Unanswered questions on Norwegian Air

When I served at the Department of Transportation, we worked to open aviation markets around the globe.  From January of 2009 until July of 2013, we signed Open Skies agreements with sixteen different countries.  Our goal with these agreements was to ensure open access to aviation markets, expand travel choices for consumers, and create a level playing field in international aviation for U.S. airlines and their employees.  In June of 2010 we reached a historic “Second Stage” air transport agreement with Europe, which further strengthened our close aviation ties and emphasized the importance of fair competition and strong labor standards. 

The U.S. government must vigorously pursue fair competition in international aviation to ensure that U.S. airlines and their workers are able to compete and that consumers are not harmed.  Fair competition is one of the founding principles of Open Skies but is being undermined in a number of ways by some foreign governments and foreign airlines.  Some foreign governments provide subsidies to their airlines in the form of grants, capital injections, forgiven loans, assumption of debt and other unfair practices not used in the U.S..  Some airlines tilt the competitive playing field to their advantage by taking steps to avoid labor laws.  Others work with their governments to maintain sub-standard labor laws, avoid fuel taxes, exempt themselves from competition laws, and receive other government conferred advantages not allowed in the U.S.. 

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Norwegian Air International’s (NAI) pending application to serve the United States raises a number of important questions about fair competition that must be thoroughly answered.

NAI is owned by a Norwegian company that already operates an airline in Norway.  Yet NAI would operate as an Irish carrier under Ireland’s regulatory laws (but not serve or base planes in Ireland) and will use what appears to be a Singaporean company to hire its workers.   The key question, which has not been thoroughly answered in the public debate over NAI, is why? 

Why is a Norwegian company using such a complicated business model to establish itself on paper in Ireland and potentially use low-cost contract workers from a company in Asia?  What benefits would NAI fairly or unfairly gain?  And, what does this business model and the regulatory regime under which NAI might operate mean for fair competition?  

While I am withholding final judgment until more facts become available, NAI’s proposal appears contrary to a key provision in our EU Second Stage agreement that ensured new commercial opportunities created by the agreement could not be exploited to subvert labor standards and create an unfair competitive environment.  We spent many hours negotiating this provision with Europe and its importance to this application should not be overlooked. 

Even if our regulatory authorities ultimately believe NAI’s application is consistent with the European agreement, a thorough and public analysis of the competitive implications associated with NAI’s application must still be performed. 

To date, the questions about NAI are many and the answers, with adequate verification and supporting evidence, are few.  We should not rush approval of this new business model until the consequences for international competition and the impact on airlines, their workers, and consumers are fully understood.   

LaHood, Secretary of Transportation under President Obama from 2009 to 2013, is a senior policy adviser in the Washington office of DLA Piper (US) LLP.