Norwegian draws a line in the sand

Dino D'Amore
By Dino D'Amore April 29, 2014 13:56

Norwegian draws a line in the sand

For many months now we have worried about the Norwegian business model as the aircraft purchase processes seemed to be moving forward while the entire earmarked use of the same seemed in question.

After a torrent of opposition from seemingly all quarters, chief executive of Norwegian Air Services Bjorn Kjos has indicated that the airline is reconsidering plans to base its fledging long-haul activities in Ireland. The airline is also reported to have suspended talks to buy 20 787s to serve its US operations, since it has not yet received approval from the US Department of Transportation to fly to the country. Norwegian is currently operating flights to the US under a temporary permit.

Kjos wrote in a letter to Transport Minister Leo Varadkar: “Unfortunately, the delay in the Department of Transportation process has given us no other choice than to put our ongoing negotiations with Boeing to purchase 20 new 787-9 Dreamliner aircraft — due to be registered in Ireland — on hold until Norwegian Air International’s future in the US has been decided,” Mr Kjos said in the letter.

“An additional delay — or in the worst case, a negative decision by the US Department of Transportation — may regrettably force us to reverse our commitment to build an international long-haul airline in Ireland,” he said.
Back in February, Kjos had suggested that if the DOT was to reject its application for a US foreign-carrier permit it could buy another airline that already has a permit in place. With the comments in the letter this week, it seems such a plan B has been sidelined.

Norwegian’s bid to fly from Ireland to the US has caused intense controversy in the US, with many organisations lobbying for its application to be denied. One such body is the AFL-CIO Transportation Trades Department (TTD) and its member unions, which have been lobbying the Federal Aviation Administration for the past six months to deny US landing rights to Norwegian.

TTD resident Ed Wytkind said that approving Norwegian’s application would “open the floodgates for them to scour the globe for the cheapest labour and the most favourable laws”. The aspect of the airline’s business model that object most vociferously to is the tactic of getting a flight certificate from Ireland, hiring flight crews from Thailand and covering them with Singapore’s labour laws, which they say will distort the marketplace. Three US carriers – Delta, United and American – have also lodged their protests against Norwegian’s application to fly to the US.

There is support from US consumer groups, however, which are in favour of Norwegian’s move into the US market where consolidation has caused air fares to rise.

If Norwegian is forced to abandon its long-haul plans, it will have to re-register its aircraft in Norway.

It must be added that this whole saga fills one with sorrow. Just as we thought air transport globalisation was taking one giant leap forward we are reminded yet again of the limitations placed upon the industry by continuous protectionist measures. Can Boeing lobby Capitol Hill hard enough to see the status quo reversed in favor of Norwegian’s plans? That is the bottom line to today’s news. Bjorn is passing the baton to Boeing to see what it can do: You want the order, fine then lobby for it.  One thing is for sure all this highlights what we here have been saying for many months now, that NAS should consolidate in Northern and Central Europe before doing anything else and move quickly before easyJet and Ryanair expand to a point that prevents NAS from breaking out of Scandinavia in a meaningful way. NAS, without the long haul operations to the US, is left with a business model that is questionable and I would argue wide open to attack from competitors, what it does next should be of great interest to all. Good luck to them.

Dino D'Amore
By Dino D'Amore April 29, 2014 13:56
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