TTD, ALPA, and ECA Ask DOT to Deny NAI

Dated: August 25, 2014

INTRODUCTION

The Labor Parties hereby reply to the comments filed in response to DOT’s August 4 Notice (“Notice”) requesting comments on the views expressed by DG MOVE on the meaning and applicability of Article 17 bis of the U.S.‐EU Air Transport Agreement (“ATA” or “Agreement”) as it pertains to consideration of a foreign air carrier’s application for operating authority. For the reasons set forth below, the Labor Parties believe that DOT should reject the narrow view of Article 17 bis advanced by DG MOVE and deny NAI’s application for an exemption on the ground that the application does not meet the standards set out in 49 U.S.C. § 40109, and should issue a show cause order stating that it proposes to deny NAI’s application for a foreign air carrier permit on the ground that approval would be inconsistent with Article 17 bis. If the Department believes that it would benefit by having more information before it issues such an order, it should issue document production requests, including those attached to the February 21, 2014 Joint Reply of the Labor Parties to Comments on DOT’s January 30 Notice, and/or should hold a hearing at which representatives of NAI and its parent Norwegian Air Shuttle (“NAS”) may be examined about the founding and structure of the company, including the compensation and laws that will apply to NAI’s air crew.

We note that our position has support from a broad range of U.S. and European airlines, labor groups and individuals who oppose NAI’s application. Other than NAI, the supporters of DG MOVE’s views have not attempted to analyze Article 17 bis.

REPLY TO NAI’S COMMENTS

A. Article 17 bis Affords a Unilateral Basis to Deny NAI’s Applications.

The principal assertion made in the August 18 Comments of NAI (“NAI Comments”) is that the views set out by DG MOVE in the Notice, along with those stated in a Joint Declaration of John Byerly and Daniel Calleja attached to those comments [1] “unequivocally” demonstrate that Article 17 bis does not afford a unilateral basis for one Party to the ATA to deny an application for operating authorizations to an airline of another Party.

The Labor Parties respectfully disagree.

We do agree with NAI that “a treaty [or, in this case, an executive agreement] shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose.” (NAI Comments at 4‐5) (internal quotations omitted). Application of this guideline would, for the reasons we set out in our August 18 Joint Comments (at 7‐10), lead to the conclusion that Article 17 bis gives each Party the unilateral right to deny applications for operating authorizations. Our analysis is based on the text of Article 17 bis as well as its contemporaneous negotiating history. While we have previously set out those reasons, they are, in brief, as follows.

The principles enunciated in Article 17 bis are clear: (1) benefits arise when open markets are accompanied by high labor standards; and (2) 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. Article 17 bis is also clear that these principles, in turn, “shall guide” the Parties as they implement the Agreement.

The phrase “shall guide” is not “hortatory” or “aspirational” as NAI suggests (NAI Comments at 5‐6), but provides clear instruction to the Parties as they unilaterally or collectively implement the Agreement. (Labor Parties August 18 Comments at 9‐10); see Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35 (1998) (“The Panel’s instruction comes in terms of the mandatory ‘shall,’ which normally creates an obligation impervious to judicial discretion.”); Ass’n of Civilian Technicians v. FLRA, 22 F.3d 1150, 1153 (D.C. Cir. 1994) (“The word ‘shall’ generally indicates a command that admits of no discretion on the part of the person instructed to carry out the directive.”). Even Norwegian’s Operations Manual definitional section states: “‘Shall’ means that the application is mandatory.” (Attachment A).

NAI’s arguments (at 8‐9) that the “text of Article 17 bis contemplates joint action only” does not square with the text of the article, for the reasons set out in our August 18 Joint Comments (at 7‐11). We will only note here that NAI, just like DG MOVE, does not address in its argument the critical word “including” in Article 17 bis. When interpreting the article, “the ordinary meaning [is] to be given to [its] terms . . . in their context” and doing so clearly means that resort to collective action through the Joint Committee process is but one path available to a Party as it implements the Agreement. See Vienna Convention on the Law of Treaties, Part III, § 3, Art. 31.

As for NAI’s contention that “‘the Parties’ are the object of the provision, rather than the subject taking on a legal obligation or right,” (NAI Comments at 6), there is no material difference between “the Parties shall be guided by the principles . . .” and “the principles shall guide the Parties . . . .” The commandment is just as clearly stated and obligatory. [2]

NAI also suggests that Article 17 bis was intended only to address the concerns of labor regarding the EU’s efforts to reduce the limitations on the ownership and control of airlines of the Parties. (NAI Comments at 11). This assertion is simply not true, as the record in this case amply demonstrates. While Article 17 bis was designed to be responsive to possible ownership and control concerns, it was equally based on the concern posed by the ability of European airlines to establish themselves in a particular country for the purpose of undermining labor standards. (See December 17, 2013 Answer of ALPA at 7‐13, and accompanying exhibits). [3]

At the time the 2010 Protocol was concluded, the challenges posed by “the increasing cross‐border mobility of workers and the structure of companies” within the European Union was recognized not just as a matter of joint concern by the Parties in the context of negotiating the Protocol, but as a matter meriting examination by the EU internally. The EU delegation noted that the “European Commission is closely monitoring the situation and is considering further initiatives in order to improve implementation, application, and enforcement in this area.” 2010 MOC ¶ 18. These concerns, however, have not yet been addressed and, if anything, have become more urgent. For example, in a January 15, 2014 letter to Siim Kallas, Norwegian Minister of Transport and Communications Ketil Solvik‐Olsen raises the potential competitive problems that are created by the fact that “[d]iscrepancies between national legislation within the EU/EEA may result in a non‐level playing field, both on operations within the EU/EEA and on operations between the EU/EEA and third countries.” Moreover, he wrote, “[f]ragmentation of operations between several countries, within and outside of the EU/EEA, makes collection of information burdensome for member states and complicates the establishment of a relevant jurisdiction.” The result of these tendencies, he notes, “may be that genuinely innovative undertakings do not succeed.” (Attachment D).

NAI also repeatedly states that the views advanced by DG MOVE at the July 14 meeting of the U.S. and European delegations were those of the Commission. (NAI Comments at 1‐4). It is not clear from DOT’s Notice that this characterization is accurate, as the Labor Parties have shown. (Labor Parties August 18 Comments at 2‐4; Civil Aviation Sectorial Dialogue Committee Comments of August 18, 2014 (“CASDC Comments”) at 1‐2; Scandinavian Airlines Systems Comments of August 18, 2014 (“SAS Comments”) at 1‐2). DG MOVE stated during the meeting that it was in the process of consulting with the EU Member States, Norway and Iceland about the Article 17 bis issues but the results of that consultation have not been made public. (Notice at 2). Before DOT accepts DG MOVE’s comments as those of the Commission it should seek written confirmation that they are.

Finally, the Joint Declaration of the delegation chairmen should be given little or no weight. [4]

First, the intentions set out by the Joint Declarants are at odds with the actual text of Article 17 bis. As shown in our August 18 Joint Comments (at 8‐10), and above at 4‐5, Article 17 bis gives the Parties the unilateral right to deny an application.

Second, to our knowledge, the Joint Declarants’ opinions on the intent of Article 17 bis are being expressed publicly for the first time, more than four years after the conclusion of the US‐EU ATA Stage 2 negotiations in 2010. These opinions were not previously disclosed to the Labor Parties. Further, to our knowledge, at the time Article 17 bis was negotiated, those opinions were not disclosed to any of the labor representatives who participated in the bargaining over that article. Each of the Labor Parties participated in the negotiations leading to the agreed upon text of Article 17 bis and understood that Article 17 bis allowed for unilateral action. Only now do we find that the lead negotiators had another view. Had that view been disclosed at the time the agreed upon version of Article 17 bis was formulated, we would have refused to support it.

B. Even if the DOT Believes Article 17 bis Does Not Provide a Basis for Unilateral Denial of NAI’s Applications, the Applications Should be Denied.

1. Exemption Application

Even assuming that Article 17 bis does not provide the basis for a unilateral denial of NAI’s applications, NAI’s application for an exemption should be denied under 49 U.S.C. § 40109(c), for the reasons stated in our August 18 Joint Comments (at 4‐7). 49 U.S.C. § 40109(c) states that an exemption may only be granted if an 8 exemption is “necessary” and in the “public interest,” and forms an independent basis for denial of NAI’s exemption application. NAI, DG MOVE, and the Joint Declarants, have all not addressed that statutory standard. As the Labor Parties have shown, neither component of the test is met here. (August 18 Joint Comments at 4‐7).

First, there is no “necessity” to grant NAI’s exemption application. All the services to the U.S. that it plans to operate are being operated and will be operated, at least for several more months, by its sister airline Norwegian Long Haul. The Aviation Week Intelligence Network confirmed this just today, quoting NAS as stating “[a]ll of Norwegian’s long‐haul routes between the U.S. and Europe are operated by Norwegian Air Shuttle” with its own existing operating authority. Victoria Moores, Norwegian Opens Gatwick Long‐Haul Base, Aviation Week, August 25, 2014 (Attachment E).

Second, granting an exemption to NAI to allow it to operate while its application for a permit is being considered would not be in the public interest. NAI and several supporters of its application tout the consumer benefits that NAI’s services will bring to the trans‐Atlantic marketplace. But they completely ignore the facts that while one of the objectives of the ATA is to promote competition in the international aviation marketplace, the Agreement states that all sectors of the air transportation industry, including airline workers, are to benefit by a liberalized agreement, and both the aviation statutes and the ATA place parameters on business practices of airlines. NAI’s business model is well beyond the pale of these parameters.

NAI does not contest the central aspects of that model as demonstrated in our August 18 Joint Comments (at 6‐7). There is no gainsaying that approving an application based on this extraordinary model, which completely disenfranchises employees from having a collective say over their wages and working conditions and has the potential to undermine key foundational principles contained in the labor laws of the United States, is not in the public interest. These key principles include limiting the freedom of association among employees and the complete independence of employees in the matter of self‐organization. See 45 U.S.C. § 151(a). They also include the principle that there is to be a single representative for a particular class or craft of an airline’s employees, see 45 U.S.C. § 152, Ninth, a principle that the U.S. singled out during the negotiations as promoting the rights of airline flight and ground workers to organize themselves and to negotiate and enforce collective agreements. See 2010 MOC ¶ 19. [5]

The labor relations structure of NAI, in which a pilot, for example, has no direct employment relationship with the carrier whose aircraft he or she operates, and is employed under an individual employment contract governed by the laws of a country other than the carrier’s licensing country, and is “based” in yet another country the laws of which the carrier claims apply to his or her labor conditions, presents real questions about the effect of that employment structure on “fair wages and working conditions” for U.S. airline employees whose employers must compete against that structure. Additional questions presented by NAI’s business model can be gleaned from the declaration that has been submitted in this docket by Stephen Colman, a pilot who flew aircraft for NAI’s parent company NAS. That declaration appears to show there was a lack of effective recourse even at NAS for a pilot who had concerns about the operation of the company, even when those concerns touched on safety issues. The lack of recourse to the operating carrier for employment concerns and the resulting effect on wages and working conditions is potentially an even greater issue at NAI, where the carrier, even today, has not clarified which aspects of which country’s employment laws apply to specific aspects of its pilots’ working conditions. The highly complex and seemingly vague arrangement poses novel and significant questions that deserve, as part of the public interest assessment, detailed clarification and consideration before DOT allows NAI to operate commercial air transport services under the ATA.

2. Permit Application

NAI, DG MOVE, and the Joint Declarants all recognize that Article 17 bis provides a basis for joint denial of a permit application. For the reasons stated here, in all of our filings in this docket [6] and those of the other many opponents to NAI’s application, DOT should advise Ireland of its intent to deny the permit application. The Department may do this by issuing an order to show cause stating that it believes that granting NAI a permit would be inconsistent with the principles set out in Article 17 bis. Because of the nature of NAI’s business model, the Department may decide that it would benefit by having additional information to consider before it issues a show cause order. If it so decides, DOT should issue document production requests designed to obtain additional pertinent information, including the production requests attached to the February 21, 2014 Joint Reply of the Labor Parties to Comments on DOT’s January 30 Notice, and/or should hold an evidentiary hearing at which representatives of NAS/NAI may be examined about the founding and structure of the company, including the compensation and laws that apply to Norwegian Long Haul’s air crew and that will apply to NAI’s air crew.

B. Retaliation Concerns Are Unfounded.

Several parties supporting the approval of NAI’s application have raised concerns about the possibility of retaliation on the part of the European Parties should NAI’s application be denied. We believe these concerns are unfounded.

The ATA has been working as intended. DOT has routinely approved applications from more than three dozen European carriers for new or amended operating authority since the Agreement came into effect, and authorization has generally been granted within one to three months. (Attachment F).

NAI’s is the first application that has implicated Article 17 bis, a provision specifically designed to deter its type of business model. Given the novelty and complexity of NAI’s business model and the fact that the applicant has not been forthcoming about which laws apply to which aspects of the employment relations of the flight crew who work on board its aircraft, it is appropriate for DOT to carefully consider the application of Article 17 bis to NAI’s request for authority.

If DOT denies NAI’s applications ‐‐ as we strongly believe it should ‐‐ or, in the case of the permit application, proposes to deny, the Agreement has established a procedure for contesting that determination and that procedure is to take the concerns to the Joint Committee. See Article 18 ¶ 2; 2007 MOC ¶ 33. Paragraph 20 of the 2010 MOC does state that “in the event that a Party would take measures contrary to the Agreement . . . the other Party may avail itself of any appropriate and proportional measures in accord with international law. . . .” However, this provision contemplates that there is a determination that a Party’s action is contrary to the Agreement. Given that there is a clear mechanism for resolving disputes over interpretations of the Agreement, this provision obviously means that it must be determined through that mechanism that a Party’s actions are contrary to the Agreement before the other side may take responsive action. The likelihood of a Party not complying with a dispute resolution determination is remote. Equally remote is the chance that a Party will ever have to decide whether to avail itself of retaliatory measures.

“SPIRIT” OF THE AGREEMENT AND CONCLUSION

The Director of Aviation for DG MOVE and the Joint Declarants have expressed the view that any unilateral decision to deny an application using Article 17 bis “runs against the letter and spirit of the Agreement.” (Notice at 3; NAI Comments, Ex. A ¶ 8). These views raise two key questions: (1) What is the “spirit” of the ATA? and
(2) Would approval of NAI’s application be consistent with that spirit? We submit that that approval would not be consistent with the essential spirit of the Agreement.

NAI says that from the EU point of view the spirit of the Agreement was to “secure American acceptance of the fundamental ‘right of establishment’ guaranteed by the treaties establishing the EU.” (NAI Comments at 12). That may have been a key negotiating objective of the Europeans but it in no sense captures the spirit of the Agreement. The spirit that animates the Agreement is expressed in the preamble to the 2010 Protocol amending the Agreement which articulates the broad, encompassing goals of the Parties: “opening access to markets and maximizing benefits for consumers, airlines, labour and communities on both sides of the Atlantic.” (Emphasis added.)

It is these broad, embracing, goals that gives life to the Agreement. Certainly, the “spirit” of the Agreement encompasses the desire to provide benefits to airlines and consumers, and NAI and the airports and travel groups that support it rightfully point that out. But it also encompasses the intent to ensure that those benefits are not achieved at the expense of airline employees. This spirit is made manifest in paragraph one of Article 17 bis where the parties recognize that “benefits arise when open markets are accompanied by high labour standards.” The spirit of the Agreement is that competition among airlines is to be encouraged and consumers are to benefit from liberalization, but so, too, are airline workers, and the competition spurred by the Agreement is to take place within certain parameters.

The spirit of Article 17 bis was well‐expressed in the statements of Commissioner Kallas made contemporaneously with the completion of the negotiation of the Protocol:

For the first time in aviation history, the agreement includes a dedicated article on the social dimension of EU‐US aviation relations. This will not only ensure that the existing legal rights of airline employees are preserved, but that the implementation of the agreement contributes to high labour standards.

Press Release, Breakthrough in EU‐US second‐stage Open Skies negotiations: Vice ‐ President Kallas welcomes draft agreement, March 25, 2010 (Attachment G).

This sentiment was reiterated by Mr. Kallas during the debate over the Protocol in the European Parliament where he declared:

For the first time in such an aviation agreement, the need to balance market access opportunities with strong social protection has been recognized through a commitment to implementing the provisions of the agreement in a way which does not undermine labour rights.

Plenary session from March 23‐24, 2013, available at http://www.europarl.europa.eu/ep‐ live/en/plenary/video?debate=1300953658079.

And Mr. Kallas’s understanding of this aspect of the Agreement was consistent with the understanding expressed elsewhere in Europe:

For the first time in aviation history, the agreement includes a dedicated article on the social dimension of EU‐US aviation relations. This will not only ensure that the existing legal rights of airline employees are preserved, but that the implementation of the agreement contributes to high labour standards.

10/April/2010‐U.K. House of Commons, Open Skies; Standard Note: SN/BT/455 at 18 (Attachment H (excerpts)).

It is these statements, made contemporaneously with the completion of the 2010 Protocol, that illuminate the spirit and intent of Article 17 bis in particular, and the Agreement as a whole. If a business model such as NAI’s, which is expressly calculated to undermine labor standards and labor‐related rights and principles, is deemed to be acceptable by the Parties to the Agreement, Article 17 bis is devoid of substance and the Agreement devoid of spirit.

***

For these reasons and those set out in our earlier filings and in the filings of the broad range of U.S. and European airlines, labor groups, and individuals opposed to the NAI’s application, DOT should promptly deny NAI’s application for an exemption and should issue a show cause order stating that it proposes to deny NAI’s application for a foreign air carrier permit. If the Department believes that it would benefit from having more information before it issues such an order, it should issue document production requests, including those attached to the February 21, 2014 Joint Reply of the Labor Parties, and/or should hold a hearing at which representatives of NAI and its parent company Norwegian Air Shuttle may be examined about the founding and structure of the company.

Respectfully submitted,

Edward Wytkind, President Transportation Trades Department, AFL‐CIO

815 16th Street NW Washington, DC 20006

Phone: 202‐628‐9262 Fax: 202‐628‐0391 Email: edw@ttd.org

/s/ Philip von Schöppenthau

Philip von Schöppenthau, Secretary General, European Cockpit Association

Rue du Commerce 20‐22 B‐1000 Brussels Belgium

Phone: 32‐2‐705‐3293 Fax: 32‐2‐705‐0877 Email: pvs@eurocockpit.be

Jonathan A. Cohen, Russell Bailey, David M. Semanchik, Attorneys for Air Line Pilots Association

1625 Massachusetts Avenue NW Washington, DC 20036

Phone: 202‐797‐4086 Fax: 202‐797‐4014 Email: Jonathan.Cohen@alpa.org Email: Russell.Bailey@alpa.org

CERTIFICATE OF SERVICE

I certify that on this 25th day of August, 2014, the foregoing Joint Reply Comments of Air Line Pilots Association, Transportation Trades Department, AFL‐CIO, and the European Cockpit Association were served electronic mail to the addresses identified below:

romanow@pillsburylaw.com peter.nelson@pillsburylaw.com steve.morrissey@united.com dan.weiss@united.com sascha.vanderbellen@delta.com howard.kass@usairways.com robert.wirick@aa.com francis.heil@aa.com michael.whitaker@faa.gov jesse.elliot@faa.gov douglas.schwab@faa.gov nicholas.tsokris@faa.gov john.allen@faa.gov EngleTS@state.gov cristinasa@state.gov Keith@washingtonairports.com sschembs@cwa‐union.org john.hanlon@elfaa.com dberg@airlines.org mgoldman@sgbdc jrb1718@gmail.com Daniel.Calleja‐Crespo@ec.curopa.eu Charles.Leocha@travelersunted.org

by causing a copy to be sent by

jcasey@airlines.org kglatz@airlines.org clytle@portoakland.com kgeorge@broward.org mrichardson@swapa.org pjackson@swapa.org ejames@jamhoff.com eugene.alford@trade.gov matthew.baldwin@ec.europa.eu felix.leinemann@eeas.europa.eu david.batchelor@sesarju.eu ottar.ostnes@sd.dep.no paul.gretch@dot.gov robert.finamore@dot.gov nssparks@fedex.com dpdean@jamhoff.com vegard.einan@parat.com thore.selstad.halvorsen@parat.com minister@dttas.ie emjahan@orange.fr jh@eurocockpit.be pruden@asta.org rdow@ustravel.org

Russell Bailey