US Approves Norwegian Air License, Puts a Smile on Boeing’s Face

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After a delay of nearly three years, the U.S. Department of Transportation (DoT) on Friday approved a license for Norwegian Air Shuttle’s Ireland-based unit to fly to and from the United States. The airline already flies across the Atlantic and to other international destinations, but because Norway is not part of the European Union, Norwegian Air’s ability to expand depends on negotiations with every country from which it seeks a license. Gaining recognition for its Irish subsidiary as an EU member gives the airline the same rights as any other EU nation.

This is not a small thing from Norwegian Air Shuttle (ICAO code: NAX) or for its aircraft vendor, Boeing Co. (NYSE: BA). NAX is a low-cost carrier that currently flies Boeing 737-800s exclusively. Boeing has delivered 79 of the planes to the airline since the first delivery in 2009, and NAX is one of Boeing’s top 10 customers measured by backlog of orders.

Boeing’s order book shows 21 more 737-800s still to be delivered and 108 737 MAXs on order for delivery beginning next year. Boeing has also delivered three 787-8s to NAX and has orders for 19 787-9s. That is a total of 148 new Boeing planes, before the U.S. licensing decision was announced.

NAX will be an early, if not the first, Boeing customer to fly the 737 MAX, and that includes transatlantic flights the airline now flies with the 787. The new planes could open new routes between smaller cities in the United States and Europe and threaten to cut into the revenues of legacy carriers United Continental Holdings Inc. (NYSE: UAL), Delta Air Lines Co. (NYSE: DAL) and American Airlines Group Inc. (NASDAQ: AAL). There is no question that NAX fares will undercut legacy carriers’ transatlantic fares.

The DoT’s decision was widely praised by consumer advocacy and travel and leisure groups and generally opposed by airline employee unions and U.S. legacy carriers. U.S. Travel Association CEO Roger Dow said:

The American travel community is ecstatic at the decision by the Obama administration to allow new service to U.S. cities by Norwegian Air International. If ever there were a trade policy that brings jobs to U.S. soil, this is it: [NAX] is flying and will buy more American-made planes, their passengers will spend money in American businesses, and American travelers will have more and cheaper options when they fly. This announcement is an unmistakable endorsement of competition, connectivity and Open Skies agreements, and a welcome repudiation of protectionist, anti-competitive policymaking.

Association of Flight Attendants-CWA President Sara Nelson condemned the license approval:

This decision must be reversed immediately by the Obama administration. It is a betrayal to hundreds of thousands of aviation workers. The DOT decision overrides carefully negotiated worker rights and designs a new playbook that rolls out the red carpet for foreign corporation by trampling workers’ rights. This decision puts a rubber stamp of approval on the ‘flag of convenience model’ that destroyed over a hundred thousand U.S. shipping jobs. …

Congress must be prepared to act next week. President Obama must reverse this harmful decision and stand up for working people all across the country. We will not accept this. We will act. We will never stop. We will never accept abrogation of our rights.

No legacy carrier has yet commented on the license, but Southwest Airlines Co.’s (NYSE: LUV) Southwest Pilot’s Association (SWAPA) also condemned the license. Union President Jon Weaks said:

By approving [NAX]’s application despite it being in direct violation of Article 17 bis of the EU-US Open Skies Agreement, the Obama Administration has unilaterally undermined every trade agreement the U.S. has ever signed – including the Open Skies agreements we have with more than 100 countries across the globe. In the process, President Obama and Secretary Foxx have turned their backs on the tens of thousands of American workers employed in the aviation industry.

To be clear, this decision gives a single foreign carrier an advantage unavailable to a single one of its competitors – including those in the U.S. Norwegian Air International will possess an unparalleled advantage over U.S. carriers if allowed to proceed with its Flag of Convenience scheme. This reckless decision sets a dangerous precedent in aviation and further underscores the unwillingness to ensure a level playing field for American workers when executing trade agreements that have been a hallmark of the Obama Administration.

The question now falls into the lap of President-Elect Donald Trump, who has positioned himself as a champion of maintaining U.S. jobs. SWAPA has called on Trump “to preserve a fair and level playing field for U.S. workers by denying [NAX] the Foreign Carrier Permit unjustly awarded by President Obama.”

The DoT explained its rationale in a statement cited by The Wall Street Journal:

Regardless of our appreciation of the public policy arguments raised by opponents, we have been advised that the law and our bilateral obligations leave us no avenue to reject this application.

There is no evidence, yet, that the NAX license will cost a single U.S. airline-industry job. The Norwegian carrier does, however, use contract crews hired by Asian staffing agencies to fly its Ireland-based routes. The airline has promised to use only EU and U.S. crews on transatlantic flights, but that has not been sufficient for U.S. and international labor unions.

Boeing on one side, legacy airlines and unions on the other. Welcome to the White House, President Trump.