DOT Finally Approves Norwegian’s Irish Subsidiary to Fly to the US

The US and EU have an Open Skies treaty. Airlines based on either side of the Atlantic can fly from wherever they want to wherever they want, more or less.

However Norwegian Air’s subsidiary NAI – based in Ireland – was getting slow walked by the US government over its authority to operate. US airlines and pilots objected because of the airline’s low costs and low fares.

In April 2016 the Department of Transportation made a tentative decision to grant an operating license. But they didn’t give final approval — until this week, as pushed out on a Friday afternoon. (Good catch, @BrianSumers)

On Thursday the European Commission began formal proceedings against the US for violating its Open Skies treaty over the failure to permit Norwegian’s Irish subsidiary to operate as they’re clearly legally entitled to. (HT: Cranky Flier) A loss in arbitration would have meant retaliation against US airline operations.

Interestingly the DOT release that came out at the end of the day Friday indicates approval was granted on Wednesday, conveniently the day before the European Commission filed proceedings. So of course the US government couldn’t have been influenced by being called out for violating a treaty, it was doing the right thing all along, just slowed down in bureaucracy.

US airlines have made all measure of specious arguments looking to the government for protection from competition.

Norwegian has said they’d buy a bunch of Boeing 787s if approved.


Copyright william87 / 123RF Stock Photo

I’ve argued that it’s not the big Middle East carriers US airlines need to worry about competing against — it’s low cost airlines like Norwegian and Ryanair. Indeed, even without operations via the Irish subsidiary Norwegian is a big part of why we’re seeing deeper discount transatlantic fares than ever before – like $252 roundtrip.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Despite your spin, the Norwegian operation is a bit sketchy because Norway isn’t in the EU. It would be a bit like American setting up an Irish “subsidiary” to fly intra-Europe flights as an EU carrier. Would you think that was fair?

    There have also been disputes over the years of Norwegian using non-EU flight crews (Asian) to save money.

    That said, at least they’re not getting billions of subsidies, which at least makes the competition somewhat fair. Given the weakness of their business model — nobody has ever made transatlantic “work” with extensive biz travel — they can fail on their own.

  2. Despite your spin, the Norwegian operation is a bit sketchy because Norway isn’t in the EU. It would be a bit like American setting up an Irish “subsidiary” to fly intra-Europe flights as an EU carrier. Would you think that was fair?

    There have also been disputes over the years of Norwegian using non-EU flight crews (Asian) to save money.

    That said, at least they’re not getting billions of subsidies, which at least makes the competition somewhat fair. Given the weakness of their business model — nobody has ever made transatlantic “work” without extensive biz travel — they can fail on their own.

  3. Excellent. Maybe the US legacy carriers will show their passengers a little respect, or be a little more loyal to their rapidly diminishing loyal frequent flyers.

  4. I have a coworker who flies them all the time – it’s a very nice no-frills airline flying very nice planes. I welcome to competition – they will do very well.

  5. @iahphx – nothing sketchy when the EU has approved the airline as a European carrier. They dispute that they plan to use crew from Asia, but what’s wrong with it if they did? There was no legal basis to deny the application, as the DOT makes clear in their order. There was no reason other than domestic politics for taking 3 years to approve the Irish airline, and the UK one still hasn’t been approved. Which country is using its government to protect its airlines despite legal obligations to the contrary?

  6. @ Gary — Just because the EU is willing to consider Norwegian to be a “European carrier” doesn’t necessary mean the USA would need to make the same legal judgment. Do we really want the airline industry to be dominated by “flags of convenience” (like the shipping industry)?

    That said, the biggest hurdle Norwegian faces is their business model. It seems destined to fail. The 787 was not designed for long haul, low fare leisure travel. And there’s a very good reason airlines like Southwest, Easyjet and Ryanair haven’t tried to go into this business. So far, there’s little evidence that Norwegian’s strategy is sound.

  7. @iahphx there’s nothing wrong with a company using its own capital to try a business model, nothing the government should stand in the way of.

    under any plausible legal standard norwegian is a european airline. the dot said as much in their order. they wanted to protect us airlines but had no legal basis to do so, and they dragged their feet as a result. (“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.”)

    It was only as the EU prepared to enter proceedings to declare the US in violation of its treaty obligations that the DOT moved on this [and still hasn’t done so with the UK airline].

    there’s no risk or downside to an airline being flagged in the EU, it has to meet both US and EU safety standards. Nothing wrong with Irish standards, look at Aer Lingus.

    frankly — and this is in no way implicated here — nothing wrong with 5th freedom flying either as long as the airlines in question meet safety standards, non-discrimination rules etc.

    I’ll never understand your desire to protect delta et al from competition at the expense of US consumers. US airlines are making the bulk of the world’s aviation profits, and airline industry employment is at an all-time high. more travel and more travel options is good for the economy overall (and employment beyond aviation).

    And in this case, approval was the law.

  8. @iahphx Norway isn’t in the EU but they are part of the ECAA, which is the agreement in question, and allows Norweigan into the open skies treaty between the US and EU. https://en.wikipedia.org/wiki/European_Common_Aviation_Area

    That aside, it’s not the Norweigan (as in belonging to country) parent airline that wants to fly to the US, it’s the Irish subsidiary. As Gary said, approval for this subsidiary follows the law.

    And yes, the 787 is ideal for low-cost international travel. Norwegian, Scoot, and Jetstar are proving the business model and the equipment works.

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