Norwegian Air Says U.S. Thwarts Growth on No License Action

Jun 13, 2014 2:53 pm ET

(Updates with EU response starting in seventh paragraph.)

June 13 (Bloomberg) -- Norwegian Air Shuttle AS said a planned long-haul discount network operating out of London risks being stymied by U.S. opponents who claim a push to trim costs by basing planes in Ireland undermines labor standards.

While a largely trans-Atlantic timetable planned for the next two years could be performed under the carrier’s existing Norwegian license, flights to other long-haul destinations from the U.K. capital require aircraft to be registered in the European Union, of which Norway isn’t a member.

“When you start flying to the Far East, South Africa and South America you need the EU license,” Chief Executive Officer Bjoern Kjos said in a telephone interview. Splitting the fleet between two jurisdictions would be too expensive, he said. “It’s very stupid and not very cost effective to have one airline flying east and another airline flying west.”

Norwegian Air made its first foray into long-haul flying in 2013 with routes from Scandinavia to the U.S. and Thailand. Service from London to New York, Los Angeles and Fort Lauderdale, Florida, will start as planned next month, though the U.S. Transportation Department hasn’t granted a foreign air carrier permit for the Irish subsidiary, Kjos said.

“Norwegian Air Shuttle’s application is pending,” a department spokesman, Ryan Daniels, said in an e-mailed statement. “Because it is a contested proceeding, the department cannot comment on the merits of the case.”

Congress, Union

The U.S. House of Representatives this week passed an amendment to the department’s budget aimed at blocking the application. The U.S. Air Line Pilots Association said Norwegian was seeking to base jets in Ireland, without flying from there, “expressly to evade the social laws of Norway in order to lower the wages and working conditions of its air crew.”

The European Commission said the Ireland-based Norwegian Air subsidiary can fly trans-Atlantic routes from the EU under the 28-nation bloc’s “open skies” accord with the U.S.

The commission, the EU’s executive arm, said it raised the matter with U.S. officials at a June 10 meeting in Vienna and received no explanation for the U.S. government’s failure to grant a foreign permit to the Irish unit. The commission said it would consult with EU nations on the next steps.

“We are keeping all our options open on how to respond,” the Brussels-based commission said today by e-mail.

‘Same Operation’

Kjos said the U.S. pilots it uses on trans-Atlantic flights are paid an above-average rate, and that many are joining from established network airlines. The carrier can add new flights “under the same operation, with the same crew as we’re doing today” using its Norwegian air operator’s certificate if it has to do so in the short term, he said.

Norwegian Air is embarking on one of the industry’s most ambitious growth plans as it rolls out long-haul flights while swelling an 88-plane European fleet with 222 mainly re-engined Boeing Co. 737s and Airbus Group NV A320s arriving from 2016.

Kjos’s long-haul ambitions are built around the lower operating costs of the all-composite Boeing 787 Dreamliner that he says will finally make low-cost flights viable after decades of false starts at carriers such as Laker Airways.

Norwegian Air has agreed to take eight 787-8s each seating 259 people in coach class and 32 in premium economy. Six have so far been delivered. It also has agreements for nine 787-9s that have a longer range and will carry 20 percent more people, which will take the 787 fleet to 17 aircraft by 2018.

In an April letter to Irish Transport Minister Leo Varadkar, Kjos said talks with Boeing for a further 20 787-9s were frozen pending the U.S. Transportation Department’s decision on the license application.

--With assistance from Alan Levin in Washington and Jonathan Stearns in Brussels.