[Congressional Record (Bound Edition), Volume 160 (2014), Part 5]
[Extensions of Remarks]
[Pages 6754-6755]
[From the U.S. Government Publishing Office, www.gpo.gov]




RECOMMENDATION TO REJECT NORWEGIAN AIR INTERNATIONAL'S APPLICATION FOR 
                  A FOREIGN AIR OPERATORS CERTIFICATE

                                 ______
                                 

                         HON. RICHARD M. NOLAN

                              of minnesota

                    in the house of representatives

                         Thursday, May 1, 2014

  Mr. NOLAN. Mr. Speaker, I would like to draw the attention of my 
colleagues concerned about our nation's aviation industry and the 
delicate balance in our international relations to the pending decision 
by U.S. Secretary of Transportation Anthony Foxx regarding the 
application of Norwegian Air International for a Foreign Air Operators 
Certificate.
  This important issue was addressed with utmost clarity recently by my 
friend, former U.S. Congressman Jim Oberstar in the following letter to 
Secretary Foxx. Jim Oberstar served in the U.S. House from 1975 to 2011 
and was for many years Chairman of the House Transportation and 
Infrastructure Committee. He is known as the nation's leading expert on 
Domestic and International Transportation issues. Former Congressman 
Oberstar urges Secretary Foxx to reject the Norwegian Air International 
Application.

                                                   April 28, 2014.
     Hon. Anthony Foxx,
     Secretary, U.S. Department of Transportation,
     New Jersey Avenue SE., Washington, DC.
       Dear Mr. Secretary: I have watched with great interest the 
     public debate over the application of Norwegian Air 
     International (NAI) for a foreign air operator's certificate 
     from the U.S. Department of Transportation (DOT). As a former 
     chairman of the House Transportation and Infrastructure 
     Committee, it is my strongly held view that the approval of 
     NAI's application would run contrary to the U.S.-EU Air 
     Transport Agreement and the labor article embodied in the 
     agreement, and contrary to the best interests of U. S. 
     commercial aviation. I respectfully urge you to reject NAI's 
     application.
       During my 36 years of service in the U.S. House of 
     Representatives on the committee of jurisdiction over 
     international aviation trade issues, I witnessed dramatic 
     changes in the U.S. and global airline industries. Beginning 
     with deregulation in 1978 and continuing through the modern 
     era of mergers, code sharing, anti-trust-immunized alliances, 
     and expansive Open Skies agreements, much of the airline 
     industry today is globally interconnected; U.S. airlines and 
     their employees are directly impacted by the actions of 
     foreign competitors more than ever before. During my tenure 
     of watchfulness over the U.S. aviation industry, I sought to 
     ensure that liberalization was pursued in bi-lateral 
     agreements which assured a balance of benefits with our 
     international trade partners, protecting the integrity, 
     safety, and competitiveness of the U.S. aviation system.
       In the early 1990s, the U.S. government began negotiating 
     bilateral Air Transport, or Open Skies agreements that were 
     intended to open aviation markets, promote competition and 
     tourism, create jobs and increase consumer choice for 
     international travel. These Open Skies agreements are 
     qualitatively different from other trade agreements which 
     deal with services in that they are almost exclusively 
     bilateral. As such, they reflect a balance of benefits for 
     the U.S. and our trade partner, often with in-country and 
     beyond operating rights, and they are overseen by the 
     Departments of State, Transportation, and Justice, rather 
     than the United States Trade Representative. Given the 
     complexity and size of the U.S. aviation market--which 
     accounts for over half of the world's aviation marketplace--
     retention of this model is necessary to ensure that the 
     exchange in air traffic rights is done in a way that promotes 
     strong safety, labor and working condition standards, while 
     also ensuring an equitable competitive environment for U.S. 
     airlines. Critical to achieving this goal has long been the 
     continued enforcement of U.S. foreign ownership and control 
     and cabotage laws, along with strong U.S. DOT and DOJ 
     regulatory oversight.
       The negotiation of the U.S.-EU Open Skies agreement, which 
     began in the middle of the last decade, presented many unique 
     challenges. While the European Union is an economic and 
     political union of 28 member states, each of these states has 
     retained its respective governmental aviation regulatory 
     authority. Therefore, rather than dealing with a single 
     aviation regulatory body and one set of labor and social laws 
     as we had with previous agreements, we were dealing with 
     multiple aviation regulatory authorities and sets of labor 
     and social laws. While there are base standards for safety 
     and labor laws, the individual nation-state laws still differ 
     widely.
       Given the unique nature of negotiating with the EU, many of 
     my colleagues and I were concerned about proposed changes in 
     regulatory structure that would allow any EU airline to 
     operate from any point in the EU to any point in the U.S. and 
     to establish subsidiaries in other EU states. Despite this 
     ``European status'' for operating and corporate rights, there 
     was no EU-wide law that governed key labor-management 
     relations aspects of these airlines. Instead, these aspects--
     such as selection of bargaining representatives and contract 
     negotiations--were, and continue to be, subject to the 
     national labor laws of the respective European countries.
       During the negotiations, EU representatives expressed 
     concern that such an arrangement could lead to ``forum 
     shopping'' where European airlines would seek to operate out 
     of countries with less robust labor and social laws. This 
     could allow airlines to seek the lowest common denominator in 
     terms of labor and regulatory standards thereby lowering 
     their own operating costs but driving down standards 
     throughout the EU. In other words, the EU was concerned that 
     new airlines could be launched using a NAI-like business 
     model.

[[Page 6755]]

       This concern led negotiators to include in the agreement 
     Article 17 bis (``Social Dimension''), which states that 
     ``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.'' 
     It further states that ``the principles in paragraph 1 shall 
     guide the Parties as they implement the Agreement.'' The fact 
     that there was no equivalent to Article 17 bis in any of the 
     previous Open Skies agreements with EU member states is a 
     direct acknowledgement of the challenges posed by the 
     regulatory and legal arrangement within the EU.
       Article 17 bis was a critical factor in the ``Agreement''. 
     I applauded its inclusion as an important and necessary step 
     in protecting against the use of market-opening aviation 
     trade agreements to lower labor standards throughout the 
     transatlantic aviation market: the largest aviation trade 
     market in the world.
       Today, in light of NAI's application for a foreign air 
     operator's certificate, as well as the plethora of public 
     comments that the DOT has received on this application, I 
     believe that the inclusion of Article 17 bis and the concerns 
     that led to its inclusion were particularly prescient.
       Mr. Secretary, you and the DOT International policy staff 
     are familiar with the details of NAI's application and 
     business model, but key facts are worth repeating: NAI is a 
     subsidiary of Norwegian Air Shuttle (NAS), a low-cost 
     European carrier based out of Norway. When Norway became a 
     signatory of the U.S.-EU Open Skies Agreement in 2011, NAS 
     was afforded the same access to air traffic rights under that 
     agreement as other EU carriers. Rather than expand its 
     operations with its existing corporate structure, its 
     workforce and collective bargaining agreements, NAS created 
     NAI and proceeded to register its long-haul aircraft in 
     Ireland and obtain an Irish Air Operator's Certificate--
     effectively becoming an Irish airline despite the fact that 
     it has no announced plans to operate in Ireland.
       This move allowed NAS to expand its long-haul operations 
     through NAI, but also to escape Norway's social laws and to 
     evade existing collective bargaining agreements with its 
     Norwegian pilots and flight attendants. For example, NAI's 
     pilots are based in Thailand and employed under individual 
     employment contracts that are covered by the laws of 
     Singapore. These pilots are then contracted to NAI. The 
     individual employment contracts prevent collective 
     bargaining, and allow NAI to drastically reduce labor costs 
     and gain an unfair competitive advantage over U.S. and 
     European carriers who currently operate in the transatlantic 
     market. The workforce arrangement for flight attendants is 
     still evolving, but what I have learned is that NAI is hiring 
     and basing its cabin crewmembers outside of its home country 
     in what is clearly a plan to secure substandard wages and 
     working conditions and to blatantly evade its collective 
     bargaining obligations in Norway. NAI is pursuing, quite 
     simply, what in maritime law is called a ``Flag of 
     Convenience'' strategy.
       NAI has not denied that it registered in Ireland to avoid 
     the application of Norwegian labor laws to its crews. Other 
     economic justifications presented for selecting Ireland over 
     other possible places to incorporate, the validity of which 
     also have been effectively rebutted by several opponents, 
     appear to be intended to distract from this central and 
     undisputed motivation. The company is thus taking advantage 
     of the opportunities provided by the U.S.-EU Open Skies 
     Agreement in order to lower its own labor costs and undercut 
     the competition, the very scenario that EU negotiators feared 
     when Article 17 bis was included in the U.S.-EU agreement.
       I believe that the evidence and arguments submitted in the 
     public docket provide the Department with ample justification 
     to deny the application.
       During my years of service on the House Committee on 
     Transportation and Infrastructure, conducting vigorous 
     oversight of international aviation trade, I learned that 
     liberalization and market expansion could provide numerous 
     benefits to consumers, open business opportunities for U.S. 
     carriers and create jobs. But I also observed that effective 
     market expansion required the thoughtful and careful approach 
     of balancing reduced trade barriers with the assurance of 
     fair competition and the public interest. We understand the 
     strategic and economic significance of the U.S. airline 
     industry to our nation's well-being, and further understand 
     the unique challenges inherent in implementing the expansive 
     and complicated U.S.-EU Open Skies Agreement in a productive 
     and responsible manner.
       With this background, I believe that this is an important 
     inflection point for how we as a nation project and secure 
     America's role in the global aviation marketplace. The 
     negotiators for both sides in the U.S.-EU Open Skies 
     Agreement negotiations understood the risks and adverse 
     consequences that irresponsible liberalization could pose to 
     the airline industries and workforces on both sides of the 
     Atlantic. They resisted deliberate efforts to dismantle the 
     U.S. ownership and control and cabotage laws, and they 
     included, for the first time ever, a labor article in the 
     final agreement. In doing so, they made an unmistakable 
     statement that the terms of competition must not be set by 
     those who would seek to gain an unfair advantage at the 
     expense of quality jobs and high labor standards.
       The Department should implement the Agreement in the spirit 
     of Article 17 bis and concern for both fair competition and 
     balanced trade benefits. Were NAI to be allowed to operate as 
     proposed, the dynamic of transatlantic aviation competition 
     will be changed for the worse, creating a situation where 
     Flags of Convenience become the norm, not the exception.
       I urge you to reject the NAI application, and thereby 
     uphold the spirit and intent of the U.S.-EU Open Skies 
     Agreement and Article 17 bis. Thank you for your 
     consideration of my views on this vital international 
     aviation policy issue.
           Sincerely,
     Jim Oberstar, M.C.

                          ____________________