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Big Three U.S. Airlines and Labor Get First Round Win Over Norwegian Air

WASHINGTON ( TheStreet) -- The U.S. Transportation Department has rejected Norwegian Air International's request for an exemption that would permit it to serve the U.S. while its request for a permit to operate as an Ireland-carrier is reviewed.

The rejection, which has no immediate impact because Norwegian can continue to serve the U.S. under its current framework, was sought by a variety of airline labor unions as well as by American (AAL) Delta (DAL)  and United (UAL) . Norwegian's application for a permit is still pending and the carrier continues to fly to the U.S.

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"The U.S. Department of Transportation took an important stand for fair competition today by denying Norwegian Air International's request for temporary authorization to fly to and from the United States," Lee Moak, president of the Air Line Pilots Association, said Tuesday in a prepared statement.

"While today's decision is extremely significant, the DOT's work is not yet complete in making certain that NAI is not permitted to exploit international aviation policy and law to gain an unfair economic advantage over U.S. airlines," Moak continued. "The DOT must take the next step and deny NAI's application for a foreign air carrier permit to serve U.S. markets."

Sara Nelson, president of the Association of Flight Attendants, said in a prepared statement: "The DOT's decision upholds decades of work by AFA and our colleagues across the globe to create opportunities for aviation workers while expanding business." Also, 38 senators have signed a letter to the DOT opposing a permit for Norwegian.

The opponents object to NAI's strategy to establish an Irish airline and to hire pilots in Singapore, and to pay them less than pilots who fly for NAI's parent company.

American, Delta and United argued, in their December letter to the DOT, that "Article 17 of the US-EU agreement recognizes the importance of 'high labor standards' and 'prohibits the establishment of flags of convenience to evade labor protections and thereby derive a competitive advantage in the marketplace.'"

In a statement late Tuesday, Norwegian said the DOT "announced today that it will require additional time to reach a decision on Norwegian Air International's application for a foreign carrier permit to serve the U.S. from Europe. Until then, Norwegian Air Shuttle will continue to operate flights to the U.S. under its existing authority from DOT.

"Today's announcement to dismiss the exemption application 'on procedural grounds,' simply gives DOT additional time to consider NAI's permit application," Norwegian said. "It is not a denial."

"While we think it is unfortunate that DOT feels the need to further delay issuance of our permit, which has been pending now for over six months, Norwegian Air International stands behind its business," said Asgeir Nyseth, CEO of NAI. 

In a March interview with TheStreet, Norwegian Air Shuttle CEO Bjorn Kjos said that all the forces arrayed against him -- including the 38 senators, the pilots union, the flight attendants union and the big three airlines -- have it wrong. Norwegian is not anti-union and does not pay employees too little and is also among Boeing's best customers, the European launch customer for the 737 MAX, Kjos maintained.

"Nobody would work for Norwegian if we paid them peanuts," Kjos said in an interview. "We have to compete for (employees.)" In fact, he said, about two-thirds of Norwegian Air Shuttle employees are unionized.

The carrier currently operates flights to the U.S. under Norwegian registration, but has relocated its long-haul company's registration to Ireland, which is part of the European Union, while Norway is not. Kjos said the U.S. carriers "hate competition and have incredibly high fares (while) Norwegian offers low-cost flying on the 787."

Norwegian pays its captains about $170,000 annually and pays first officers about half that, Kjos said. It pays flight attendants $35,000 to $40,000 annually.

Oslo-based Norwegian Air Shuttle began flying the Boeing (BA) 787 in August on European routes as well as Oslo and Stockholm to Bangkok and New York. It plans to operate a fleet of 14 Dreamliners, with three in service and four to be delivered by summer.

Written by Ted Reed in Charlotte, N.C.

To contact this writer, click here.

Follow @tedreednc


 

At the time of publication, the author held no positions in any of the stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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