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National Journal—Globe-Trotting Carrier Poses Threat to Workers, U.S. Airlines

By Admin

[As published by Fawn Johnson in National Journal]

If you think Burger King’s recent purchase of a Canadian donut vendor to cut its tax obligations was ingenious, you’re going to flip over the business model cooked up by Norwegian Air.

Unless you’re a serious aviation geek, you probably haven’t heard about this one. The Norwegian scheme is a deviously brilliant regulation-shopping endeavor. It calls to mind the tax-haven hunt involved in Burger King’s acquisition of the fast-food donut vendor Tim Horton’s, dubbed the Dunkin’ Donuts of Canada. Burger King will get a sweet tax break by turning itself into a Canadian company, and lots of folks in the United States are upset about it. (This analysis from the Seattle Times, titled “Burger King to America: Drop Dead,” gives a sense of how the deal is going over in the public sphere.)

Now it’s time for travelers to get their feathers ruffled. Norwegian Air International has unsuccessfully sought a foreign air carrier permit from the U.S. Department of Transportation to operate in American airports. The airline argued that the inclusion of the European carrier in the mix of international flight providers would be a boon to travelers. Some Americans agreed. For example, officials from Broward County, Florida, said Scandinavia is one of its richest sources of inbound tourists. Why not give those fair-haired Nords as many ways to get here as we can?

The Transportation Department was not swayed. On Monday, the agency dismissed the carrier’s request, saying the “novel and complex nature of the case,” along with an array of opponents, was against the public interest.

The problem, as the transportation unions and U.S.-based airlines repeatedly told DOT, is that Norwegian Air isn’t really a European airline anymore. It has established corporate subsidiaries in Ireland, but the company won’t fly out of Ireland. The theory is that Ireland’s labor laws are less stringent than Norway’s. The air carrier also hired pilots from Thailand under that Singaporean labor laws to run their international routes. Those pilots don’t have the same labor protections as U.S. pilots.

It seems like the only thing Norwegian about the company is the people controlling its profit interests. Delta Air Lines, American Airlines, United Airlines, and U.S. Airways, who would have faced more competition if the request was approved, argued that the elaborate scheme violates the U.S.-European Union Transport Agreement, which prohibits “the establishment of flags of convenience to evade labor protections.” (See the full docket of comments on the proposal here.)

The threat that this globe-trotting business model poses to American carriers and their workers was so palpable that frequent foes—U.S. airlines and their unions—were in lock-step agreement in opposing the deal.

“This is the first attempt, really, to create this type of business model and get government sanction to do it,” said AFL-CIO’s Transportation Trades Department President Ed Wytkind. “That’s why it’s such a big deal.”

Burger King’s sly move to become a Canadian company irked both Republicans and Democrats, but in that case lawmakers can only address the deal after the fact. And as Fox News’s Howard Kurtz observes, it’s not likely Congress will do anything about it. Calls for boycotting the fast food giant probably won’t make much difference either.

From Wytkind’s perspective, the Norwegian Air case gave our government a chance to shine where it didn’t in the Burger King case. It could state unequivocally, as it did, that shopping around the world for the best regulatory framework won’t fly, literally or figuratively.

There were American supporters of the deal, although fewer in number than the opponents. Former House Transportation Committee Chairman John Mica, R-Fla., Federal Express, and the American Society for Travel Agents were among them. They said that allowing Norwegian Air to operate in American airports would bring more choices for travelers—always a good thing—and potentially lower the prices for trans-Atlantic flights.

What’s more, there are delicate international trade norms that could be flouted by an outright denial of a request that would be a shoo-in under the U.S.-E.U. Open Skies agreement if not for the location shopping by Norwegian Air. As pro-trade FedEx noted, the Open Skies agreement gave U.S. carriers access to European markets. “To try to rewrite the agreement through regulatory actions would not evidence good faith,” the carrier said in its comments to DOT.

International trade practices, labor standards, and the shifting customs of an increasingly global business community all bump up against each other in this case. The fallout from Norwegian Air’s attempt to do business here and the government’s rebuff will tell us how much sway the U.S. has over global businesses that want to move around the world in search of the easiest operating rules.