American lawmakers take aim at cheap transatlantic flights
AMERICA’S House of Representatives is considering a bill, HR5090, that aims to block further expansion by Norwegian Air Shuttle, the only low-cost carrier flying direct between Europe and America. Four lawmakers introduced the bill last month after the Department of Transportation (DoT) tentatively agreed to let Norwegian scale up its transatlantic route. They accuse it of unfair commercial advantages, echoing concerns voiced by several airlines and trade unions.
Low-cost carriers like Norwegian place operational efficiency and cost-competitiveness at the heart of their business models. This includes low labour costs—at least, when compared with the generous collective-bargaining agreements that keep salaries high at most full-service airlines. By under-cutting their rivals, low-cost carriers have nearly doubled their market share within Europe over the past decade. The price-sensitive demand that they unlock creates an economic multiplier effect through higher tourism and business spending. It also opens up air travel to the less well-off.
Americans have benefited a little from the low-cost revolution too within their own country. But not across the Atlantic. Norwegian provides less than 2% of scheduled seating capacity between Europe and America. Three of its full-service rivals—Delta Air Lines, American Airlines and United Airlines—command a jaw-dropping 79% share, when including their joint-venture partners in Europe.
The 2007 US-EU open-skies agreement was intended to weaken this oligopoly by injecting private-sector competition. Its impact, though significant, was dampened by the airline consolidation that followed the global financial crisis. Indecision by American regulators has not helped. It took more than two years for the DoT to provisionally grant Norwegian’s request for a new foreign-carrier permit. Lobbyists in both America and Europe complained that the application was for an Ireland-based subsidiary; a flag-of-convenience that would enable Norwegian to bypass stringent labour laws at home. They accused the airline of planning to hire Asian pilots at a fraction of the cost of Western ones. Its promise not to do so helped sway the DoT.
The Air Line Pilots Association (ALPA), a trade union, went even further by alleging safety shortcomings at Norwegian—a potential death-knell for any airline. It claimed that the Irish Aviation Authority (IAA) would be unable to provide safety oversight for the company because its long-haul flights depart from elsewhere in Europe. This argument is specious. The IAA has a good reputation in the aviation world. And airlines routinely base aircraft outside of the country in which their operating licence has been granted. Norwegian’s proposed flag of convenience is an unusual, but not a unique, bureaucratic oddity necessitated by Scandinavia’s high cost-base. Were there any credible safety concerns, the Federal Aviation Administration, America’s aviation watchdog, would have pounced.
With the DoT’s final decision looming, HR5090 is the last chance for the anti-Norwegian campaign. The bill hones in on a section of the open-skies agreement, Article 17 bis, which highlights the “labour-related rights and principles” of incumbent carriers. The DoT has already dismissed the relevance of Article 17 bis to Norwegian’s case, so rewriting the treaty is the only way of asserting its primacy. Should that happen, America’s full-service airlines, already the most profitable in the world, would cement their grip on the vitally important transatlantic marketplace. Their commercial judgments about reasonable labour costs would be protected by international law; a fantastic outcome for shareholders and employees. For everyone else—travellers, businesses, private-sector airlines and government treasuries—the move would be a depressing step backwards.View the Article
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