In debate over Norwegian Air, a possible path to resolution

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The European Commission may have opened the door for a way out of the protracted standoff over Norwegian Air Shuttle’s plans to expand its long-haul, low-cost service from Europe to the U.S., Asia and other countries and regions.

The opening could be just a crack, and it could portend an outcome that is not in Norwegian’s favor — or a longer wait for any outcome at all.

New filings with the U.S. Transportation Department (DOT) this month, the first of which are due Aug. 18, could help push that door open further.

Norwegian AirBut it would be unwise for any of the parties to take anything for granted at this point, including whether the DOT’s decision — should it make one at all — will be the final word on the subject.

Among labor groups and others opposing Norwegian’s plans is the Air Line Pilots Association (ALPA), which said last week that more than 160 members of Congress already had written to the DOT and White House expressing concerns about Norwegian’s bid.

ALPA said the lawmakers could be called upon for congressional action if the DOT decision goes Norwegian’s way.

Norwegian, for its part, has suggested in its filings with the DOT that a refusal by the U.S. to allow the planned flights could invite a European response and risk a “race to the bottom” in international aviation relations by flouting the E.U.-U.S. open-skies agreement first signed in 2007, then expanded in 2010.

“There are a lot of different ways this could play out,” conceded Michael Robbins, managing director of government and public affairs for ALPA. “This is the first time the open-skies agreements have been tested in this way.”

Norwegian filed its application with the DOT in December for a permit to operate service from any European Union member state to the U.S. and beyond under the parameters spelled out in the U.S.-E.U. open-skies agreement, using a Dublin-based subsidiary called Norwegian Air International.

Norway is not an E.U. member, but its carriers have rights under open skies to operate from any E.U. country to the U.S. The carrier already offers Europe-U.S. services using its Norway license; flights from New York, Los Angeles and Fort Lauderdale to London Gatwick began in early July on Boeing 787 aircraft operated by Norwegian Air Shuttle.

But the approval of service using its Ireland-based subsidiary is a crucial component of its strategy to expand its long-haul, low-cost service between the U.S., Europe and Asia.

Norwegian’s opponents include U.S. and European labor groups, Delta, United, American, US Airways, Lufthansa and Air France. The opponents contend that the carrier is setting up its Ireland-based operation so it can avoid Norwegian labor laws and farm out the cabin crew work to people in countries where labor will be cheaper.

Many long-haul pilots would be employed, at least at first, by a Singapore-based employment firm and be based in Thailand.

Norwegian says it needs to be based in Ireland to access better aircraft financing terms. It also asserts that the cabin crew will receive competitive salaries, and it further notes that it has hired 300 flight attendants in the U.S. to support its American operations.

Beyond that debate, however, is the critical question of whether the DOT even has the right to use the labor issue to reject an application. To that end, in mid-July, at the request of U.S. Transportation Secretary Anthony Foxx, State Department and DOT representatives met with European Commission officials in Brussels.

The DOT wanted to hear more from the commission regarding the section of the U.S.-E.U. open-skies agreement that has become crucial to the application’s fate: Article 17 bis, which states that the agreement should not be used to undermine labor-related rights and laws.

The European Commission has seemed steadfast in its support of Norwegian, but the DOT’s account of the July meeting suggested a slight softening.

The commission remained adamant that the DOT cannot use the labor article to reject Norwegian’s application “unilaterally.” But it said the DOT could request a more formal dialogue with Ireland, since Norwegian will use an Irish operating certificate and license.

Should that fail, it suggested, the U.S. could bring the issue to the joint committee that the U.S.-E.U. open-skies agreement created to resolve questions about the interpretation or application of the treaty.

The DOT posted details of the meeting in an Aug. 4 notice on its docket for the Norwegian Air International application, inviting comments on its meeting summary by Aug. 18, and replies to those comments by Aug. 25.

One factor to watch will be whether any European governments weigh in. They have stayed out of this debate so far, but there are some rumblings that their silence will be broken, and the European Commission made it clear in July that it was speaking only for itself, not E.U.-member states.
 

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