Kjos a few months prior: “With this permission from the US Transportation Department, we can start flying people from Africa and Asia via Europe to the US. We are going to need more long-haul planes than what we have ordered today.”
NAI’s adversaries may purport to object to NAI on the grounds of labor laws, but discontent for added transatlantic competition is another likely catalyst for debate. The DOT and rivaling American carriers may continue to delay the process, but the Scandinavian LCC shows no signs of waning – and the DOT has already admitted that “there appears to be no legal basis to deny NAI’s application.” Even if the opposition were to succeed, it wouldn’t be long before other foreign LCCs broaden their scope from local to global and target the transatlantic market.