U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, DC
Docket No. OST-2013-0204
Application of NORWEGIAN AIR INTERNATIONAL LIMITED
for an exemption under 49 U.S.C. § 40109
and a foreign air carrier permit pursuant to
49 U.S.C. § 41301 (US-EU Open Skies)
JOINT REPLY OF AIR LINE PILOTS ASSOCIATION,
TRANSPORTATION TRADES DEPARTMENT, AFL-CIO
AND THE EUROPEAN COCKPIT ASSOCIATION
TO COMMENTS ON DOT’S JANUARY 30 NOTICE
Dated: February 21, 2014
The Air Line Pilots Association, the Transportation Trades Department and the European Cockpit Association hereby submit the following reply to the comments that have been filed in response to DOT January 30 Notice. The Notice requested comments on the written “Summary of Information provided by the European delegation” (“DOT Summary”) pertaining to the current and planned long-haul operations of Norwegian Air Shuttle ASA and its affiliated companies, Norwegian Long Haul AS and Norwegian Air International.
As shown by Labor Parties’ earlier filings in the proceeding, and as shown below, NAS/NAI is using an opportunity created by the ATA to undermine labor standards and principles contained in the laws of Parties to the Agreement in a manner that is inconsistent with the public interest and Article 17 bis of the ATA. Given that Ireland has now granted NAI operating authorization, DOT should notify the aeronautical authorities of Ireland that it believes the conditions prescribed in Article 4 of the ATA for the grant of appropriate authorizations have not been met and intends to deny. See ATA Article 6 bis. Should the European Commission or a Member State seek consultations under ATA Article 6, the Department should be prepared to require the Norwegian Group to respond to the attached Request for Information and Documents (Attachment 1 hereto). In addition, the Department should be prepared to ask Norway, Ireland and the Commission to respond to the question set forth in ALPA’s Answer to DOT’s Notice (at 16-17).
The evidence submitted by the Labor Parties’ and other parties in this proceeding demonstrates that approval of NAI’s application for a foreign air carrier permit would not be consistent with the public interest and Article 17 bis of the ATA. Nothing in the February 13 Comments of NAI (or in any other submission submitted in response to DOT’s January 30 Notice) detracts from that conclusion.
1. THE RECORD EVIDENCE SHOWS THAT NAS HAS ESTABLISHED NAI AS AN IRISH COMPANY IN ORDER TO AVOID NORWEGIAN LAW.
The record evidence shows that NAS has established NAI outside of Norway to avoid Norwegian laws. ALPA Answer to Application of NAI (“ALPA Answer”) at 3 & Exs. 4-6; Declaration of Jack Netskar (“Netskar Dec.”) ¶ 12 (filed with ALPA’s Answer); Answer of PARAT to DOT Notice (“PARAT Answer”) at 3 & Appendix 1.
NAI states that “the EU delegation conveyed explicitly and correctly Norwegian International ‘chose Ireland because as an Irish carrier it would have access to significant additional traffic rights not available to it as a Norwegian carrier, access to additional financing options under OECD rules, and access to insurance and financing rebates because Ireland is a Cape Town Convention Signatory.’” Comments of NAI to DOT Notice (“NAI Comments”).
As a preliminary matter, it is important to note that no matter what the Norwegian Group’s reasons for establishing a subsidiary are, if that act undermines the labor standards and labor-related principles in the Parties’ laws, it is inconsistent with Article 17 bis. But the Labor Parties’ February 14 Answers to DOT’s Notice also showed why each of these asserted reasons is insubstantial and appear to be manufactured only to respond to the opposition to NAI’s application. As far as the Labor Parties are aware, these reasons never appeared publicly until this case began. They are inconsistent with news reports that repeatedly gave the reason that NAS would move its long-haul operations out of Norway to avoid Norwegian laws. ALPA Answer at 4 & Exs. 7-9; Netskar Dec. ¶ 10. They are also inconsistent with what the Royal Norwegian Ministry of Transport and Communication says about NAS’s reasons: NLH had, in a letter to the Ministry, “been very clear about that the company’s planned moving of its long haul activity to Ireland is due to [the fact] that the Norwegian immigration legislation was not amended.” PARAT Answer Appendix 2 at 2 (translation). No other reason was mentioned. The legislation that NAS/NLH sought to have amended requires that Norwegian labor legislation applies to employees on board Norwegian aircraft. Id.3 In face of this overwhelming evidence, there can be little doubt that NAS sought to establish its long-haul operations outside of Norway to avoid the application of Norwegian labor laws to its air crew. However, should NAI continue to contest this point, DOT should require the Norwegian Group to provide the information and produce the documents specified in the Request for Information and Documents attached to this Reply.
2. ESTABLISHMENT OF NAI AS AN IRISH CARRIER UNDERMINES THE LABOR-RELATED STANDARDS AND PRINCIPLES CONTAINED IN THE LAWS OF NORWAY AND THE U.S.
A. Norway is a Party to the ATA.
NAI appears to argue that the only law that the Department should look at is EU or U.S. law. NAI Comment at 7-8 and n.21. If that is what NAI is arguing, then it is incorrect on this score. The term “Party” in the Agreement means “the United States, the European Union and its Member States, Iceland and Norway.” U.S-EU (Iceland, Norway) Air Transport Agreement, June 21, 2011(emphasis added).4
B. NAS’s Establishment of NAI as an Irish Carrier Will Undermine the Standards and Principles in Norway’s Employment Laws.
ALPA has shown that “but for” the ATA, NAS could not own and control a subsidiary in Ireland. ALPA Answer at 7-8. The use of this opportunity afforded by the ATA is not to be used to undermine the standards and principles in Norway’s laws. Id. The very fact that NAS is attempting to move its long-haul operations out of Norway undermines the standards and principles in Norway’s labor laws.
NAI asserts that the European delegation provided DOT with “detailed information on salaries and working conditions that clearly demonstrate that Norwegian will, in fact, promote – not undermine – ‘high labor standards.’” NAI Comments at 4. They also claim that “EASA regulations prescribe the working conditions on all Norwegian International flights” and that, “in conformity with the Rome Convention and EU Regulation 593/2008, Norwegian International applies the law of the country where an employee is hired and based to that person’s employment relationship with the Company.” NAI Comments at 7-8. NAI then goes on to assert that “the majority of employees employed by Norwegian International’s affiliated companies are unionized and, that as the EU delegation recognized . . . the Norwegian group has ‘no tradition of discouraging unionization.’” Id. at 8.
These assertions do not hold up under scrutiny.
The European delegation did not provide the U.S. with “detailed salary and working conditions.” The salary information provided by the EU delegation was a chart that showed what purported to be “dollarized average gross payments” for certain flight crew categories of Norway, Spain, Thailand and the U.S. DOT Summary at 2. There is no source given for the numbers and there was no indication whatsoever as to how the numbers were calculated. As ALPA and ECA pointed out, the numbers appeared to be something other than total compensation and, at least for pilots, a first step in evaluating the total compensation would be to reduce the Thailand numbers and raise the Norway, Spain and U.S. numbers by 20-25 percent to account for pension and other social costs. ALPA Answer to DOT Notice at 7-8; ECA Answer to DOT Notice at 4-5.
As for working conditions, there was no mention of them in the information presented by the European delegation. All that NAI offers here is that EASA regulations would prescribe some working conditions during NAI’s flights. But the EASA regulations only have to do with safety requirements, not with working conditions. Commission Regulation (“EU”) No. 1178/2011, 3 Nov 2011 (laying down technical requirements and administrative procedures related to civil aviation aircrew). “Working conditions” or “conditions of employment” as the idea appears in Norwegian and U.S. labor law, embrace a much wider range of matters: e.g. retirement programs, medical coverage, the way work is performed, vacations, days off, requirements for layover and training accommodations, bidding rights and the like. In addition, the EASA safety rules, as with FAA regulations, are minimum standards that can be improved upon in collective bargaining. The NAI flight crew will be deprived of bargaining over these matters by virtue of NAS’s unilateral decision to move its long-haul operations out of Norway and put them under an Irish AOC. This undermines the labor standards and principles in Norway’s labor laws.
The assertion that the Norwegian Group has “no tradition of discouraging unionization” similarly lacks merit. PARAT – the union for NAS’s pilots and flight attendants – has convincingly shown that NAS has engaged in a systematic effort in the last few years to discourage unionization and this effort has resulted in the portion of NAS employees who are unionized dropping from nearly 96 percent to under 50 percent. PARAT Answer at 5 & Appendix 2. And, of course, no NLH/NAI aircrew are represented by unions: the employment relationship is set up in a way to preclude that result. Finally, the European delegation did not “recognize” that NAS had “no tradition of discouraging unionization.” The delegation merely passed on information that NAS had provided it. It turns out that the information was misleading or, more accurately, incorrect.
NAI’s claims that it “applies the law of the country where an employee is hired and based to that person’s employment relationship to the company,” NAI Comments at 7-8, and that it recruits pilots and flight attendants “in the local markets where they are based,” id. at 6, are also problematic. These statements raise more questions rather than provide answers and highlight the problems with the Norwegian Group business model. In which “country” are the pilots “hired and based?” Is it the law of one, two, or even more countries that applies to the employment relationships? The longhaul pilots must all hold EASA licenses and European passports. Answer of ECA to NAI Application at 5 & attached NLH/NAI recruitment advertisement. So they are recruited and maybe even “hired” in one or more European countries. But their employment contracts are with a Singapore employment company and the contracts are governed by Singapore law. So, are they “hired” there? Basing is another matter, and it certainly appears that wherever NLH/NAI pilots might be hired, they are not, unless by happenstance, based there. According to the recruitment advertisement the pilots will be based not in Europe, not in Singapore (where, incidentally, none of the Norwegian Group even offers air service), but in Thailand. Id. Similarly, the NLH/NAI pilots are not recruited in the local markets where they will be based as they are recruited in Europe, not in Thailand. So there is no “country” where a pilot is “hired and based.” So which country’s (or countries’) laws apply to a pilot’s relationship with the company? And if it is more than one country’s laws, to which aspect of the employment relationship does each country’s law apply? Unless DOT does not grant NAI’s application at this juncture – which it should not – the Department should find out the answers to these questions before it makes a final determination on the application. See attached Request for Information and Documents.
4. NAI DOES NOT SATISFY ALL THE APPLICABLE REQUIREMENTS FOR RECEIVING A FOREIGN AIR CARRIER PERMIT.
NAI suggests that it has satisfied all the applicable requirements to receive a foreign air carrier permit that its application is consistent with precedent and that DOT should “now promptly grant” its permit. NAI Comments at 3, 9. But the very authority NAI cites in support of these arguments shows that where it is appropriate – as the record in this proceeding amply shows it is – DOT is required to take a close look to determine whether the grant of a particular permit is in the public interest.
Thus, NAI cites (1) a House report that says that “[i]n most of these cases, there are no substantial issues,” and so a grant of authority is in the public interest in those cases, NAI Comments at 9; (2) Article 4 of the ATA which refers to the “‘conditions . . . normally applied to the operation of international air transportation,’” id. at 10; and (3) Article 6 bis of the ATA which states that a Party will not look into an applicant’s fitness and ownership unless the Party has “a specific reason for concern . . . that the conditions prescribed in Article 4 . . . have not been met,” id. As ALPA and ECA have shown, NAI’s application is not “most cases,” that the Norwegian Group business model provides a “specific reason for concern,” and that “the laws and regulations normally applied” contain a public interest test that dictates that NAI’s application should not be granted.
While the ATA established a recognition proceeding for fitness determinations, fitness is only one criterion an applicant must meet. Consistency with the public interest is another, as is consistency with the ATA, and there is no mutual recognition procedure for these determinations.
As for NAI’s assertion that the application is consistent with precedent, the response is simple: There is no precedent for NAI’s application. This is the first time DOT has been presented with clear evidence of an applicant whose business plan, if allowed to proceed, would undermine the principles of Article 17 bis of the ATA.
5. THE LABOR PARTIES DO NOT CONTEND THAT THE ATA CREATED NEW LABOR STANDARDS; RATHER ARTICLE 17 BIS WAS DESIGNED TO DETER AND PREVENT THE USE OF OPPORTUNITIES MADE AVAILABLE BY THE AGREEMENT TO UNDERMINE THE PARTIES’ EXISTING LABOR STANDARDS AND LABOR-RELATED PRINCIPLES.
NAI argues that Article 17 bis “does not create new labor standards or override the existing laws, regulations, and practices of either the EU and its Member States or the U.S. that address airline employment and labor issues.” NAI Comments at 8. ALPA and ECA do not contend that it does.
Rather, we contend that Article 17 bis is intended to do is just what it says – to deter and prevent the use of opportunities made available by virtue of the ATA to undermine the existing laws, regulations and practices of the Parties that address labor and employment law.
The negotiating history of Article 17 bis is set forth in ALPA’s Answer. ALPA Answer at 7-13 & Exs. 16-24. This history is supplemented and fully corroborated by the Declaration of Martin Chalk (“Chalk Dec.”) (Attachment 2 hereto), the President of the European Cockpit Association from 2005 to 2011, a period that covers the time in which the labor concerns addressed by Article 17 bis were considered at length by the EU and U.S.
The ECA was a stakeholder that participated as a member of the EU delegation at every negotiating session and every Joint Committee meeting during that time period and Mr. Chalk either participated personally or oversaw ECA’s participation in meetings. He demonstrates that:
(1) The elimination of the nationality clause and the “European carrier concept” raised a “question of major importance for airline workers both in the EU and the U.S.” because the “EU had no EU-wide law that governs critical aspects of the employment relationship for airline workers.” Chalk Dec. ¶ 5.
(2) Of particular concern to EU and U.S. airline workers was that the EU had no EU-wide law that governed the selection of employee representatives or the negotiation and enforcement of collective bargaining agreements. These matters were, instead, left to the national laws of the Member States. Id. ¶¶ 5, 6.
(3) The labor representatives to the negotiations were concerned that this fragmented legal structure could lead to “forum shopping” by European airlines to take advantage of more favorable labor standards in another Member State. Id. ¶ 13.
(4) The EU-wide laws “were perceived as part of the problem because they were complex, vague, and difficult to apply, and served to encourage, rather than discourage,” the problem that the labor parties sought to address. Id. ¶ 13.
(5) The EU examined the fragmentation/forum shopping issues closely, both in two special “labor forms” and in an analysis undertaken by a specially appointed expert. Id. ¶ 14.
(6) In order to be responsive to the fragmentation/forum shopping concern, the EU proposed including a provision in the ATA that addressed this issue. The EU proposal, after ratification at the negotiating table, eventually became Article 17 bis of the Agreement: a “succinct but flexible provision that was designed to address the forum shopping concern.” Id. ¶ 15.
(7) Article 17 bis “has, and had, no other function than to prevent an airline using their preferred labor regulations in one country from undermining the labor rights in another.” Id.
Mr. Chalk concludes with a question: If Article 17 bis is not clearly designed to prevent forum shopping, what is it intended to prevent?
In short, we are asking to have the Agreement interpreted in accord with its plain meaning and intent.
We would encourage the European Commission, Norway and Ireland to reconsider their views in light of this negotiating history and in view of the fact that many components of the Norwegian Group’s “story” that the European delegation delivered on its behalf are incomplete, misleading and/or false.
6. The Parties Supporting NAI’s Application Do Not Address The Core Concerns of ALPA and ECA.
The supporting third-parties to NAI’s application (City of Orlando, Visit Orlando, Orlando Airport, Orange County, Florida; Broward County Aviation Department; Washington Airports Task Force: Port of Oakland; Travel Technology Association; Irish Minister of Transport; Norway’s Transport Ministry; the European Low Fare Airline Association Federal Express Corp.) do not address, the fundamental labor concerns at the core of the Labor Parties’ opposition.
One naturally expects the airports, their communities, and travel industry groups to favor new service because these serviced are perceived to benefit them. But none of these parties have addressed the undermining of labor standards that the Norwegian Group’s business plan would bring. Moreover, none has addressed the fact that implementation of Norwegian’s business plan would put U.S. carriers such United, Delta, and American and their employees at a competitive disadvantage. The Labor Parties have not opposed the many applications of EU carriers for new authority which the ATA has made possible but we are confronted here with a business model that the Agreement was designed to deter. The Department should view these expressions of support to be inapposite.
Similarly, the Irish and Norwegian transport ministries do not meaningfully address the Labor Parties’ labor concerns. In his letter, the Norwegian Transport Minister makes a passing reference to the labor article and suggests that whatever the Labor Parties’ concerns may be they can be handled after NAI’s application is approved. This position seems at odds with the Minister’s letter to the European Commission discussing the labor fragmentation challenges confronting the EU and its Member States. ALPA Answer Attachment 2 (Ketil Solvik-Olsen letter to Siim Kallas) ALPA Answer to DOT Notice at 13). The concerns set out there would seem to be arguments that would support addressing the challenges before, rather than after, the Norwegian Group model is placed in operation in the trans-Atlantic market.
The Irish letter is devoted in large measure to discussing the Irish authorities’ safety record. The Labor Parties’ recognize the IAA’s record of competence with respect to aviation oversight and have not raised safety oversight issues in this proceeding.
The European Low Fare Airline Association (“ELFAA”) counts NAI’s parent, Norwegian Air Shuttle, as a member. See http://www.elfaa.com/members.htm, last visited Feb. 21, 2014. It dismisses the concerns of the opponents of NAI’s application as “defensive, protectionist concerns” which are outweighed by a “desperate need [for] the availability of low fares,” ELFAA letter at 3, but provides no legitimate reason for sweeping Article 17 bis aside.
Finally, with respect to the filing by Federal Express Corporation, ALPA understands, and is sympathetic to, the fact that FedEx’s international business is built upon the existence of liberal traffic rights for cargo as embodied in Open Skies agreements generally. But the Parties to the ATA expressed their intent that the opportunities made available in the Agreement are not to be used in a particular way. NAI’s business plan is unique and unprecedented. Denial of its application should not affect legitimate expectations of other carriers under the ATA or other air service agreements.
We recognize that fare competition can be a good thing, so long as it is carried out in accordance with law. But as shown in the Labor Parties’ filings throughout this proceeding, the Norwegian Group’s service proposal is starkly at odds with the U.S.-EU Air Transport Agreement.
The CEO of NAS, Bjorn Kjos, was recently quoted touting the benefits of low-cost service verses the potential adverse effect on the quality and quantity of airline jobs saying, “If I was a politician, I wouldn’t give a shit about the airline side.” Gwyn Topham, How are Norwegian Air Shuttle’s low-cost US flights financially possible?, The Guardian, Feb. 4, 2014, at 3.5
DOT should not accept Mr. Kjos’s invitation. Such an approach is plainly unacceptable.
DOT should notify the aeronautical authorities of Ireland that the conditions prescribed in Article 4 of the ATA for the grant of appropriate authorizations have not been met and that DOT intends to deny the application. Further, should the EU or a Member State seek consultations under Article 6 of the ATA, DOT should require the Norwegian Group to respond to the attached Request for Information and Documents. In addition, DOT should be prepared to ask the European Commission, Norway and Ireland to respond to the information requests set forth in ALPA’s Answer to DOT’s Notice.
Jonathan A. Cohen
David M. Semanchik
Air Line Pilots Association
1625 Massachusetts Avenue NW
Washington, DC 20036
Attorneys for Air Line Pilots Association
Edward Wytkind, President
Transportation Trades Department,
815 – 16th Street NW
Washington, DC 20006
Philip von Schöppenthau,
European Cockpit Association
Rue du Commerce 20-22
B-1000 Brussels Belgium