The following is from the Air Line Pilots Association (ALPA):
(June 29, 2016) — In the United States and much of the rest of the world, international aviation regulations have traditionally required aircraft to be registered (“flagged”) in the home country of its owners and regulators. This system encourages best practices in safety and prohibits forum shopping — or the repositioning of airlines as a means to benefit from environments with the most impotent regulatory and labor practices, and lowest tax rates — to provide more stability and predictability to the consumer and a more level playing field for air carriers.
Several new airlines are currently attempting to evade the national flag-based system and switch to a flag-of-convenience business model. Using the international maritime system as a template, companies such as Norwegian Air Shuttle have set up subsidiaries based outside of their home countries in an attempt to increase their “bottom line” financial results.
The debate over flag-of-convenience carrier access to U.S. markets reached a potential watershed on April 15, 2016, when the U.S. Department of Transportation (DOT) tentatively approved Norwegian Air Shuttle subsidiary Norwegian Air International’s (NAI) foreign air carrier permit. ALPA is opposing this decision and working with our allies to reverse DOT’s decision.
TAKE A STAND — Help stop this job-killing approval by participating in ALPA’s Call to Action today! You’ll send an email to your representatives in Congress that you support H.R. 5090 to ensure that air transportation between the United States and the European Union complies with the intent of Article 17 of the United States-European Union-Norway-Iceland Air Transport Agreement of June 21, 2011. (H.R. 5090’s co-sponsors include Reps. Suzan DelBene, Derek Kilmer, Rick Larsen, Jim McDermott and Adam Smith of Washington.)
The NAI example fully illustrates the flag-of-convenience dilemma and the threats it poses to the international airline industry. While headquartered in Norway (as the name suggests), NAI is based in Ireland. Norwegian Air Shuttle already flies to the United States today under its own DOT authority. Flagging its planes outside of Norway allows the company to evade Norwegian tax and labor laws.
The pilots who operate the NAI aircraft are employed by a Singapore hiring company on fixed-term individual employment contracts with total compensation and labor protections substantially inferior to pilots employed by Norwegian. The flight attendants have been employed in a similar manner, though the laws, terms, and conditions of employment that apply to them are unclear.
The expressed purpose of this forum shopping, according to NAI itself, is to avoid Norwegian labor standards and reduce its costs compared to its other competitors who are playing by the rules.
The possibility of such flag-of-convenience airlines was anticipated during the negotiations that led to the U.S.-EU-Norway-Iceland Air Transport Agreement. To prevent forum shopping, Article 17 bis was added during the second phase of the agreement. This article reads in part:
The Parties recognize the importance of the social dimension of the Agreement and the benefits that arise when open markets are accompanied by high labour standards. The opportunities created by the Agreement are not intended to undermine labour standards or the labour-related rights and principles contained in the Parties’ respective laws. . . [and these] principles. . . shall guide the Parties as they implement the Agreement. . .
This provision is designed to prevent forum shopping with the intent of undermining labor-related standards—exactly what NAI is attempting to do.
PREVIOUSLY at The Stand:
Deny NAI: We must protect open, fair aviation competition (by Reps. Peter DeFazio, Frank Lobiondo and Rick Larsen — May 5, 2016)
It’s time to derail Norwegian Air scheme to undermine good jobs (by Ed Wytkind — Aug. 20, 2014)
Urge White House to reject Norwegian Air scheme (March 12, 2014)