BEFORE THE

U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON, DC

)

Application of )

) Docket No. OST

‐ 2013

‐ 0204

NORWEGIAN AIR INTERNATIONAL )

LIMITED )

)

for an exemption under 49 U.S.C. § 40109 )

and a foreign air carrier permit pursuant to )

49 U.S.C. § 41301 (US

‐ EU Open Skies) )

)

ANSWER OF AIR LINE PILOTS ASSOCIATION

TO DOT NOTICE

Dated: February 14, 2014 J onathan A. Cohen

Russell Bailey

David M. Semanchik

Air Line Pilots Association

1625 Massachusetts Avenue NW

Washington, DC 20036

Phone: 202

‐ 797

‐ 4086

Fax: 202

‐ 797

‐ 4014

Jonathan.Cohen@alpa.org

Russell.Bailey@alpa.org

David.Semanchik@alpa.org

Attorneys for Air Line Pilots AssociationBEFORE THE

U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON, DC

)

Application of )

) Docket No. OST

‐ 2013

‐ 0204

NORWEGIAN AIR INTERNATIONAL )

LIMITED )

)

for an exemption under 49 U.S.C. § 40109 )

and a foreign air carrier permit pursuant to )

49 U.S.C. § 41301 (US

‐ EU Open Skies) )

)

ANSWER OF AIR LINE PILOTS ASSOCIATION

TO DOT NOTICE

ALPA hereby comments on the written “Summary of Information provided by

the European delegation” in response to the requests made by the U.S. delegation

during the January 8, 2014, US

‐ EU Joint Committee meeting for information about the

current and planned long

‐ haul operations of Norwegian Air Shuttle ASA and its

affiliated companies, Norwegian Long Haul AS and Norwegian Air International

Limited (“Summary”). 1 The EU delegation’s responses were made orally in a closed

‐

door government

‐ to

‐ government session of the Joint Committee.

As a preliminary matter, ALPA would make a general observation. The

Summary states that during the closed

‐ door session, the European delegation gave the

1 Norwegian Air Shuttle ASA is referred to as “NAS,” Norwegian Long Haul AS is

referred to as “NLH,” and Norwegian Air International Limited is referred to as “NAI.”2 Joint Committee what the Summary characterizes as “some detailed factual

information.” We question this characterization of the information provided by the

European delegation. To be sure, “some” information was provided, but as shown

below, and as we believe will be shown by other parties to this proceeding, the

information is in many cases far from detailed, or not factual, or both.

COMMENTS ON PARTICULAR STATEMENTS

INCLUDED IN THE SUMMARY

Statement 1 (Summary at 1):

The European delegation conveyed that NAI chose Ireland because as an Irish

carrier it would have access to significant additional traffic rights not available to

it as a Norwegian carrier, access to additional financing options under OECD

rules, and access to insurance and financing rebates because Ireland is a Cape

Town Convention signatory. In addition, Ireland has a considerable aviation

cluster in Europe and a highly regarded aviation authority.

Comments on Statement 1:

As shown in ALPA’s answers to NAI’s application, the only publicly stated

reason that NAI is seeking to establish itself as an Irish carrier is that NAS/NAI wish to

avoid Norway’s labor and other social laws. ALPA Answer to Application of NAI at 3

& Exs. 4, 5, and 6; Declaration of Jack Netskar (“Netskar Dec.”) ¶ 12 (filed with ALPA’s

Answer). ALPA was unaware that NAS/NAI was claiming that there was any other

reason for NAI’s efforts to establish itself as an Irish company until the day after the

January 8 Joint Committee meeting, when it received this information in an informal

conversation with Members of the European delegation.3 The reasons provided by the European delegation why Ireland is preferred over

Norway seem insubstantial. They involve alleged access to additional financing options

under OECD rules; Cape Town Convention benefits; and access to “significant

additional traffic rights.”

While it is not entirely clear, the OECD rules referred to may well be the 2011

Sector Understanding on Export Credits for Civil Aircraft, dated September 1, 2011

(“ASU”). The purpose of the ASU is to “provide a framework for the predictable,

consistent and transparent use of officially supported export credits for the sale or lease

of aircraft and other [specified] goods and services

. . . .” ASU at 1. To foster a “level

playing field” for such financing, the agreement seeks to “[e]qualise[] competitive

financial conditions among the Participants,” and neutralize “official support among

Participants as a factor in the choice among competing goods and services

. . . ,” and

avoid “distortion of competition among Participants to this Sector Understanding and

any other sources of financing.” Id

. Both Norway and the EU are “Participants” and

have access to the provisions laid down in the ASU. Id

. at 5. Under the ASU there does

not appear to be any advantage to NAI to being an Irish as opposed to a Norwegian

airline.

Certainly, with respect to receiving financing from the U.S. Export

‐ Import Bank,

there is no disadvantage in being a Norwegian carrier. NAS has, in fact, received

funding for some of its 737s. See, e.g.

, Export

‐ Import Bank of the United States,4 Application for Long

‐ Term Loan or Financial Guarantee: AP084212XX, Public Notice 2012

‐

0089, 77 Fed. Reg. 44239 (July 27, 2012), and Export

‐ Import Bank of the United States,

Application for Final Commitment for a Long

‐ Term Loan or Financial Guarantee in Excess of

$100 Million: AP087223XX and AP087223XA, Public Notice 2013

‐ 0026, 78 Fed. Reg. 20317

(April 4, 2013). NAS has also applied for financing of an unspecified number of the

787s that would be used in NAI’s operations. See Export

‐ Import Bank of the United

States, Application for Final Commitment for a Long

‐ Term Loan or Financial Guarantee in

Excess of $100 million: AP088035XX, Public Notice 2013

‐ 0038, 78 Fed. Reg. 44562 (July 24,

2013).

“[A]ccess to insurance and financing rebates because Ireland is a Cape Town

signatory” also seems to be a dubious basis for leaving Norway. The purpose of the

Cape Town Convention 2 “is to create greater consistency and predictability in matters

related to aircraft sales, leases, and financing by establishing clear, predictable, and

uniform rules that would govern the conduct of debtors in various states.” Practitioners’

Guide to the Cape Town Convention and Aircraft Protocol

, Legal Advisory Panel of the

Aviation Working Group, p. 50 (rev. Nov. 2012). Those various states include not only

Ireland, but Norway, which ratified the Convention in December 2010. See

http://unidroit.org/english/implement/i

‐ 2001

‐ convention.pdf (last visited Feb. 14, 2014).

2 The “Convention on International Interests in Mobile Equipment” and an associated

“Protocol to the Convention on matters Specific to Aircraft Equipment” are collectively

known as the “Cape Town Convention .”5 Thus, whatever benefits NAI would derive as an Irish carrier it would also enjoy as a

Norwegian carrier.

Similarly, it seems highly unlikely that NAS is moving its long

‐ haul operations to

Ireland because that country has a “considerable aviation cluster in Europe and a highly

regarded aviation authority.” So does Norway.

As for the contention that NAI would have access to significant additional traffic

rights not available to it as a Norwegian air carrier, the contention is certainly not true

with respect to the United States. Norway acceded to the US

‐ EU Air Transport

Agreement and its carriers have all the rights available to it under that agreement that

Irish carriers have. NLH/NAI is not currently proposing to serve any routes that could

only be served by an Irish carrier. If NAS/NAI were to propose to operate new ex

‐

Europe services, an examination of the Norwegian, EU and individual Member States

air service agreements with the countries involved would be necessary to evaluate

whether being an Irish carrier affords any benefit over being a Norwegian carrier.

Certainly, the EU does not have “open skies” agreements with countries like China,

India and Japan, so NAI services from points such as London or Frankfurt to such

markets seems highly questionable.

In sum, the reasons that NAI wishes to establish itself in Ireland seem to have

materialized only after opposition to its application appeared. These reasons appear to

be insubstantial and, indeed, to have been manufactured for the purpose of obfuscating6 the real reason ‐‐ avoidance of Norwegian employment laws. The reasons conveyed by

the European delegation on behalf of NAI for the selection of Ireland as a place to

incorporate over Norway do not seem valid.

Statement 2 (Summary at 2):

The NLH/NAI business model will focus on using operating bases in the United

States and Asia to serve several European destinations

. . . . Given this business

model, basing crews outside of Europe makes sense economically. In order to

address the related and complex staffing issues, the carriers intend to hire and

domicile crews at operating bases outside of Europe

. . . . In each case, the local

labor laws of those countries will apply.

Comments on Statement 2:

These statements do not address the core facts that (1) Norway would not permit

NLH/NAI to structure its operations in this manner without requiring NAS/NLH/NAI

to obtain Norway work permits for its pilots and flight attendants and (2) Ireland

would apparently permit the NAS group of carriers to operate in this manner without

Irish work permits. ALPA does not know if many of these statements are true without

verification and supporting evidence being provided by NAS/NLH/NAI. However, the

assertion that the local labor laws at the operating base will apply appears to be false

with respect to pilots. The pilots are being hired under employment contracts with a

Singapore company that is governed by Singapore law, not Thai, Norwegian or U.S.

law. ALPA Answer at 3, 6. The effort to move to Ireland directly undermines

Norwegian labor standards and the labor

‐ related rights and principles contained in7 Norway’s laws, an outcome that would violate Article 17 bis of the U.S.

‐ EU Air

Transport Agreement.

Statement 3 (Summary at 2):

For the startup period, NLH and NAI use local hiring agencies at operating bases

because recruitment is quicker, the agencies are familiar with local laws and

regulations, and the practice minimizes the companies’ investment costs. In

accordance with EU regulations, the pilots employed by NLA and NAI must

hold EASA licenses. NAI intends to hire U.S. pilots in the future and would

prefer to have crew bases in the United States for its U.S. operations. It is

currently training cabin crew members that will be based in the United States,

under U.S. law. Currently, long

‐ haul pilots are employed by Global Crew Asia

(Singapore) and cabin crew members are employed by Adecco (Thailand).

Comments on Statement 3:

These statements do not address the core facts that (1) Norway would not permit

NAS/NLH/NAI to structure its operations in this manner without requiring

NAS/NLH/NAI to obtain Norway work permits for its pilots and flight attendants and

(2) Ireland would apparently permit the NAS group of carriers to operate in this

manner without Irish work permits. ALPA does not know if many of these statements

are true without verification and supporting evidence being provided by

NAS/NLH/NAI. However, the statement that NLH and NAI use local hiring agencies

at operating bases appears to be false with respect to pilots. Global Crew Asia, the

company that has hired NLH’s pilots, is a Singapore, not a Thai, Norwegian or U.S.

company. The effort to move to Ireland directly undermines Norwegian labor

standards and the labor

‐ related rights and principles contained in Norway’s laws, an8 outcome that would violate Article 17 bis of the U.S.

‐ EU Air Transport Agreement, in

violation of Article 17 bis of the ATA.

Statement 4 (Summary at 2):

Chart of pilot wages.

Comments on Statement 4:

The European delegation provides no source (presumably because it was

provided no source by NAS) for the “dollarized average gross payments” numbers and,

with the exception of the “Thailand” numbers, it is impossible to assess them in any

detail.

The “Thailand” number for pilots appears to be the flat monthly salary and per

diem payments that pilots receive under their individual employment contracts with

their Singapore employer, Global Crew Asia, PTE, multiplied by twelve. It is not clear

what the components of the other pilot numbers are

– whether they include just hourly

pay or other direct compensation. It is also not clear how the “averages” were

calculated given the range of equipment pilots in Norway, Spain and the U.S. operate

and the fact that compensation is usually tied to longevity. What certainly is not

reflected in these numbers are the costs for social benefits such as pensions and social

security programs. Under their employment arrangements with the Singapore hiring

company the pilots who work on board NLH’s aircraft have to pay any pension and

social benefit costs out of their compensation, so the “Thailand” numbers would have to9 be reduced by such payments. On the other hand, pension and social benefit payments

make up 20 to 25 percent of total compensation costs for Norwegian, Spanish and U.S.

pilots, so the proffered numbers would have to be raised for those pilots.

However, whatever, the “real” numbers are, it is plain that NAS/NAI is

proposing a business model that avoids the carrier paying taxes and social

compensation benefits to its aircrew. This is not a model that the EU or the U.S. should

countenance.

Statement 5 (Summary at 2):

The European Delegation also indicated that company employees are organized

in labor unions and that NAS had no tradition of discouraging unionization.

Comments on Statement 5:

Some NAS group employees are represented by unions. However, none of the

flight crew who work on board NLH’s aircraft

– which are operated as NAS services on

a wet lease basis

– are represented by unions and it is not clear that they can be. They

are employed not by NLH, but by Asian employment companies on individual

employment contracts.

Whatever the “tradition” might have once been, NAS is implementing a business

strategy that is overtly designed to stifle and, for new hires, effectively preclude,

representation by unions. Even though the company’s U.S. transatlantic routes are

held out as NAS services, they will be operated not by NAS pilots and cabin crew, but

by NAI crew that will not be represented by unions. The NAS pilots have sought to10 have the company’s long

‐ haul flying brought under the pilots collective agreement.

Netskar Dec. ¶ 13. NAS has vigorously resisted this effort and has chosen to have its

long

‐ haul pilots and flight attendants hired under short

‐ term individual employment

contracts governed by the laws of Asian countries. Summary at 2; ALPA Answer at 3 &

Netskar Dec. Attachment A; European Cockpit Ass’n (“ECA”) Answer to Application of

NAI at 1

‐ 2.

Similarly, NAS short haul pilots have been moved out from direct employment

with the airline and have been made employees of multiple subsidiary corporations of

NAS that are incorporated in a variety of European companies. Netskar Dec. ¶ 14.

ALPA understands that the union representative for the NAS companies’

Norwegian employees will be filing comments that address NAS’s approach to labor

relations.

Statement 6 (Summary at 3):

The European Delegation objected to any characterization of Ireland as a “flag of

convenience” and stated that Ireland’s safety and fitness oversight meets all

applicable ICAO and EU standards.

Comments on Statement 6:

A “flag of convenience” is defined as a foreign flag under which a vessel is

“registered to avoid financial charges or restrictive regulations in the owner’s country.”

http://www.oxforddictionaries.com/us/definition/american_english/flag

‐ of

‐

convenience?q=%22flag+of+convenience%22 (last visited Feb. 14, 2014). Not only safety11 standards but labor and tax regulations are commonly associated with the flag of

convenience concept. Here the record is replete with evidence that the reason NAI

seeks to establish itself in Ireland is to avoid Norwegian employment laws. It is without

question that the regulatory maze that NAS/NAI has configured is designed to facilitate

forum shopping for favorable labor, tax and other policies, which by definition make

the proposed operation a flag of convenience enterprise.

Statement 7 (Summary at 3):

[The European delegation] stated that under Article 6 bis of the U.S.

‐ EU Air

Transport Agreement (Reciprocal Recognition of Fitness and Citizenship

Determinations), the U.S. should recognize Ireland’s determinations regarding

NAI.

Comments on Statement 7:

As stated by the European delegation, the ATA established a mutual recognition

procedure for fitness and citizenship determinations. The ATA, however, did not

diminish DOT’s authority to determine whether approval of an application for foreign

air carrier permit is consistent with the public interest. See ALPA Answer at 5, n.2; and

Joint Reply at 5. 3

Statement 8 (Summary at 3):

The European delegation further stated that the European Commission

welcomed the competition that NAS/NAI has provided in the EU market and

noted that its business model, if successful, will benefit competition, U.S.

consumers and U.S. manufacturers.

3 “Joint Reply” refers to the Joint Reply of ALPA, Transportation Trades Department

and ECA to Reply of NAI, filed January 7, 2014.12 Comments on Statement 8:

We all welcome and recognize the benefits of competition

‐‐ it makes carriers

more efficient and benefits consumers. But competition only works if it is fair

competition. It does not work when carriers game the system to play by different rules

and garner a competitive advantage by actively seeking to undermine labor standards.

This is what NAI seeks to accomplish and this is what Article 17 bis seeks to prevent.

The Commission’s statement is also surprising in light of the text of the ATA and the

negotiations that led to Article 17 bis

. The preamble of the ATA states the desire of the

Parties “to have all sectors of the air transport industry, including airline workers,

benefit from a liberalized agreement.” The preamble also states that the goal of the

ATA is “maximizing benefits for consumers, airlines, labor, and communities on both

sides of the Atlantic.” Throughout the negotiations the European Commission

repeatedly stated that one of their key objectives was to have “upward harmonization”

of standards

– labor, safety, and security. And throughout the negotiations the

Commission worked hard to understand and be responsive to the labor issues posed by

the establishment of the “European carrier” concept. The Commission held two labor

forums that extensively explored labor’s concerns with the fragmented state of

European labor law and appointed an examiner who evaluated labors’ concerns and

found them legitimate.13 The Commission then proposed a social dimension article and worked to form it

into what should be an effective mechanism for addressing the labor forum shopping

concern. When the Protocol to the ATA was completed, Siim Kallas, the European

Commission Vice President responsible for air transport, touted this provision

– which

was included in the ATA as Article 17 bis

– as one that would “not only ensure that the

existing legal rights of airline employees are preserved, but that the implementation of

the agreement contributes to high labor standards.” Siim Kallas Statement, March 25,

2010 (Attachment 1 hereto).

Just last month, Mr. Ketil Solvik

‐ Olsen, the Minister of Norway’s Ministry of

Transport and Communications, sent a letter and accompanying “Memo” to Mr. Kallas

(Attachment 2 hereto) expressing Norway’s concerns about operations such as that

proposed by NAS/NAI. Minister Solvik

‐ Olsen noted that:

Discrepancies between national legislation within EU/EEA may result in a non

‐

level playing field, both on operations within the EU/EEA and on operations

between EU/EEA and third countries. In addition differences in interpretation,

application and enforcement of harmonized EU/EEA legislation may result in

unequal conditions.

Minister Solvik

‐ Olsen went on to say:

Fragmentation of operations between several countries, within and outside of the

EU/EEA, makes collection of information burdensome for member states and

complicates the establishment of a relevant jurisdiction.

The Memo pointed out that due to “vagueness,” EU’s laws on contractual

employment obligations are “difficult to interpret and enforce,” particularly with14 respect to aircrew who work on board EU aircraft but who are allegedly based outside

the EU/EEA. The Memo recognizes that Regulation (EC) No. 1008/2008, places “no

formal limitations on the level of acceptable legal and operational fragmentation” and

that the application and enforcement of national labor laws may be very difficult in

cases (such as the NAS/NAI business model), where an AOC may be issued by one

Member State, personnel may recruited in another country or countries, and labor

contracts may be governed by legislation in a third (possibly non

‐ EU/EEA) country.

The Memo also noted that if Member States enforce the EU regulation and their own

laws in different manners then some Member States “will be able to attract carriers

utilizing personnel with less favorable working conditions.”

These are certainly challenging questions for the EU and they should be

thoroughly examined and satisfactorily answered before an operation such as that

proposed by NAS/NAI receives government approval. These questions were the front

and center labor issue in the U.S.

‐ EU talks and the Parties ultimately included a

provision in the ATA that could help deter flag of convenience models in the trans

‐

Atlantic air transport market.

Yet in the face of this history with respect to the need for effective regulation

against forum shopping for lower labor standards, during the closed

‐ door session not

only did the European delegation apparently fail to mention Article 17 bis in its

presentation to the U.S., but it did not even mention labor as one of the beneficiaries of15 the ATA, invoking benefits to consumers and manufacturers (a group not mentioned at

all in the preamble to the Agreement) instead.

The European delegation’s statements in the closed

‐ door meeting are

mystifyingly at odds with the purposes set out in the preamble and in the plain text of

Article 17 bis

. In the closed session, the European delegation appears to have been

acting as a mere advocate for NAI without having inquired into the reliability of the

information the company had provided it. As is demonstrated here, and in other filings

in this docket, that information is, in many material respects, patently false, misleading,

or incomplete.

General Comment About the Failure to Provide Information

What is striking about the “some detailed factual information” that the European

delegation provided to DOT is what is lacking.

The U.S. first brought forward its concern over how NAS desires to operate its

services to the U.S. at the June 5, 2013 Joint Committee meeting in Oslo. The U.S. stated

that it was interested in obtaining more information about NAS’s plans. Among other

things, the U.S. asked what labor rules would apply to the flight crew and stated that

this information was “key.” The EU stated that it did not have that information or

much other information at that time. However, the EU committed to seeking more

information and the head of the European delegation, Matthew Baldwin, concluded the

exchange on NAS by saying: “It is important that we try to tackle tough areas. No area16 is off limit. The labor issues are as important as any area of the Agreement.” Prior to

the meeting and subsequently, ALPA provided the U.S. delegation with a list of

questions that it asked the U.S. to submit to the EU. ALPA understands that this list, or

at least the key questions on that list, were asked of the Commission sometime between

the June 2013 and January 2014 Joint Committee meetings. Among the questions were

these:

Which laws would apply to the establishment of the terms and conditions of

employment [of an NAS subsidiary in Ireland]? Would Ireland law apply?

Would EU law apply? Would Norway’s Aviation Authorities have a role in

ensuring compliance with the employment rules that apply to an NAS subsidiary

in Ireland?

ALPA’s Answer to NAI’s application in this docket also contained a number of

questions for Norway, Ireland and the European Commission. These were:

1. Does Norwegian law require all flight crew who operate aircraft that are on

the operating certificate of a Norwegian air carrier to be employed under

Norwegian social laws? If there are exceptions, what are they? Does the fact

that the aircraft may be registered in a country other than Norway make a

difference? Does he fact that the aircrew may be domiciled outside of

Norway make a difference? What is Norway’s view of which country’s social

laws apply to the aircrew (pilots and flight attendants) who work on board

the Irish

‐ registered 787s operated by NLH?

2. Has Norway made efforts to bring NLH’s crew under coverage of Norwegian

social laws? If so, how has NLH responded to these efforts?

3. What is Ireland’s view on whether Ireland’s social laws apply to the aircrew

who work on board the Irish

‐ registered 787s operated by NLH? Does Ireland

require that the terms and conditions of employment of aircrew working on

board Irish

‐ registered aircraft be covered by Irish social laws? Has Ireland

made any efforts to bring NLH’s aircrew under Irish social laws? If so, how

has NLH responded to these efforts?17 4. Does Ireland require that Irish social laws apply to the establishment of terms

and conditions for the aircrew of airlines that hold Irish AOCs? If not, what

are the exceptions? What are the rules in such a case?

The “some detailed factual information” did not contain answers to any of these

highly pertinent questions. All of the answers would shed light on why NAI might be

seeking to establish itself in Ireland. DOT should make it clear that it is not going to

disregard or diminish the core labor protections embodied in the ATA and require that

answers be given to these questions.

Respectfully submitted,

_________________________________________ Jonathan A. Cohen

Russell Bailey

David M. Semanchik

Air Line Pilots Association

1625 Massachusetts Avenue NW

Washington, DC 20036

Phone: 202

‐ 797

‐ 4086

Fax: 202

‐ 797

‐ 4014

Jonathan.Cohen@alpa.org

Russell.Bailey@alpa.org

David.Semanchik@alpa.org

Attorneys for Air Line Pilots Association

February 14, 201418 CERTIFICATE OF SERVICE

I certify that I have, on this 14th day of February, 2014, served the foregoing

Answer of Air Line Pilots Association to DOT Notice by causing a copy to be sent by

electronic mail to the addresses identified below:

romanow@pillsburylaw.com

peter.nelson@pillsburylaw.com

edw@ttd.org

steve.morrissey@united.com

dan.weiss@united.com

sascha.vanderbellen@delta.com

howard.kass@usairways.com

robert.wirick@aa.com

francis.heil@aa.com

michael.whitaker@faa.gov

jesse.elliot@faa.gov

douglas.schwab@faa.gov

nicholas.tsokris@faa.gov

john.allen@faa.gov

urskr@state.gov

westphalkl@state.gov

pvs@eurocockpit.be

leo@washingtonairports.com

sschembs@cwa

‐ union.org

john.hanlon@elfaa.com dberg@airlines.org

jcasey@airlines.org

kglatz@airlines.org

clytle@portoakland.com

kgeorge@broward.org

mrichardson@swapa.org

ejames@jamhoff.com

eugene.alford@trade.gov

matthew.baldwin@ec.europa.eu

felix.leinemann@eeas.europa.eu

david.batchelor@sesarju.eu

ottar.ostnes@sd.dep.no

paul.gretch@dot.gov

robert.finamore@dot.gov

nssparks@fedex.com

dpdean@jamhoff.com

vegard.einan@parat.com

thore.selstad.halvorson@parat.com

minister@dttas.ie

Russell Bailey