TTD Opposes Norwegian Air Shuttle Operating Scheme

BEFORE THE
U.S. DEPARTMENT OF TRANSPORTATION
WASHINGTON, DC

_________________________________________
                                                                                  )
Application of                                                          )
                                                                                  )           Docket No. OST-2013-0204
NORWEGIAN AIR INTERNATIONAL                      )
LIMITED                                                                    )
                                                                                   )
or 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)                  )
                                                                                   )

 ANSWER OF THE TRANSPORTATION TRADES DEPARTMENT, AFL-CIO
TO APPLICATION OF NORWEGIAN AIR INTERNATIONAL LIMITED
FOR AN EXEMPTION AND FOREIGN AIR CARRIER PERMIT

On behalf of the Transportation Trades Department, AFL-CIO (TTD) I write to oppose the application of Norwegian Air International Limited (NAI) for an exemption and a foreign air carrier permit.  By way of background, TTD consists of 32 affiliated unions including those that represent workers at U.S. airlines that would be in direct competition with NAI for international routes.

TTD supports comments filed by the Air Line Pilots Association (ALPA), and we refer you to the analysis of the NAI business model and legal implications detailed in ALPA’s filing.  As those comments discuss, NAI is an affiliate of Norway-based Norwegian Air Shuttle (NAS), and was incorporated in Ireland with the express intent of evading Norway’s social laws.  As a controlled affiliate of a Norway-based company, NAI would not have the opportunity to apply for a foreign air carrier permit if not for the U.S.-European/Norway/Iceland Air Transport Agreement (ATA), which liberalized air traffic rights between the EU and the U.S[1].  NAI’s business model, which is based on undermining labor standards and driving down labor costs, runs contrary to the provision in the ATA that states that the opportunities created by the Agreement are not intended to undermine labor standards or the labor-related rights and principles contained in the laws of the signatories to that agreement.  Furthermore, granting the NAI application would violate the statutory requirement that regulatory decisions made by the U.S. Department of Transportation (DOT), including the granting of air carrier certificates, must promote the public interest and encourage fair wages and working conditions[2].

Throughout the negotiations leading to the ATA, TTD raised concerns[3] about proposed changes in regulatory structure that allowed any EU airline to operate from any point in the EU to any point in the U.S.  This right essentially allows the national airlines of individual European countries to operate as “European” airlines, at least for the purpose of the ATA.  Our concerns during negotiations were that airlines would not be subject to a single European labor law, rather the labor-management relations of these airlines would continue to be subject to the national labor laws of particular European countries.  We believed that this framework would raise the possibility that EU airlines would seek to compete with one another on the basis of differences in those national labor laws and, in the process, secure an unfair advantage with the U.S. carriers providing transatlantic service.

For this reason, we supported the inclusion in the ATA of a labor article such as the previously referenced language stating that the opportunities provided by the ATA are not intended to undermine labor standards or the labor-related rights.  With the emergence of the NAS business model that is designed to exploit European aviation and labor laws in order to undermine collective bargaining by the NAS pilots and flight attendants, our concerns during the negotiations in 2010 and our insistence on language protecting labor standards have proved prescient.

NAS is incorporated in and holds and air operators certificate in Norway.  However rather than register its 787 aircraft in its home country, NAS has registered them in Ireland and is seeking to obtain an Ireland-issued AOC.  For its long haul operations the airline is using pilots who are based in Thailand and employed on individual employment contracts that are governed by the laws of Singapore.  The pilot crews are not employed directly by NAS but by a pilot recruitment company that contract, or more accurately “rents,” them to NAS.  We believe that NAS intends to use the same or similar model for NAI long haul.

In addition, the airline apparently takes the position that because its aircraft are registered in Ireland it does not need to obtain Norwegian work permits for its Asian-based crew.  While the union that represents the non-787 crew is challenging this assertion, the Norway government has indicated that registration of the aircraft in Ireland will postpone the need for Norwegian work permits for the Asia-based pilots and has indicated that obtaining an Irish AOC may take those pilots completely out from under coverage by Norwegian social laws.  It is also unclear whether Irish social laws will cover these airline workers, or if they will be required to obtain Irish work permits.  TTD sent a letter[4] to the Irish Minister for Social Protection on October 18, 2013 inquiring whether the Government of Ireland is applying, or intends to apply its social laws to the flight crew members on NAS aircraft.  At this time we have yet to receive a response.

It is clear that NAS is using the unique nature of EU aviation laws to effectively shop around for the labor laws and regulations that best suit its bottom line.  The airline is using a “Flag of Convenience” strategy at the expense of decent labor standards.  In addition to subjecting its own workforce to substandard wages and conditions, the NAS model threatens the U.S. aviation workforce.  NAS now serves routes from Scandinavia to New York City and Fort Lauderdale, with plans to serve Los Angeles, Oakland and Orlando in the near future.  It also plans to start services to the U.S. from London this summer.  By using a Flag of Convenience to dramatically lower labor costs, NAS is undercutting U.S. carriers and their employees that serve those same markets by as much as 50 percent.

In addition to being counter to the labor article included in the ATA, the application is also contrary to the public interest criteria in U.S. law.  DOT may issue a permit authorizing a person or entity to engage in foreign air transportation if it finds, among other things, that the transportation provided “will be in the public interest[5].”  When determining if the proposed service is in the public interest, one criterion is the encouragement of “fair wages and working conditions[6].”  Another criterion is “strengthening the competitive position of [U.S.] air carriers to at least ensure equality with foreign air carriers[7].”  The NAS/NAI business model as discussed above clearly fails on both criteria.  It would discourage, rather than encourage, fair wages and working conditions, and would clearly put U.S. carriers at a competitive disadvantage.

We have watched as another once-great U.S. industry fell victim to the Flag of Convenience strategy that NAS is now seeking to perform.  The U.S. maritime industry was not long ago a significant force in the global maritime marketplace with U.S.-flag vessels carrying commercial cargo to ports throughout the world.  Now, however, the U.S.-flag fleet is a shell of its former self, with fewer than 100 vessels in operation.  Those only sail under a U.S. flag because of government programs that keep them commercially viable due to their strategic importance to our military and national security.  The reason is that international shipping corporations are able to register their vessels in the country with the labors laws that best suit their bottom line.  By using a Flag of Convenience strategy and choosing the lowest common denominator for wages and labor standards, foreign-flagged vessels are able operate at a much lower cost, and the U.S. maritime industry has been left on life support after sending thousands of good-paying maritime jobs overseas.  Currently, 98 percent of the commercial vessels entering and leaving U.S. ports and harbors are foreign flagged.

We cannot allow a similar fate to befall our aviation industry and its workforce.  The NAS/NAI business model is precisely designed to achieve what international shipping corporations achieved with great success over the past several decades.  Members of Congress who witnessed the decline of the maritime industry in their own districts have also raised concerns over the NAS/NAI strategy and its vast implications for the U.S. airline industry.  At a House Transportation and Infrastructure Subcommittee on Aviation hearing on December 12, 2013, Rep. Peter DeFazio (D-OR) expressed his considerable concern about foreign airlines using a Flag of Convenience strategy to DOT Deputy Secretary for Aviation and International Affairs Susan Kurland, and asked that the government do whatever it can to prevent this from harming U.S. aviation.

DOT should reject NIA’s application on the grounds that its business model violates the labor article in the ATA.  It is further in the public interest and consistent with the DOT’s statutory requirement to encourage fair wages and working conditions to reject this application.

Respectfully Submitted,
Edward Wytkind
President
Transportation Trades Department, AFL-CIO
815 16^th Street, NW
Washington, DC  20006

202-628-9262
edw@ttd.org

December 17, 2013

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