U.S. Approves Norwegian’s Flight Expansion With Irish Unit

Dec 2, 2016 Issues: Transportation

Bloomberg: U.S. Approves Norwegian’s Flight Expansion With Irish Unit
Alan Levin and Michael Sasso

Norwegian Air Shuttle ASA won approval to expand flights to the U.S. using an Irish subsidiary, paving the way for the carrier to offer discount trans-Atlantic fares over the objections of domestic carriers and unions.

The Department of Transportation found Ireland-based Norwegian Air International fit to serve U.S. destinations, according to a regulatory order Friday. The decision opens the door to “greater competition, more flights and more jobs on both sides of the Atlantic,” said Anders Lindstrom, a spokesman for the Norwegian parent company.

The decision, which drew rebukes from unions and at least one Democratic lawmaker, stokes a high-profile trade conflict just as President-elect Donald Trump prepares to take office vowing to protect U.S. jobs. Norwegian Air says the Irish unit gives it more leeway to serve different markets. Opponents counter that the arrangement will enable the carrier to skirt safety regulations and labor protections, giving it an unfair competitive advantage.

“I am extremely disappointed by DOT’s short-sighted decision to ignore the serious harm to thousands of American jobs, and our national security,” Representative Peter DeFazio, an Oregon Democrat, said in an e-mail. DeFazio is the highest-ranking member of his party on the House Transportation and Infrastructure Committee.

DeFazio’s condemnation was joined by Representative Frank LoBiondo, the New Jersey Republican who is chairman of the House’s aviation subcommittee, and Representative Rick Larsen, a Washington Democrat who is that party’s ranking member on the subcommittee.

Union Criticism

The largest U.S. flight attendants’ union said the government had “double-crossed” its members and called on President Barack Obama to reverse the ruling. The decision undermines legal protections for airline workers, the Association of Flight Attendants said in an e-mailed statement.

In a separate statement, the Air Line Pilots Association called it “an affront to fair competition” that would cause U.S. job losses.

In April, U.S. regulators gave a tentative nod to the application. When final approval didn’t immediately follow, the European Union’s executive arm triggered arbitration against the U.S. in July. Ireland belongs to the EU, while Norway doesn’t.

“This case is among the most novel and complex ever undertaken by the Department,” the U.S. transportation agency said in its decision. “Regardless of our appreciation of the public policy arguments raised by opponents, we have been advised that the law and our bilateral obligations leave us no avenue to reject this application.”

Norwegian made promises in its application to abide by hiring and employment practices, the Transportation Department said. Obama has the power to overturn the action, according to the agency’s decision.

Profit Pressure

Airlines for America, the chief lobbying group for U.S. carriers, said the organization hasn’t taken a position on Norwegian Air International’s application, other than asking regulators to ensure fair competition and to adhere to international airline agreements.

Increasing competition on U.S.-Europe routes has hurt profits at some carriers.

Delta Air Lines Inc. blamed low-cost rivals for a steep third-quarter drop in the traditionally lucrative trans-Atlantic market. Passenger revenue for each seat flown a mile on those routes fell 9.7 percent in the third quarter as discount carriers and Middle Eastern airlines offered a greater supply of seats. Terrorist attacks in Europe and the U.K.’s withdrawal from the EU also weighed on demand, according to the company.

In the long term, the Atlanta-based airline said it would need to evaluate its offerings on trans-Atlantic routes as it competes with low-cost rivals.