The Department of Transportation (DOT) will soon decide whether or not to grant controversial low-cost airline Norwegian Air International (NAI) a foreign air carrier permit to fly to the U.S. NAI is seeking to establish a "flag of convenience" model in transatlantic aviation, just as has been done in merchant shipping since the 1950s. If the DOT were to approve NAI's application, it would likely spell disaster for American aviation workers, carriers and consumers.
Several points stand out about the NAI case.
First, there are the peculiarities of the airline's business model. U.S. airlines that fly to the EU use American-based flight crews, and EU airlines that fly to the U.S. use EU-based flight crews. NAI is a Norwegian-owned company that holds an air carrier certification from Ireland, but does not fly to or from Ireland. Nor does it use Norwegian or even Irish flight crews, but rather Bangkok-based crews are hired through a Singapore employment agency and who work under Singapore labor law. This "nation-shopping" model has enabled NAI to artificially lower operating costs by suppressing collective bargaining rights and substantially lowering the wages, benefits and conditions offered to these rented workers as compared to their Norwegian-based counterparts.
This flag of convenience business model does not simply raise questions about fair labor practices. It clearly violates the terms of the U.S.-EU Open Skies trade agreement. Enacted in 2007 and amended in 2010, the agreement governs the operation and oversight of transatlantic flights between the U.S. and Europe. The agreement requires international carriers to uphold labor standards applicable in their home countries. Article 17 bis of the agreement — the "social clause" that was widely praised on both sides of the Atlantic when it was adopted — explicitly prohibits nation-shopping for low wages and lax standards. The article states: "The Parties recognize ... the benefits that arise when open markets are accompanied by high labor standards. The opportunities created by the Agreement are not intended to undermine labor standards or the labor-related rights and principles contained in the Parties' respective laws." The U.S.-EU aviation trade pact's explicit prohibition of NAI's flag of convenience model, which was concocted in order to to dodge labor and tax laws in Norway, could hardly be much clearer.
Second, both Democratic and Republican lawmakers oppose NAI's application for access to more Europe-U.S. routes. In November 2014, 188 House members wrote to Transportation Secretary Anthony FoxxAnthony Renard FoxxBusiness, labor groups teaming in high-speed rail push Hillicon Valley: Uber, Lyft agree to take California labor win nationwide | Zoom to implement new security program along with FTC | Virgin Hyperloop completes first test ride with passengers Uber, Lyft eager to take California labor win nationwide MORE urging him to reject the NAI bid for a foreign air carrier permit. Dozens of other letters from lawmakers, including one from 33 House Republicans earlier in the year, have been sent to Foxx, urging him to rebuff the application. Furthermore, Congress included in its year-end spending bill — the so-called "Cromnibus" — an amendment prohibiting the DOT from using funds to approve a foreign air carrier permit that would violate the Open Skies agreement. That provision is now law. At a time when Democratic and Republican lawmakers cannot agree on much else, they agree that the NAI business model would be bad for U.S. airlines, workers and consumers.
The bipartisanship is less surprising when one considers that all major U.S. air carriers and unions that represent U.S. aviation workers also oppose the application. Democrats and Republicans, business and labor: They all understand that the Norwegian model threatens to undermine the viability and future of the U.S. aviation industry.
Finally, because it both protects labor standards and opens new markets, the Open Skies deal as negotiated by the U.S. and EU is a rare example of a multilateral trade agreement that can work for the benefit of American workers, not only for the benefit of wealthy investors and powerful transnational corporations. Article 17 bis was crafted to ensure that opening markets and liberalizing air service in the transatlantic market were not accomplished at the expense of good jobs. In order to protect those well-paying jobs, however, the DOT must enforce the agreement in a way that prohibits the low-road labor practices that NAI would introduce to a highly profitable market segment that has been a driver of middle-class job creation on both sides of the Atlantic.
This is a critical moment for U.S. aviation. The experiences of other industries have demonstrated that this flag of convenience model is not going away. But if Foxx rejects Norwegian's application, he will prevent this perverse business model from seeping into U.S. aviation. If he were to approve NAI's bid, it would establish a standard for other unscrupulous carriers here and in Europe. The result would be a "race to the bottom" in aviation labor standards, just as we have seen in industries such as merchant shipping, cruise liners and port trucking, where tough but decent jobs have been transformed into low-wage, dangerous and precarious work.
This NAI application is about more than a low-cost air carrier that wants to distort the marketplace with air service that violates both the spirit and the intent of America's aviation trade relationship with the EU. It is about upholding labor standards in the agreements negotiated by our government, protecting decent jobs and ensuring a level playing field that doesn't put American carriers and workers at a competitive disadvantage.
Transportation Secretary Anthony Foxx must tell NAI that its operating scheme will not fly.
Logan is professor and director of Labor and Employment Studies at San Francisco State University.