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…
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.
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 NAT 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.