Norwegian Airline Opposed Over Low-Budget Business Model
A startup airline based in Norway is running into opposition from a leading U.S. congressman on transportation policy over its plan to expand into the United States.
The issue is its “flag of convenience” business plan.
The startup, called Norse Atlantic Airways, has links to Norwegian Air International, a low-cost airline that operated flights between Europe and the United States.
Its division that handled long-haul flights went bankrupt last year as the COVID-19 pandemic cut deeply into the travel industry’s finances. It now operates only shorter European routes.
The controversy for members of Congress who oversee transportation policy was its operating plan in the United States.
Norwegian Air International was registered in Ireland, where labor costs and corporate taxes are lower than Norway. In addition, Irish labor laws are less stringent.
It originally used crews from a staffing agency to keep wages lower than U.S. airline industry norms.
Norwegian Air International received a U.S. Transportation Department permit to fly in the United States in 2016 but operated U.S. flights for only four years.
Now Norse Atlantic Airways plans to use the same kind of flag of convenience business plan when it enters the U.S. market. Some of the new airline’s biggest investors are executives for Norwegian Air International.
Norse Atlantic plans to fly between New York, Los Angeles and Miami and to European cities such as London, Paris and Oslo. It plans to begin its first flights this year in December after raising capital from institutional investors and in a public stock offering.
Rep. Peter DeFazio, D-Ore., chairman of the House Transportation and Infrastructure Committee, calls the flag of convenience tactics used by both airlines irresponsible efforts to avoid labor laws.
Other critics of the flag of convenience carriers question their safety as they cut costs to a minimum.
DeFazio tried but failed to block the Transportation Department from granting Norwegian Air International a permit. Now he is trying again with Norse Atlantic Airways.
He warns that allowing another flag of convenience airline to operate in the United States would open the door for many others.
Airlines defend their sometimes drastic cost-cutting strategies by pointing out the intense international competition they face to win passengers.
DeFazio says compliance with the best labor and other regulatory laws is a higher priority.
He wrote a letter to U.S. Secretary of Transportation Pete Buttigieg last week explaining why he thought Norse Atlantic Airways’ permit for U.S. routes should be denied.
“In short, Norwegian exploited labor while enjoying the liberalized benefits of the U.S.-E.U.-Iceland-Norway open skies agreement and competing unfairly with airlines that do not subvert fair labor standards,” DeFazio said in his letter.
Norwegian Air International is the only airline so far with a flag of convenience operating model to have won a U.S. Transportation Department permit.
“All the elements are in place for a repeat of the Norwegian debacle,” DeFazio said about Norse Atlantic Airways.
By denying the airline a permit, “Norse Atlantic’s application will give you the opportunity to make good on the new administration’s commitment to protecting U.S. jobs and promoting fair competition in international markets,” DeFazio wrote to the Secretary of Transportation.
Norse Atlantic Airways and Norwegian Air International officials deny they are operating as what DeFazio called “alter egos” of each other while trying to evade labor law responsibilities.
Nevertheless, Bjørn Kjos, former chief executive officer of Norwegian Air International, owns 15% of Norse Atlantic Airways, the new airline disclosed. The majority owner is Bjørn Tore Larsen, who co-founded OSM Aviation, the staffing agency used by Norwegian Air International.
In addition, Norse Atlantic Airways plans to fly former Norwegian Air International 787 Dreamliners across the Atlantic.
“The operation will be in line with the agreements that regulate air traffic between Europe and the U.S,” Norse Atlantic Airways said in a statement.
The U.S. Transportation Department has not yet made a decision on whether to grant flight permits to Norse Atlantic Airways.
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