If You Think Norwegian Has Been Banned From the US, You’re Wrong

Government Regulation, Norwegian

The news broke earlier this week and spread like wildfire. The US has refused to grant Norwegian Air International approval for its foreign air carrier permit. That sounded like something big, but it wasn’t even what actually happened. All the US did was delay on actually taking any action, and Norwegian can continue to fly its existing schedule the way it’s set up today. The saga continues…

Norwegian Air Shuttle flies to the US today, but it’s as a Norwegian carrier (which makes all too much sense). Despite its name, Norwegian has decided that it can’t get its costs low enough this way, so it wants to start up an Irish subsidiary that’s called Norwegian Air International (NAI) for long haul flights. If it does that, it can not only escape restrictive and pricey Norwegian labor law, but it can also get a more favorable tax situation being in Ireland. There’s also supposed to be a traffic benefit being located in the EU, but since Norway is a party to the US-EU open skies agreement, I don’t quite understand that logic.

Norwegian Air International has been in a lengthy process to convince the Department of Transportation (DOT) regulators here in the US that it should be given the ability to fly here. It’s been quite the campaign for the company. How comprehensive is it? It’s even buying ads in the Navy Yard Metro station in Washington to state its case. Yep, that’s where DOT headquarters is. A reader sent me this photo:

Norwegian Navy Yard Ad

The pitch is simple. Allow Norwegian to fly here and you’ll get low fares on new routes with new airplanes. We already have that now, of course, but Norwegian thinks it needs to get costs lower to make these flights work. Travel agents and airports that are getting Norwegian service agree, as you’d expect. But there are some powerful enemies.

Pretty much every US and European airline hates this plan, as does any labor group worth its salt. The airlines obviously don’t like the idea of competition with a cost advantage, and the labor groups don’t like the idea of cheap labor undermining their efforts. The argument being put forth is that Norwegian is trying to create a “flag of convenience” operation – a company that bases itself wherever it wants to circumvent less favorable laws. Is that what Norwegian is trying to do here? That’s the question at hand.

With such a weighty question out there, DOT issued a ruling yesterday but not on the airline’s fitness to serve the US. See, any airline, Norwegian included, asks for a temporary exemption to allow flights while the final permit is being considered. DOT, seeing such widespread conflict here, denied that request. In its own words.

The Department typically reserves its exemption powers in awarding foreign air carrier authority to situations where the circumstances of a case are sufficiently clear-cut…. Because of the extensive record, which reflects the novel and complex nature of this case, however, the Department does not find that a temporary exemption is appropriate or in the public interest.

And that’s smart. There’s no reason to rush this decision with so much anger in the process. DOT is just going to take its time to fully review the application before coming to a decision. When that’ll happen is anyone’s guess, but I imagine it’ll be awhile.

For what it’s worth, Ireland says that this is perfectly fine and the European Commission agrees. So why is the US having such issues? It’s primarily the opposition from airlines and labor that’s making the US look very closely here.

I’ve written about this before, and I’ll admit that I remain torn on this. It doesn’t seem like there’s anything illegal here, and I’m inclined to think NAI should be allowed to fly, but the flag of convenience issue is one that hasn’t really been an aviation issue. Other industries (like cruises) have dealt with this on a large scale, but it’s not something I know all that well.

Let’s hear your thoughts. Should NAI be allowed to fly?

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49 comments on “If You Think Norwegian Has Been Banned From the US, You’re Wrong

  1. This is a no-brainer. There’s really nothing hard here.
    * There’s no safety issue.
    * There’s clear consumer benefit.
    * And it’s clearly legal.

    The fact that entrenched interests, which contrast with consumer interests, are against it is a pretty strong signal that it’s a good idea. The government shouldn’t be used to hold back competition.

    There’s nothing wrong with airlines being based in Ireland. We’re comfortable with Aer Lingus flying to the U.S. “US airlines don’t like competition” isn’t a legal argument. By any standard consistent with the rule of law this should be allowed. Any contrary action is pure cronyism.

    1. Nonsense. Their being based in Ireland is a legal fiction, and their staff will be primarily on international contracts from other countries, predominantly SE Asia, where they can further depress wages. There are legitimate complaints against the Gulf carriers for doing similar things, but atleast they don’t have the audacity to move out of their own sovereign country and just set up a hub. If NAI is allowed to do this than any carrier can effectively, hell any business, can attempt to make an end run around the very social contract we determine for corporations and treatment of labor.

      1. Could an Irish company do the same thing? Legally? I don’t know the answer to the question, but let’s suppose it’s yes.

        Well, then within the EU (or, in this case, other parties to EU treaties — Norway being treated as an EU country for air service purposes) all countries are supposed to be treated the same, and all companies are supposed to be treated like any other — analogously to how a US company based in California is not treated any differently than one based in New York.

        So really it boils down to whether an Irish company could do this, flying from Ireland. If the answer is Yes, then a Norwegian company ought to be able to do the same thing.

        1. Except NAI is not flying from Ireland, or atleast does not actually have the desire to run it’s hub operation out of there. These would be, in theory, non-stop runs from EU cities to US cities with no touching down in Ireland. This is unlike for example the Gulf carriers or Icelandair who atleast run their physical operations from a base hub in their own sovereign country.

          1. Could they not base the airline in Ireland, rotate all aircraft through DUB at some point and run DUB-FLL/MCO a few days a week? Voila, Irish airline serving Ireland….legal no?

      2. Please cite from this (mythical) social contract. Also, as long as the crews are not being forced to serve, this will improve the lives of the workers and their families.

        1. The same mythical contract that allows for corporations to exist in the first place. They exist only because the laws and regulations governments provide allow them to be. They cease to exist, or cease the ability to operate, when they attempt to make an end run around them.

          Also, as long as the crews are not being forced to serve, this will improve the lives of the workers and their families.

          And what regulations will prevent this if, as NAI promises to do, the contracts are in one legal jurisdiction, the company’s financial base is in another, and it flies in none of them? This is why flag of convenience operations are such a disaster, and often ripe for abuses and indentured servitude. What rights do you have when you are in transit between two countries that have absolutely no jurisdiction over you by either immigration, labor, or contract? The answer is none.

          1. I have the ultimate right, the right to choose whether to fly them again. It is long leap from potentially lower wage labor to indentured servitude.

            1. Sure you have the right to choose whether to fly them again. However, DOT’s job is to protect the flying public. “Fly them if you want, at your own risk” is not acceptable.

  2. Yeah, the advertising in the DC metro area can be surreal. Nowhere else in the country do you see billboards and subway ads advertising tanks, planes, and missiles. It gets especially dense near the Pentagon.

    You get ads in the airport advertising “clean coal” (because so many legislators fly out of there), L ‘Enfant plaza gets marketing for nuclear reactors (right next door to the Dept. of Energy.)

  3. Here’s a crazy idea. If US airlines are concerned, maybe they should use some of their record profits to buy new planes, install fast Wifi, and up the quality of the hard product. (I know some are.)

    How about compete instead of complain?

    1. Well.. Looks like they’re doing that. Yes, they have record profits, but upgrades take time when you want to keep high utilization so you can continue to have record profits.

    2. I’m always amused that when the airlines barely eek out a profit, with margins still in the single digits on a percentage basis, people are screaming about the “greedy airlines”, but when Apple or Microsoft or another company reports record profits and a 30+% margin, those same people don’t seem to notice.

    3. US AirLines will do what they always do..use any dip in earnings to justify wage cuts. FA’s took a nearly 50% cut in pay between 9/11-2004 and we have not seen it returned to us as promised during the uptic. We have had our pensions cut, offset, or eliminated. US Flagship Airlines must be willing to convert and use resources to “defend the nation” during times of war. Who do u think flies troops into many overseas bases? I have and so have many of my collegues. Many of our pilots are in the “reserves” and have been called up at various times. US Airlines are not permitted to follow labor to the lowest denominator in some 3rd world country & even if they could “legally” would you trust them with the safety of our nation if their allegance was not to our flag? If you are for these things you support our nations “race to the bottom”. People still have to be able to affort to fly and US carriers are not government subsidized nor do we get “free gas”

  4. I agree with all of this. Operating into the US out of a flag of convenience is pretty clearly legal. (And Ireland is hardly a pariah state!) It actually seems like an easier case than cruise lines, because the web of safety and consumer regulations applying to foreign airlines flying into the US is so dense.

  5. Gents it’s not legal and that’s the crux of the issue. The US-EU open skies treaty has a provision that says it will not be used to skirt labor laws and that’s exactly what Norwegian is doing here.

    There are other issues as well:
    Safety: For one the flights proposed will never touch Ireland making it hard for the regulator to oversee the operation in any meaningful way. For another the whole point of this exercise it cheap labor and as any employer can tell you when you pay less the quality of your applicant pool drops. For another fatigue will likely raise its head as free from regulatory oversight and with the unquestioned ability to fire an employee on the spot regardless of merit (this is why you do offshore contracts) you can push your people to the breaking point.

    There are Human rights issues as well. You gave only to look at the expose done on Ethiad inflight crews and the way they are abused to know this is a human rights issue as well.

    In short there are very good reasons (the law among them) to deny the application.

  6. First, to answer the question, let them fly for all I care. The pro competition points have already been made above my post.

    I am not a government is the enemy type of guy, but I think you are ascribing too much to DOT’s smarts here… It just looks to me like they are kicking the can. First, any bureaucracy sufficiently entrenched just kicks the can out of habit. Second, with labor issues involved this administration probably just doesn’t want to deal with this at all, and you can bottle anything up in Washington for two to two and a half years…

    Last, I think you have an excellent point about the flag of convenience issue in aviation. As you say, maritime has been dealing with that issue for many years, but how much of the settled maritime law translates directly into aviation and how much new law is needed internationally probably does demand a fair record. Even if there is no new law or treaty needed, the legal basis for the statement that there is no new law needed probably runs several hundred pages of federal record. Once you leave the EU, you are into international law and so the EU okaying this really doesn’t have any bearing on what the US feds do.

  7. Why should we defend NAI here? It hasn’t figured out how to be a better airline. It hasn’t come up with better service, or been cleverer in route selection, or advertising, or more efficient in scheduling or maintenance. It hasn’t out competed other airlines in any real sense. What it has done is find ways of using various governments to support them in ways that are not legal or available to domestic US carriers. Ireland shelters them from taxes. Thailand lets them have crew wages and employment standards far below Western standards. The US Ex/Im bank finances their major capital expenditures.

    While some airlines enjoy some, all, or even better than these benefits by virtue of their home country, none that service the US have shopped the entire world to pick and choose favorable tax/labor/finance laws. If such behavior is tolerated it leads to a slippery slope where perhaps airlines *must* do things like relocate to Ireland in order to compete, as has already happened in the cruise industry.

    1. It’s not a question of “tolerating” this behavior or that. It’s a question of whether that behavior is legal or not. That is, or should be, the sole issue.

  8. Regardless of whether NAI is legal or not, I still question what the market is for transatlantic. There is already way too much capacity on TATL, including on less-frills carriers such as IcelandAir and Aer Lingus. VS, Thomson, Arkefly etc already take care of the charters to Florida and the Caribbean. Even Ryanair being an Irish carrier decided TATL wasn’t worth it.

    My understanding is that Norwegian can fly all these Europe-US routes under their own certificate, but has to pay the home country Norwegian labor rates. Isn’t this the opposite problem Ryanair had in France a few years ago, where they wanted to pay their home country Irish rates but France wouldn’t let them? This seems contradictory.

    The whole Thai crews thing definitely doesn’t help NAI in their argument to DOT.

  9. They already fly over the Atlantic here to a number of cities so what’s the big deal. Any carrier based in Ireland now can do exactly what Norwegian wants to do and no one would care less. There are many airlines located around the world who hire flight crews from outside their own country, so it’s nothing new. It’s just other airlines/unions crabbing about it. Wow maybe Norwegian would be a better product with good fares and the other carriers would look bad.

    It just shows that Washington is just stalling from something they really can’t say no to, but at the same time not wanting feel the wrath of Congress members who’s wallets are filled with airline/union money.

  10. It is funny how the airlines don’t wont the NAI here in the us because of low wages but they are perfectly happy pilots here in the us as low as 36000 dollars a year to do the same thing. Fix the problems here before you complain about others.

    1. That’s part of the point Skip we already pay pilots here far too little and as many can not actually afford to live where they work, they commute long distances from other cities. Fatigue has contributed to accidents. The solution was not to pay them more and increase rest it was to require they have more flight hours before we certify them! It was stupid! Who is going to pay 200k dollars for the education necessary to acquire a certificate just so that they can fly a plane for minimum wage. Yet most people buying a ticket on a regional mistakenly think they are buying a ticket on a US Mainline carrier…they have no clue. Many pilots are electing to stay in the military….this is leaving us short. US law does not permit us to “import foreign trained pilots” & relocate them here. Well trained US Pilots are lured overseas with sometimes false promises by some carriers. They are promised tax free living, contracts that can’t really be enforced if the overseas employer does not keep their word. Hiring cheap foreign labor is not going to fix our problem with our own pilot shortage. We need a competitive comprehensive training program and better wages for new hires. Mainline Airlines are constantly squeezing Regionals on cost. I wonder what the big 4 will do when there aren’t any pilots for the regionals.

  11. The cruise industry has flown under flags of convenience for several reasons. They avoid US labor laws. This allows them to hire staff from the poorest countries and pay them comparatively poverty wages. Flagging ships out of The Bahamas, Panama etc. is done to avoid US taxes.

  12. If it’s legal, it should be permitted, regardless of whether this party or that party views it as being operated under a flag of convenience. If it’s illegal, it shouldn’t be permitted. So far as I know, it’s legal, but if someone can demonstrate it is not, then fine, don’t let it operate.

    1. Ethiad has been trying to clean up it’s act but they are downright generous compared to Qatar whose CEO is unapologetic in his belief that FAs are a step above prostitutes…and as he considers himself superior to nearly everyone he supports socio economic darwinism…”let them eat cake”

  13. The whole point of NAI is to dodge Norway’s labor laws and hire cheap labor from Asia. US-EU Open Skies specifically forbids this, and labels this type of behavior as an abuse of the agreement — which is why there’s a debate in the first place. ALPA is arguing (and making a very good case) that the whole NAI scheme is indeed illegal, and it’s why ultimately DOT will probably reject it. Competition has absolutely nothing to do with the legal challenge – that’s just smoke and mirrors from NAI because they know they can’t argue the labor or Open Skies points, which are the crux of the issue.

  14. This is a ridiculous argument (on the part of Norwegian’s foes) and can set the stage for all kinds of issues in the future. What about the cruise industry? These US-BASED companies like Carnival, RCCL, Norwegian (ironic, eh?) all are headquartered in Miami, yet the ships (with the exception of one NCL ship in Hawaii) are registered overseas to avoid US labor laws/wages and taxes. So we allow them to use the ‘flag of convenience’ without consequence but deny a legally registered air carrier the same rights, even though they are technically following EU laws? What’s the difference?

    1. Maritime laws and those governing aviation,are different. Those cruise lines are here to give the traveller a false sense of security. We think they are safe because they here. We have fooled a lot of other people into thinking they are safe because they are here as well. A relatively small (given the size if these cruise lines) percentage of employees actually work in their corporate offices. There have been lots of accidents on the high seas of late and crimes including murder on cruise ships are impossible to investigate or prosecute. The US legislated away it’s commercial shipping (as in cargo) industry and we lost a lot of middle class jobs. At some point if we continue to lower wages and outsource jobs we won’t have anyone here in our country who can even afford to get on a plane or a ship.

  15. As a retired airline pilot, I was excited to hear about a low cost [ticket wise] start up. After further investigation, however, I don’t feel that the permit is in the best interest of either the airlines or the flight crews. If something goes wrong, who does the passenger complain to? Norway?, Ireland?, some Southeast Asian country? Competition? Sure as long as the playing field is level. Short answer=NO

    1. If he was, wouldn’t they be immediately disqualified? AFAIK, he is one of the few people who is forbidden to work for an airline in the US, though not sure what affect that’d have here.

  16. How is this any different than Burger King moving to Canada and the numerous othere companies doing a tax inversion “moving” to another country? Only difference here is that there is a federal agency that most approve this. (And really strong special interest groups) It’s not illegal and will probably be good for consumers. Let them fly

  17. Isn’t his something like there is a newcomer in the street and everybody is saying: “You are welcome in my house any day, but the doors will be locked and if you try to get in through the windows, I’ll shoot you !? To me this sounds more like protectionism than ‘open skies ! It is an elementary right to work (unanimously signed by all nations in the UN) and it is unions and governments that seem to say one thing, but do the other.The question is here: Is it benefiting the general public ? Is it creating jobs ? And if Asian pilots are working so far from home to create a life for their families, making more money maybe yes, but being away from your loved ones for a longer period, what does that make it any different from European and US managers to go and work in The Middle East, China or…… if not to improve their own situation?

    1. The phrase “right to work” an early effort to make people “excited that they were not slaves” in “u r welcome to quit if u don’t like working here” gee wow people can leave a job if they don’t like it. We can leave the US & many of our best and brightest have. I did when I was young and I’d still be living tax free overseas if I didn’t have a mother who is a widow and not long for this world. Am already researching my options…we want them because they are cheep they want us because we are smart…wonder where the US will be in a decade?

  18. Individual ships, both cruise and freight, are often registered with flag-of-convenience countries to circumvent safety legislation: the registration country of the owner/operator is a different question. This is not the same with commercial aviation, One airline that does register some aircraft in a foreign country is Qantas,

  19. This may not be a good comparison but we are going through a similar issue in Charlotte with Chiquita. From what I understand, they merged with a company from Ireland in order to move their HQ to Ireland. One benefit of that is the a lower tax burden. Now what bananas have you ever seen come from Charlotte or muchless Ireland? Same deal with NAI (although couldn’t they just not use the Norwegian name and call it something like “Cool Air” or something?)
    For me, NAI sgould be able to fly here. It is total BS that hiring crews from Asia will cause a safety issue. And if it does, I think folks are smart enough not to get on planes that are falling out of the sky (just look at the Malaysian Airlines case). Allow them to fly here and let us make the choice whether to fly them or not.

    1. Yup, and before that Chiquita moved from Cincinnati to Charlotte. In part because of DL’s pulldown of the CVG hub and to have better access to Central America without connecting. Oh, and I’m sure the brain drain from Ohio and the midwest in general didn’t have anything to do with it, nor did the incentives that North Carolina offered for CQB to relocate.

  20. There’s lot of talk about whether this is legal or illegal under the bilateral agreement. The EC and Ireland clearly believe it’s legal. I see things in the agreement that say “the opportunities created by the Agreement are not intended to undermine labour standards or the labour-related rights and principles contained in the Parties’ respective laws.” But that is one heck of a vague statement.

    All the assertions here that Norwegian is solely using cheap Southeast Asian crews are wrong. Norwegian is using a lot of US-based crews as well. I’m not sure how you decide if it undermines labour standards or not with such a vague reference.

    Maybe there’s more later in the agreement. If anyone wants to read, you’ll find everything here:
    http://www.state.gov/e/eb/rls/othr/ata/e/

  21. I’ve just checked, Delta, like many other companies, are incorporated in Delaware, providing the legal and tax benefits that this affords. Frankly I don’t see how this NAI decision differs from companies in the US using this provision. Sure, Norway is not in the EU but it is in the EFTA which provides some free trade benefits. They are just taking advantage of those benefits like millions of other companies do. If anyone should be complaining it should be the Norwegians who would be losing out of jobs, but then again Norwegians have a very good life and frankly I doubt most would be willing to work the unsociable hours that flying as cabin crew involves.

    1. The Norwegian’s are complaining it is called “social dumping” and is hurting their job market and those who have, are, or who hope to have a career in aviation. Trying to use a name “Norwegian” which is symbolic of many things having to do with quality, excellence, and social conscience is nothing more then “bait and switch”

  22. I don’t understand what is the reason to stop this airline. It is not a U.S.A. problem if this airline decided to move one branch to Ireland, it should be a norwegian issue. Anyway, let’s see what is going to happen with this saga.

  23. Some old-school U.S. protectionism is always nice.

    It really could go either way, here–I could see the DOT not giving them route authority or doing so. This’ll be a fun one to watch.

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