U.S. Temporarily Blocks Norwegian Air’s Flight Request

Norwegian Air Shuttle AS (NAS) lost its bid for temporary permission to fly to the U.S. using an Irish-registered subsidiary, a plan that pilots and competitors said would skirt local labor requirements and oversight.

The carrier’s request for long-term permission to fly under the arrangement is still being reviewed by the U.S. Transportation Department, the agency said in a decision posted on a government website yesterday. It didn’t give a timeline for making a final determination.

The interim action comes as Norwegian Air embarks on one of the industry’s most ambitious growth plans, rolling out a long-haul operation with 17 Boeing Co. (BA) Dreamliners, while swelling its European fleet. While the European Commission expressed “regret” about the decision, U.S. unions and airlines say registering as a carrier in a third country is an unfair way to sidestep labor protections and government oversight.

“The U.S. Department of Transportation took an important stand for fair competition,” Lee Moak, president of the Air Line Pilots Association union, said in an e-mailed statement.

To the European Commission, the decision “does not say anything on substance nor in law,” Helen Kearns, transport spokeswoman for the commission, the European Union’s regulatory arm, said by e-mail.

“There is no clarity as to the next steps for the definitive permit,” Kearns said. “This clearly goes against the spirit and the letter of our agreement with the U.S.”

The commission will consult with EU governments about the next steps, and “all options will be considered,” Kearns said.

‘Not a Denial’

The airline said the decision “is not a denial,” and that it intends to continue pursuing approval.

By certifying its subsidiary in Ireland, the carrier was seeking to hire pilots through a Singapore employment company and base its cockpit crews in Thailand, according to ALPA, North America’s largest pilot’s union.

The Fornebu, Norway-based company began flying between London’s Gatwick airport and New York’s John F. Kennedy International on July 3. Those flights were operated under the carrier’s existing Norwegian license and aren’t affected by yesterday’s decision.

The airline applied in December as Norwegian Air International Ltd. for permission to fly the route under a license granted by the Irish government, saying the arrangement would “serve the public interest” by increasing competition.

Push Ahead

“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,” Asgeir Nyseth, head of the airline’s long-haul unit, said in a statement.

Delta Air Lines Inc. (DAL), American Airlines Group Inc. (AAL) and United Continental Holdings Inc. (UAL) filed comments urging the DOT to reject the application. They said the regulatory framework would circumvent labor protection laws and give the carrier an unfair advantage.

The airline is bolstering its European fleet with 222 mainly re-engined Boeing Co. 737s and Airbus Group NV A320s arriving from 2016, in addition to the Dreamliners.

“The denied temporary permit and delayed permanent decision is a setback,” Danske Bank analyst Martin Stenshall said in an e-mail. While the risk in the short term is limited, “the airline needs this as a huge pile of aircraft will be deployed over the medium and long term.”

The carrier eventually wants to serve U.S. cities such as Oakland, California, and Fort Lauderdale, Florida, according to its filings with the government.

(An earlier version of this story was corrected to change the executive’s title.)

To contact the reporters on this story: Alan Levin in Washington at alevin24@bloomberg.net; Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Don Frederick, David Risser

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