UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

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1 UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Order Issued by the Department of Transportation on the 15 th day of April, 2016 Served: April 15, 2016 Application of NORWEGIAN AIR INTERNATIONAL LIMITED Docket DOT-OST for an exemption under 49 U.S.C and a foreign air carrier permit under 49 U.S.C Summary ORDER TO SHOW CAUSE By this order the Department tentatively finds under 49 U.S.C that Norwegian Air International Limited (NAI) should be issued the foreign air carrier permit attached as Appendix A to this order. Application By application filed December 2, 2013 (as supplemented on February 13, 2014), 1 NAI, a foreign air carrier of Ireland, requests a foreign air carrier permit under 49 U.S.C to enable it to conduct foreign scheduled and charter air transportation of persons, property, and mail to the full extent permitted under the U.S.-European Union-Norway-Iceland Air Transport Agreement of June 21, 2011, as amended (the U.S.-EU Agreement). 2 Specifically, NAI requests authority to engage in: a. foreign scheduled and charter air transportation of persons, property, and mail from any point or points behind any Member State(s) of the European Union, via any point or points in any Member State and via intermediate points, to any point(s) in the United States and beyond; 1 On February 13, 2014, the applicant supplemented its original application by providing its Irish Air Operator Certificate and Operating License. 2 In its application NAI also requested exemption authority to conduct its proposed services. On September 2, 2014, by Order , the Department dismissed the exemption portion of NAI s application.

2 b. foreign scheduled and charter air transportation of persons, property, and mail between any point or points in the United States and any point or points in any member of the European Common Aviation Area; c. foreign scheduled and charter air transportation of persons, property and mail between any point or points in Norway, via intermediate points, and any point or points in the United States; d. foreign scheduled and charter cargo air transportation between any point or points in the United States and any other point or points; e. other charters pursuant to the prior approval requirements set forth in 14 CFR Part 212 of the Department s economic regulations; and f. scheduled and charter transportation consistent with any future, additional rights that may be granted to European Union carriers under the Agreement. Submissions The record in this proceeding contains an extensive number of filings that were submitted throughout the course of this case. These include pleadings filed in response to the application of NAI, as well as additional information that was provided by the Department for the record on three separate occasions, and subsequent pleadings filed in response to that information. 3 The parties positions are summarized below. More detailed summaries of the pleadings in the record appear in Appendices B through D. Furthermore, the Department has attached the legal analysis that its General Counsel provided to the Department of Justice s Office of Legal Counsel (OLC) (Appendix E), and the opinion the Department received from the Department of State (Appendix F). Supporting Parties Aside from NAI itself, the parties that filed in support of the NAI application include Federal Express Corporation (FedEx), Atlas Air, Inc. (Atlas), the Travel Technology Association (Travel Tech), the European Low Fares Airlines Association (ELFAA), the Washington Airports Task Force (WATF), the American Society of Travel Agents (ASTA), the Broward County Aviation Department and Fort Lauderdale-Hollywood International Airport, and the Greater Orlando Aviation Authority. Objecting Parties NAI s application is opposed by a number of U.S. and foreign air carriers, including Delta Air Lines, Inc. (Delta), United Airlines, Inc. (United), American Airlines, Inc. (American), US Airways, Inc. (US Airways), as well as Deutsche Lufthansa AG (Lufthansa) and Scandinavian 3 In the interest of attaining a complete record in this proceeding, we grant all motions for leave to file and will also accept all other late-filed pleadings. 2

3 Airlines System (SAS), Air France and KLM Royal Dutch Airlines (KLM), and Austrian Airlines AG (Austrian). It is also opposed by numerous U.S. labor organizations, specifically the Air Line Pilots Association (ALPA), the Allied Pilots Association (APA), the Southwest Airlines Pilots' Association (SWAPA), the Transportation Trades Department AFL-CIO (TTD), the Association of Flight Attendants-CWA (AFA), the International Association of Machinists and Aerospace Workers (IAM), the Transport Workers Union of America (TWU), as well as Captain Stephen Colman, the European Cockpit Association (ECA), the European Transport Workers Federation (ETF), the Norwegian trade union Parat, and the Signatories to the Joint Declaration Against EU-Based Flags of Convenience in Aviation as Endorsed on 5 June 2014 by the Air Crew Working Group of the Sectoral Dialogue Committee. Other Airlines for America (A4A) filed comments to NAI s application, stating that the Department should continue to pursue questions regarding NAI s proposed U.S. operations through the Joint Committee established by the U.S.-EU Agreement. Positions of the Parties 4 The objecting parties generally assert that NAI is seeking to use Ireland as a flag of convenience, arguing that NAI is a subsidiary of the Norwegian flag carrier Norwegian Air Shuttle (NAS), but has established itself in Ireland to evade the social laws of Norway in order to lower the wages and working conditions of its air crew. Some objectors also assert that NAI s business plan raises safety concerns. The opponents largely concentrate on the aspect of NAI s business plan under which, they argue, it would hire its pilots and cabin crew from a third-party company domiciled in Singapore, rather than directly employing personnel itself. According to the opponents, this would create a scenario where, although the pilots and crew are subject to the direction and control of NAI, they must resolve any employment matters with the third-party company, rather than directly with the air carrier. The ECA asserts that this arrangement results in conditions that are not in accordance with the respect for workers fundamental rights, effectively fragmenting their ability to associate and bargain collectively. 5 The opponents assert that the arrangements contemplated by NAI s business plan would run counter to Article 17 bis of the U.S.-EU Agreement ( Social Dimension ), and would violate the Department s statutory public interest goal of encouraging fair wages and working conditions. Some opponents also assert that NAI s multi-jurisdictional business plan could create confusion as to regulatory supervision and applicable labor laws. NAI and its supporters, on the other hand, contend that NAI has satisfied the legal requirements of the U.S.-EU Agreement and U.S. law and therefore is qualified to operate as a foreign carrier. The proponents of NAI s application also maintain that denial of its request would violate the terms of the U.S.-EU Agreement and would turn back the clock on aviation liberalization. NAI states that the arguments raised by the objecting parties are an attempt by U.S. labor organizations to achieve through the NAI licensing proceeding what they failed to achieve during the U.S.-EU negotiations that established the U.S.-EU Agreement. With respect to the 4 See Appendix A for a detailed summary of pleadings filed in response to NAI s application. 5 Answer of ECA to NAI Application, at 2. 3

4 allegations regarding low wages and undesirable working conditions for its crews and other employees, NAI claims that it offers competitive wages, and points to the significant number of U.S. citizens that are seeking employment with the carrier as evidence of a quality work environment. NAI further asserts that approval of its application would produce innovative, procompetitive, pro-consumer, and pro-growth public interest benefits in the highly concentrated transatlantic market. The Travel Technology Association, the European Low Fares Airlines Association (ELFAA), the Washington Airports Task Force (WATF), the Greater Orlando Aviation Authority, and Broward County all cite the competitive benefits of NAI s application. Finally, FedEx notes that the FAA has determined that Ireland meets internationally-agreed safety standards. Additional Submissions on the Record As noted above, the record in this case includes additional information that was provided for the record on three separate occasions by the Department. Specifically, this information consists of: 1) a Department Notice served on January 30, 2014, that provided a summary of a U.S.-EU Joint Committee discussion on NAI s application; 2) a Department Notice served on August 4, 2014, that provided a summary of a U.S.-EC Meeting of July 14, 2014, where European Commission (EC) officials expressed their views on the meaning and applicability of Article 17 bis of the U.S.-EU Agreement; and 3) a Department Notice served on December 15, 2014, that provided a summary of a special U.S.-EU Joint Committee meeting that took place in Washington, D.C., on November 25, Various parties to the proceeding filed additional pleadings in response to the first two information submissions provided by the Department. Those pleadings are all summarized in the Appendices. 6 NAI Motion for Expedited Treatment 7 On June 1, 2015, NAI filed a Motion for Expedited Treatment on its permit application. In its motion, NAI claims that its application has been complete for over 15 months and yet remains pending despite the U.S. obligation in the U.S.-EU Agreement to grant appropriate authorizations and permissions with minimal procedural delay. 8 NAI asserts that there is no further basis for delay and urges the Department to grant its application. In this regard, NAI states that, while it vigorously disagrees with its opponents legal and factual assertions, it will commit to use only American and European pilots and crews on its transatlantic flights, except if compelled by extraordinary and unforeseen operational reasons. NAI contends that this commitment addresses the core concerns raised by its opponents. 9 The motion also contains a letter from Mr. Bjorn Kjos, CEO of Norwegian Air Shuttle (NAI s parent company), which states the same commitment with respect to the use of American and European crews and which takes the same overall position as the motion. The letter also states that, while hiring would continue to be done through employment agencies (i.e., third-party hiring), it has been and will continue to be their firm policy to offer pilots and cabin crews 6 See Appendices B and C. 7 We will grant NAI s request for leave to file. 8 Motion of NAI, at 1. 9 Motion of NAI, at 2. 4

5 employed through agencies the opportunity to transfer their employment to a company in the Norwegian group at the end of a month transitional period. 10 FedEx filed an answer in support of NAI s motion. FedEx states that no reason exists for the rejection of NAI's application, and the Department should approve it without delay. FedEx submits that the voluntary commitment from NAI/NAS to use American and European crews effectively nullifies the primary objection of opponents to NAI's application. FedEx argues that failure by the Department to approve the NAI application would constitute a breach of the U.S.- EU Agreement, and the extensive benefits of that Agreement would be immediately endangered. FedEx states that such a result would cause irreparable harm to the U.S. travelers, consumers, employees, and companies who depend on a fully liberalized U.S.-EU aviation network. 11 SWAPA and the APA filed responses opposing NAI s motion. SAS filed an answer opposing NAI s motion, and ALPA, TTD AFL-CIO, ECA, AFA-CWA, IAM and TWU (the Joint Labor Parties) also filed a joint answer opposing NAI s motion. SWAPA states its belief that NAI has not resolved the underlying issues that merit a denial of NAI s permit application. 12 It further states that NAI has not assuaged SWAPA concerns that its application is still an attempt to seek authority to operate to the United States utilizing a flag-ofconvenience strategy, whereby a carrier chooses which set of regulations from what country it chooses to follow. The APA contends that NAI s motion does nothing to cure the deficiencies that warrant denial of NAI s application for a foreign air carrier permit. 13 It asserts that NAI established itself as an Irish air carrier in order to avoid the application of Norwegian social laws, and that this flag-ofconvenience approach is antithetical to the principles that undergird the Open Skies agreement. The APA also maintains that NAI s statement regarding the country of origin of its pilots and flight crews speaks not at all to the question of which labor laws NAI intends apply. SAS states that its position remains unchanged that the NAI application should be denied because it does not meet the "high labor standards" requirement of Article 17 bis of the U.S.-EU Agreement. 14 It further states that NAI's so-called commitment raises more questions than it answers, and until these questions are resolved, whether through further pleadings or an evidentiary hearing, the Department cannot determine whether NAI s labor practices comply with the protections of Article 17 bis. In their joint answer, the Joint Labor Parties state that the alleged NAI commitments change nothing. 15 They assert that pilot citizenship has never been an issue, but rather the laws and the terms and conditions of employment applicable to NAI s pilots and flight attendants. And as to the transferability commitment, the Joint Labor Parties assert that it does not withstand scrutiny, noting for example that it does not appear in any company handbook, on the company s intranet, or even in the company s motion. They urge the Department to deny NAI s application for a 10 Letter of Mr. Kjos, at Answer of FedEx, at Response of SWAPA, at Response of the APA, at Answer of SAS, at Joint Answer of the Joint Labor Parties, at 6. 5

6 foreign air carrier permit. In the alternative, the Labor Parties state that, if the Department believes that it would benefit from having more information before it issues such an order, including information about Mr. Kjos alleged commitments, it should issue document production requests, and/or should hold a hearing at which representatives of Norwegian may be examined about the founding and structure of NAI, including the compensation and laws that will apply to NAI s air crew. 16 Subsequent Developments In light of the issues raised on the record in this proceeding regarding NAI s business plan and the applicability of Article 17 bis of the U.S.-EU Agreement, the Department s General Counsel solicited the views of both the Department of State and the OLC. They were asked to address the following question: Assuming that an air carrier of a Party to the U.S.-EU Agreement is otherwise qualified to receive a permit under DOT s authorities and the U.S.-EU Agreement, does Article 17 bis allow the United States to unilaterally deny an application for a permit by such carrier, and, if so, under what circumstances? The analyses contained in those responses parallel that of the legal analysis by the Department s General Counsel (Appendix E), to the effect that Article 17 bis does not afford an independent basis for rejecting an application that is otherwise qualified to receive a permit. By letter to the Department dated April 14, 2016, the Department of State advised us of its view that the issuance of a foreign air carrier permit to NAI, subject to the standard conditions that the Department of Transportation has imposed on carriers of the European Union, would be consistent with the U.S.-EU Agreement, including Article 17 bis of that Agreement. The Department of State further states that Article 17 bis of that Agreement does not provide a basis upon which a Party may unilaterally deny an air carrier of the other Party a permit to provide services under the Agreement when the carrier is otherwise qualified to receive such a permit. Finally, the Department of State states its position that grant of NAI s application, subject only to standard permit conditions, is in the foreign policy interests of the United States. In a Memorandum for the Department s General Counsel dated April 14, 2016, OLC concluded that Article 17 bis does not provide an independent basis upon which the United States may deny a permit to an air carrier of the Party to the Agreement if that carrier is otherwise qualified to receive such a permit. Tentative Findings and Conclusions The Department has tentatively decided to grant the applicant a foreign air carrier permit, in the form attached as Appendix A to this order. 17 In reaching our decision, the Department tentatively finds that the applicant has demonstrated, based on the record, that it is financially 16 Joint Answer of the Joint Labor Parties, at The applicant s request for a foreign air carrier permit was summarized in the Department s published weekly list of applications filed. This notice described the authority sought and gave interested persons an opportunity to submit evidence and objections to the award of this foreign air carrier permit authority. The attached permit includes the standard conditions normally applied to such permits. 6

7 and operationally fit to perform the services authorized; that Irish aviation safety oversight satisfies Federal Aviation Administration (FAA) and ICAO standards; and, that the applicant is substantially owned and effectively controlled by citizens of Member States of the European Union, consistent with the provisions of the U.S.-EU Agreement. We also tentatively find that the authority sought by the applicant is encompassed by the U.S.-EU Agreement. 20 Under the operative statutory provision on the award of foreign air carrier permits, the Department may award foreign air carrier permit authority if: (1) the applicant is fit, willing, and able to provide the foreign air transportation to be authorized by the permit and to comply with this part and regulations of the Secretary; and (2) (A) the applicant is qualified, and has been designated by the government of its country, to provide the foreign air transportation under an agreement with the United States Government; or (B) the foreign air transportation to be provided under the permit will be in the public interest. 21 The record before the Department makes clear that NAI s application, and in particular its unique business plan, present novel and complex issues. Those objecting to the application have raised significant concerns that NAI s hiring and wage practices, and its limitation of the right of employees to challenge those practices directly with NAI management, could create unfair wages and working conditions, and might not be consistent with one of the Department s several public interest considerations (49 U.S.C (5)). In addition, some of the opponents raise further concerns about the multi-jurisdictional nature of NAI s business plan, and about how that plan would be executed in practice. The opponents assert that the arrangements contemplated by NAI s business plan would run counter to Article 17 bis of the U.S.-EU Agreement. The Department acknowledges that these are important issues that warrant proceeding with caution and careful consideration. As part of our determination to engage in a thorough analysis, we have taken the unprecedented step of formally seeking the legal views of the Department of State and of OLC. As noted above, their responses, as well as the analysis of our own General Counsel, leave no doubt that Article 17 bis cannot be decisional in this proceeding. Moreover, the language of the statute is clear that, if an applicant is fit and qualified under the terms of an agreement with the United States, we do not reach the question of whether grant of authority would be in the public interest. 22 The existence of an air service agreement demonstrates that granting operating authority to a foreign carrier is per se in the public interest. Therefore, we tentatively conclude that the two critical issues in this case require us to award the authority requested: first, that Article 17 bis cannot be invoked to take precedence over our normal licensing standards, and second, that those standards are met here and therefore, in light 18 The Department makes this fitness and citizenship finding based on Article 2 (Reciprocal Recognition of Regulatory Determinations with Regard to Airline Fitness and Citizenship) of the Protocol to amend the U.S.-EU Air Transport Agreement, signed June 24, The Department notes that the applicant is properly licensed by its homeland to perform the proposed services. In addition, Ireland holds a Category 1 rating under the FAA s International Aviation Safety Assessment (IASA) Program, and the FAA has advised the Department that it knows of no reason why we should act unfavorably on the applicant s request. The Department has verified the applicant s compliance with 14 CFR Parts 203 (Warsaw liability waiver), and 205 (insurance requirements). 20 Given our tentative decision here, we will dismiss Norwegian s motion for expedited treatment as moot U.S.C We note that under the applicable agreement, the parties do not require designation. Rather, we regard the application of a carrier under the provisions of such an agreement as satisfying this requirement. 22 Id. 7

8 of the statute and the terms of the U.S.-EU Agreement, preclude a comparative public interest analysis. In view of the foregoing and all facts of record, we tentatively find and conclude that: 1. The applicant is fit, willing and able properly to perform the foreign air transportation described in the attached permit and to conform to the provisions of Title 49 of the U.S. Code, and to our rules, regulations, and requirements; The applicant is substantially owned and effectively controlled in a manner consistent with the provisions of the U.S.-EU Agreement; 3. The issuance of this foreign air carrier permit will not constitute a major regulatory action under the Energy Policy and Conservation Act of 1975, as defined in 14 CFR 313.4(a)(1) of our regulations; The Department s action with respect to this foreign air carrier permit should, unless disapproved by the President of the United States under of Title 49 of the U.S. Code, become effective on the 61st day after its submission for review, or upon the date of receipt of advice from the President or his designee under Executive Order and implementing regulations that he or she does not intend to disapprove this portion of the Department s decision under that section, whichever occurs earlier. In view of the above, we tentatively find that our actions would be consistent with the law and Department policy. ACCORDINGLY, 1. With respect to the applicant s request for a foreign air carrier permit in this proceeding, we direct all interested persons to show cause why our tentative decision granting that application, as set forth above, should not be made final; 2. Any interested person objecting to the issuance of an order making final our tentative findings and conclusions with respect to the applicant s request for a foreign air carrier permit shall, no later than twenty-one (21) calendar days after the date of service of this order, file with the Department and serve on the parties to this proceeding, a statement of objections specifying the part or parts of the tentative findings and conclusions objected to, together with a summary of testimony, statistical data, and concrete evidence to be relied upon in support of the objections; if objections are filed, answers to objections are due no later than seven (7) calendar days thereafter; 3. If timely and properly supported objections are filed, we will give further consideration to the matters and issues raised by the objections before we take further action; The attached permit reflects the standard scope of route rights available to EU carriers under the U.S.-EU Agreement. 24 This finding is based on the fact that the grant of this permit will not result in a near-term net annual change in aircraft fuel consumption of 10 million gallons or more. 25 As we are providing for the filing of objections to this tentative decision, we will not entertain petitions for reconsideration of this order. 8

9 4. In the event no objections are filed, all further procedural steps shall be deemed waived, and the Department will enter an order which will (subject to Presidential review under of Title 49 of the U.S. Code) make final our tentative findings and conclusions set forth in this order; 5. We dismiss as moot the Motion of NAI for Expedited Treatment; 6. We grant all motions for leave to file; and 7. We will serve a copy of this order on Norwegian Air International Limited; all other parties to this proceeding; the Embassy of Ireland in Washington, D.C.; the Embassy of Norway in Washington, D.C.; the Department of State; the Department of Justice s Office of Legal Counsel; and the Federal Aviation Administration. By: SUSAN MCDERMOTT DEPUTY ASSISTANT SECRETARY FOR AVIATION AND INTERNATIONAL AFFAIRS (SEAL) Appendices An electronic version of this document is available on the World Wide Web at: 9

10 Appendix A Issued by Order UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C PERMIT TO FOREIGN AIR CARRIER NORWEGIAN AIR INTERNATIONAL LIMITED A Foreign Air Carrier of Ireland is authorized, subject to the following provisions, the provisions of Title 49 of the U.S. Code, and the orders, rules, and regulations of the Department of Transportation, to engage in: Foreign scheduled and charter air transportation of persons, property, and mail from any point or points behind any Member State of the European Union, via any point or points in any Member State and via intermediate points to any point or points in the United States and beyond; Foreign scheduled and charter air transportation of persons, property, and mail between any point or points in the United States and any point or points in any member of the European Common Aviation Area; Foreign scheduled and charter air transportation of cargo between any point or points in the United States and any other point or points; Other charters pursuant to the prior approval requirements set forth in 14 CFR Part 212 of the Department s regulations; and Transportation authorized by any additional route rights made available to European Union carriers in the future; provided, that the holder shall, before it commences any new service under such additional route rights, provide the Department with evidence that it holds a homeland license for that new service (unless it has already provided such evidence to the Department). Such evidence shall be filed in Docket DOT-OST This permit and the exercise of the privileges granted in it shall be subject to the terms, conditions and limitations in both the order issuing this permit and the attachment to this order, and to all applicable provisions of any treaty, convention or agreement affecting international air transportation now in effect, or that may become effective during the period this permit remains in effect, to which the United States and the holder s homeland are or shall become parties.

11 This permit shall be effective on. Unless otherwise terminated at an earlier date pursuant to the terms of any applicable treaty, convention or agreement, this permit shall terminate (1) upon the dissolution or liquidation of the holder to whom it was issued; (2) upon the effective date of any treaty, convention, or agreement or amendment, which shall have the effect of eliminating the right for the service authorized by this permit from the service which may be operated by airlines of the European Union and its Member States (or, if the right is partially eliminated, then the authority of this permit shall terminate in like part); or (3) upon the termination or expiration of the applicable air services agreement between the United States and the European Union and its Member States. However, clause (3) of this paragraph shall not apply if prior to such termination or expiration, the foreign air transportation authorized herein becomes the subject of another treaty, convention or agreement to which the United States and the European Union and its Member States become parties. The Department of Transportation has executed this permit and affixed its seal on. By: (SEAL) 2

12 Foreign Air Carrier Permit Conditions In the conduct of the operations authorized, the foreign carrier applicant shall: (1) Not conduct any operations unless it holds a currently effective authorization from its homeland for such operations, and it has filed a copy of such authorization with the Department; (2) Comply with all applicable requirements of the Federal Aviation Administration, the Transportation Security Administration, and with all applicable U.S. Government requirements concerning security, including, but not limited to, 14 CFR Parts 129, 91, and 36 and 49 CFR Part 1546 or 1550, as applicable. To assure compliance with all applicable U.S. Government requirements concerning security, the holder shall, before commencing any new service (including charter flights) from a foreign airport that would be the holder s last point of departure for the United States, contact its International Industry Representative (IIR) (formerly referred to as International Principal Security Inspector) to advise the IIR of its plans and to find out whether the Transportation Security Administration has determined that security is adequate to allow such airport(s) to be served; (3) Comply with the requirements for minimum insurance coverage contained in 14 CFR Part 205, and, prior to the commencement of any operations under this authority, file evidence of such coverage, in the form of a completed OST Form 6411, with the Federal Aviation Administration s Program Management Branch (AFS-260), Flight Standards Service (any changes to, or termination of, insurance also shall be filed with that office); (4) Not operate aircraft under this authority unless it complies with operational safety requirements at least equivalent to Annex 6 of the Chicago Convention; (5) Conform to the airworthiness and airman competency requirements of its Government for international air services; (6) Except as specifically exempted or otherwise provided for in a Department Order, comply with the requirements of 14 CFR Part 203, concerning waiver of Warsaw Convention liability limits and defenses; (7) Agree that operations under this authority constitute a waiver of sovereign immunity, for the purposes of 28 U.S.C. 1605(a), but only with respect to those actions or proceedings instituted against it in any court or other tribunal in the United States that are: (a) based on its operations in international air transportation that, according to the contract of carriage, include a point in the United States as a point of origin, point of destination, or agreed stopping place, or for which the contract of carriage was purchased in the United States; or (b) based on a claim under any international agreement or treaty cognizable in any court or other tribunal of the United States. In this condition, the term "international air transportation" means "international transportation" as defined by the Warsaw Convention, except that all States shall be considered to be High Contracting Parties for the purpose of this definition; (8) Except as specifically authorized by the Department, originate or terminate all flights to/from the United States in a Member State of the European Union; (9) Comply with the requirements of 14 CFR Part 217, concerning the reporting of scheduled, nonscheduled, and charter data; (10) If charter operations are authorized, except as otherwise provided in the applicable aviation agreement, comply with the Department's rules governing charters (including 14 CFR Parts 212 and 380); and (11) Comply with such other reasonable terms, conditions, and limitations required by the public interest as may be prescribed by the Department, with all applicable orders or regulations of other U.S. agencies and courts, and with all applicable laws of the United States. This authority shall not be effective during any period when the holder is not in compliance with the conditions imposed above. Moreover, this authority cannot be sold or otherwise transferred without explicit Department approval under Title 49 of the U.S. Code. EU carrier 01/2008

13 Appendix B Summary of Pleadings Filed in Response to Application of NAI Answer of Air Line Pilots Association (ALPA) ALPA asserts that NAI is an affiliate of NAS that has been established expressly to evade the social laws of Norway, in order to lower the wages and working conditions of its air crew. ALPA contends that, as an entity under the control of Norwegian citizens, NAI could not expect to receive a permit but for the opportunities made available by the U.S.-EU Agreement; however, that Agreement includes a provision stating that the opportunities created by the U.S.-EU Agreement are not intended to undermine labor standards or the labor-related rights and principles contained in the laws of the signatories to that Agreement. ALPA further contends that allowing NAI, as structured, to provide foreign air transportation services to the United States would be at odds with two public interest objectives expressly set out in the aviation statutes, specifically: 1) the encouragement of fair wages and working conditions; and 2) strengthening the competitive position of [U.S.] air carriers to at least ensure equality with foreign air carriers. 49 U.S.C (a)(5) and (15). 1 It argues that, if the Department does not deny NAI s application immediately, the public interest questions raised by the application deserve further attention before final action is taken and the Department should require the applicant (including its airline affiliates), and the appropriate government authorities, to provide additional information relevant to whether approval of the application would be in the public interest. ALPA includes in its answer an information request specifying a number of questions that it believes should be posed and answered. While highlighting its involvement in the initial and second stage U.S.-EU aviation negotiations, ALPA states that it raised concerns during the negotiations regarding how the new rights made available to EU carriers could be used to undermine airline employee representation rights and the terms and conditions of employment. ALPA specifies in detail the efforts that took place to ensure how those labor concerns were to be addressed in the U.S.-EU Agreement, which it states ultimately led the U.S. and EU to adopt Article 17 bis into the Agreement, which contains language that expressed the notion that the U.S.-EU Agreement is not intended to facilitate the undermining of labor standards. 2 ALPA describes the labor concerns it has with the existing NAS-Norwegian Long Haul (NLH) operation and maintains that these factors will remain in place with NAI as the likely successor to NLH. For example, ALPA asserts that the B787 aircraft operated by NLH for NAS are registered in Ireland for the purpose of avoiding the application of Norway social laws to NLH aircrew. ALPA states its belief that some, maybe all, of the non-management pilots who fly NLH s B787 aircraft are employed on individual employment contracts by Global Crew Asia PTE Limited (Global Crew), a company incorporated in Singapore, with the contracts governed by Singapore law. ALPA asserts that although the NLH pilots are subject to the direction and control of NLH, they are to take up any concerns they have about NLH not with NLH itself, but with Global Crew. ALPA contends that the pilots terms of employment are substantially inferior to those of the non-management pilots employed by NAS, and that the pilots are domiciled not in Norway, but in Thailand. ALPA claims that earlier this year, the Norwegian government gave NAS/NLH until December 23 to obtain work permits for the NLH aircrew, but NAS stated that it would seek to establish an air carrier in another European country, with Ireland, where it has already registered its B787 1 Answer of ALPA, at Answer of ALPA, at 8-12.

14 aircraft, being mentioned specifically as a possible site. ALPA notes that NAI was incorporated in Ireland on March 4, 2013, and that a number of its directors also have management roles in NAS. In outlining the history of the relationship of NAS/NLH/NAI with labor organizations, ALPA includes in its answer a declaration from Mr. Jack Netskar, the International Director of the Norwegian Airline Pilots Association. ALPA also provides examples of Global Crew-NLH labor contracts, as well as a number of additional exhibits in support of its position in opposition to NAI s application. Answer of the Transportation Trades Department, AFL-CIO (TTD) TTD objects to NAI s application and states its belief that NAI, an affiliate of NAS, was incorporated in Ireland with the express intent of evading Norway s social laws. TTD further states its support for ALPA s answer and endorses the analysis of the NAI business model and legal implications as detailed in ALPA's filing. 3 TTD argues than NAI s business model is based on undermining labor standards and driving down labor costs, which runs contrary to the labor article provision in the U.S.-EU Agreement. It asserts that the opportunities created by the U.S.-EU Agreement are not intended to undermine labor standards or laborrelated rights and principles contained in the laws of the signatories to that Agreement. TTD states that granting NAI s application would also violate the statutory requirement that the Department s decisions in granting foreign air carrier permits must promote the public interest and encourage fair wages and working conditions. TTD argues that NAI s use of a Flag of Convenience strategy to dramatically lower labor costs at the expense of decent labor standards puts U.S. carriers and their employees at a competitive disadvantage. With respect to its flag of convenience argument, TTD draws comparisons to the U.S. maritime industry, contending that it was not long ago that the United States was a significant force in the global maritime marketplace, but is now a shell of its former self. 4 Answer of the Allied Pilots Association (APA) The APA urges the Department to reject the NAI application and states that the services proposed by NAI do not fall within the letter or the spirit of the U.S.-EU Agreement. The APA contends that NAI is seeking to establish itself as an Irish air carrier in order to avoid the application of Norwegian social laws, and that it will even skirt Ireland's wage and labor protections, thus offering substantially inferior terms of employment by utilizing sub-contracted pilots directly employed by non-eu entities. The APA claims that, as a result of NAI s labor practices, its proposed service does not meet the statutory provisions that grant of its request would be in the public interest. 5 Answer of Airlines for America (A4A) A4A notes that, at the U.S.-EU Joint Committee meeting in Iceland on June 5, 2013, the U.S. Government posed to the European Commission and Member State representatives a series of questions regarding the operations of Norwegian Air Shuttle (NAS). It states that the application of NAI, an affiliate of NAS with a common management team, raises many of the same questions that the U.S. Government posed at that June meeting. A4A maintains that the Department, absent the necessary regulatory approval being issued 3 Answer of TTD, at Answer of TTD, at 5. 5 Answer of APA, at 2. 2

15 by the appropriate European authorities, should continue to pursue through the Joint Committee questions regarding NAI s proposed U.S. operations. 6 Joint Reply of Delta Air Lines, Inc. (Delta), United Airlines, Inc. (United), American Airlines, Inc. (American), and US Airways, Inc. (US Airways) Delta, United, American, and US Airways (the Joint Carriers) filed a reply to the A4A and ALPA answers. The Joint Carriers urge that NAI s application be denied because it is contrary to the express provisions of the U.S.-EU Agreement -- specifically, Article 17 bis, which prohibits the establishment of flags of convenience to evade labor protections and thereby derive a competitive advantage in the marketplace -- and is not in the public interest. 7 The Joint Carriers contend that, absent the U.S.-EU Agreement, NAS would have no expectation that it could set up a shell company in Ireland to operate its aircraft using imported labor, because standard bilateral agreements contain nationality clauses requiring that carriers be owned and effectively controlled by their own nationals. They assert that, because the EU is a collection of individual member states, and the U.S. is governed by a single set of federal aviation and labor standards, implementing the U.S.-EU Agreement presented special challenges to prevent exactly this type of forum shopping and reflagging by EU carriers, which led to the carefully negotiated Article 17 bis to ensure high labor standards were upheld. 8 In citing ALPA s answer, the Joint Carriers maintain that, although NAI does not yet have an Irish air carrier certificate, it is being established in Ireland so that its affiliate NAS can avoid the social laws of Norway -- allowing NAI to provide lower wages and less desirable working conditions. The Joint Carriers state that NAI will provide aircraft and flight crews for marketing and sale under the Norwegian brand that will be used in competition with U.S. carriers on various EU-U.S. routes. They state that an important focus of the NAI operation appears to be point-to-point service between the United States and London. They note that, in an open letter, NAS this week confirmed that NAI is being established to take over operations from NLH, a Norwegian company that currently provides lift to NAS using B787 aircraft. The Joint Carriers assert that under the Department s public interest standard, a key objective is strengthening the competitive position of [U.S.] air carriers to at least ensure equality with foreign air carriers. 49 U.S.C (a) (15) and (e) (1). 9 They contend that the NAI scheme will provide NAI and NAS a competitive advantage on transatlantic routes in direct competition with U.S. carriers. Answer of European Cockpit Association (ECA) The ECA states that it is the official Social Partner of the European Union, representing 38,000 European professional flight crew in 38 European countries. In objecting to NAI s application, the ECA describes the history of NAS and its affiliated carriers NLH and NAI with labor matters. The ECA asserts that, during the last two years, NAS has repeatedly tested the boundaries of the Norwegian and EU legislation on individual and collective labor rights. It notes that in January 2012, NAS set up a fully owned subsidiary NLH - to operate long haul flights. The ECA contends that NLH is set up in a way that de 6 Answer of A4A, at 2. 7 Answer of the Joint Carriers, at 1. 8 Answer of the Joint Carriers, at Answer of the Joint Carriers, at 3. 3

16 facto prevents the NLH pilots from being covered by the collective labor agreement covering NAS pilots. 10 It states that NLH is leasing Irish-registered aircraft and has requested an exemption from the Norwegian CAA to use Irish-registered aircraft under a Norwegian AOC. The ECA claims that in January 2013 NLH requested that the Norwegian government amend its immigration law to enable the recruitment of non-eu crew to fly onboard Norwegian-registered aircraft. The ECA maintains that, following the Norwegian Government s decision to stick to current legal requirements, NAS announced that it would move its longhaul operations to a different Member State, and NAS would ultimately register a new subsidiary in Ireland and carry out its operations from there. The ECA maintains that NAS has set up NAI in Ireland with the aim of granting it the status of an airline that would operate transatlantic flights with contracted European pilots recruited in Singapore and based in Thailand. The ECA asserts that such employment practices and social dumping are intended to circumvent the labor and social laws of the Scandinavian countries. The ECA takes the position that not only would this method of engaging workers effectively fragment their ability to associate and bargain collectively, but it would fragment the safety culture of an airline by diluting lines of accountability and responsibility, an outcome that is clearly not in the public interest. 11 The ECA states that, for example, NAI is setting up a complex system that involves contract pilot and contract cabin crew recruitment in Singapore and Thailand at low wages, ultimately affecting competition between EU and U.S. carriers. 12 It notes that this arrangement results in conditions that are not in accordance with the respect of workers fundamental rights. The ECA notes that, in 2008 and 2009, the European Commission organized two labor forums to analyze the potential risks for the labor force in further opening up the aviation market between the EU and U.S. in terms of ownership and control and market access. The ECA states that in its conclusions the forum s report fully noted that in Europe, collective labor rights may be undermined by further liberalization of the EU-U.S. aviation market. ECA states that, during the labor forum, ECA and ALPA warned against the possibility for social dumping in Europe to be exported to the United States and to affect the working conditions and labor rights of EU and U.S. workers. ECA contends that NAI is clearly an example of a company that risks undermining the terms of the U.S.-EU Agreement. Consolidated Reply of NAI In its reply, NAI states that approval of its application will serve the public interest in the same ways its affiliates NAS and NLH have, pointing out the success of the NAS/NLH U.S. services since their launch in May NAI asserts that the U.S. Government has taken the position that any service provided under the terms of a bilateral agreement like the U.S.-EU Open Skies Agreement would serve the public interest. It also cites a number of attributes of its proposed service that it regards as meeting statutory public interest objectives. For example, NAI cites increased competition, expansion of U.S.-EU air services, and consumer benefits achieved through innovative new service. NAI contends that it too will offer a unique low-fare, high-quality service with Boeing 787 Dreamliner aircraft and provide connections to over 100 destinations across Europe, Asia, and northern Africa Answer of ECA, at Answer of ECA, at Answer of ECA, at Consolidated Reply of NAI, at 4. 4

17 NAI calls attention to a 2012 study that found that 87 percent of passengers over the North Atlantic were transported by carriers affiliated with one of the three major airline alliances, and it showcases itself as a new entrant in a marketplace that is currently dominated by those entrenched transatlantic legacy carriers. 14 NAI states its intention to serve U.S. airports like Fort Lauderdale, Oakland, and Orlando that currently have limited international service particularly to Europe. NAI further states that its services support U.S. industry and the U.S. economy, noting its significant purchases of Boeing aircraft and benefits to manufacturing and jobs in Washington, South Carolina, and other states. NAI contends that its proposed transatlantic service is precisely the kind of pro-competitive, pro-consumer, pro-growth innovation that the Department has long supported and that was envisioned by the framers of the Open Skies Agreement. 15 NAI claims that the arguments raised by the objecting parties, particularly as concerns Article 17 bis, are premised on a fundamental misreading of the text and purpose of the U.S.-EU Agreement, and represent an attempt by U.S. labor groups to achieve through the NAI licensing proceeding what they failed to achieve during the U.S.-EU negotiations. NAI also claims that the issues raised by the Answering Parties constitute large-scale policy issues that are inappropriate for consideration on an ad hoc basis and are plainly outside this proceeding. It asserts that the appropriate venue for such policy considerations is the Joint Committee. NAI takes the position that approval of its application is fully consistent with the U.S.-EU Agreement, including the provisions for authorization in Article 4 and for reciprocal recognition of regulatory determinations with regard to airline fitness and citizenship in Article 6 bis. It contends that, to do otherwise would turn back the clock to a dark era before the U.S.-EU Agreement and indeed before the global liberalization achieved by open skies agreements worldwide when complicated licensing hurdles often had the effect of restricting air transportation in bilateral markets and forcing the United States to deal with foreign demands to pay again for air services rights already secured. 16 NAI notes that delay in action on its application by the Department could prompt a similar response by European authorities presented with an application by a U.S. carrier, which would contravene both the letter and the spirit of the U.S.-EU Agreement and its goals to liberalize the transatlantic travel marketplace and promote innovation and new services by carriers. Motion and Joint Reply of ALPA, TTD, and ECA ALPA, TTD, and ECA (the Joint Parties) filed an additional pleading in response to NAI s consolidated reply. In support of their position, the Joint Parties reiterate a number of assertions made by them and other objectors to NAI s application that contend that NAI s business plan and efforts to become an Irish carrier are based on avoiding the application of Norwegian law to its air crew. 17 The Joint Parties state that NAI does not deny any of the assertions made in the Joint Parties answers to its application as to how it intends to conduct its business or the reasons behind how it intends to conduct that business. The Joint Parties maintain that NAI s arguments as to why the Department should approve its application rest on a fundamental misunderstanding of the rules and procedures that govern the issuance of authority to provide international air transportation under the U.S.-EU Agreement. The Joint Parties state that an applicant seeking authority under the U.S.-EU Agreement does not have an unconditional right to have its application approved. Rather, the U.S.-EU Agreement provides an opportunity for an airline to receive 14 Consolidated Reply of NAI, at Consolidated Reply of NAI, at Consolidated Reply of NAI, at Joint Reply of ALPA/TTD/ECA, at

18 authority and permissions if it meets certain requirements, including that the airline is qualified to meet the conditions prescribed under the laws and regulations normally applied to the operation of international air transportation by the Party considering the application. Agreement Article 4. The laws and regulations normally applied include the requirement that a grant of the authority sought will be in the public interest. 49 U.S.C The Joint Parties state that the public interest analysis includes an evaluation of the effect of a permit award on fair wages and working conditions and on strengthening the competitive position of U.S. carriers to ensure at least equality with foreign air carriers, and why approval of NAI s application which is expressly predicated on a scheme to undermine labor standards is inconsistent with those elements of the public interest. 19 The Joint Parties also discount NAI S claim of disparate treatment and its assertion that rejection of its application would lead to the return of the dark era of oppressive regulatory requirements. They state their agreement with NAI s claim that Department precedent reflects a strong commitment to equal, nondiscriminatory treatment of similarly-situated carriers. However, the Joint Parties contend that NAI is unique and not similarly situated with the other carriers that have taken advantage of the Department s streamlined application procedures for EU carriers. The Joint Parties take the position that no other carrier that has availed itself of those procedures has expressly sought to use an opportunity made available by the U.S.-EU Agreement to avoid (and thereby undermine) the labor standards of one of the Parties to the U.S.- EU Agreement. They assert that NAI s singular business plan is directly at odds with key public interest factors as well as with the intent of the U.S.-EU Agreement, and that its application should therefore be rejected. 20 Motion and Comments of the Travel Technology Association (Travel Tech) Travel Tech states that its members (comprised of online travel agents (OTA) and global distribution systems (GDS)), are on the front lines of travel and tourism and recognize the great benefit that affordable travel brings to consumers, suppliers, and the travel and tourism economy. Travel Tech filed in support of NAI s application and contends that denial of the request would be inconsistent with the U.S.-EU Agreement. Travel Tech asserts that granting NAI s application would provide a number of economic benefits through NAI s use of U.S.-manufactured aircraft, its investment in airport infrastructure, and the creation of U.S. jobs. 21 Travel Tech states that NAI s proposed service would also increase foreign travel to the United States and benefit consumers by providing a competitive low-cost transatlantic service option. Comments of the European Low Fares Airline Association (ELFAA) ELFAA filed comments in support of NAI s application. ELFAA states that the U.S.-EU Agreement permits any EU-approved carrier to operate air services between the EU and U.S., and that it further provides for mutual recognition of regulatory approvals and oversight by all competent U.S. or EU regulatory authorities. ELFAA asserts that NAI has followed the necessary licensing procedures described in the U.S.-EU Agreement and that, upon receipt of required Irish regulatory approval, it will properly qualify for DOT authority Joint Reply of ALPA/TTD/ECA, at 4-5, emphasis in text. 19 Joint Reply of ALPA/TTD/ECA, at Joint Reply of ALPA/TTD/ECA, at Comments of Travel Tech, at Comments of ELFAA, at 2. 6

19 ELFAA maintains that, since committing to the U.S.-EU Agreement, the EU has not withheld any rights available to U.S. carriers, such as U.S. carriers ability to move from London Gatwick to London Heathrow, or to operate intra-eu flights. ELFAA asserts that the U.S. should honor its legal obligations under the Open-Skies Agreement and approve NAI s application. ELFAA states that it supports greater competition in air services between the U.S. and EU, 87 percent of which are at present controlled by carriers that are part of immunized alliances, which results in a lack of competition that has kept fares uniformly high. 7

20 Appendix C Summary of Pleadings Filed in Response to the Joint Committee Summary Notice (JC Notice) Comments of the Washington Airports Task Force (WATF) The WATF filed comments citing its strong support of NAI s application, and also states its support for the U.S.-EU Agreement and for taking full advantage of the opportunities it offers. It notes that while the National Capital Region is the fourth largest air travel market in the United States, just four airlines now control more than 92% of the region s air travel, and competition is only sustained because of the existence of three airports in the region. 1 It further states that the region enjoys very strong international competition, with service by 25 foreign airlines that carried 41 percent of the region s international Origin &Destination (O&D) traffic in 2012, with U.S. carriers transporting the remaining 59 percent of the volume. The WATF asserts that airline concentration over the last few years within the U.S., and within the broader worldwide air transport industry, has increased fares and further depressed the demand for travel, to the detriment of passengers and the economies of the United States and other countries. The WATF states that, should NAI decide to inaugurate service to the Washington area, the introduction of a European low-fare carrier into the current mix of U.S. and foreign airlines offering international service there would be a healthy stimulus to transatlantic travel in the United States fourth largest economic unit and its neighbors, a stimulus whose originator should be allowed to either succeed or fail in a free market. Answer and Reply of Federal Express Corporation In its answer, FedEx states that, upon issuance of an Air Operator Certificate (AOC), NAI s application should be granted and NAI should be allowed to benefit from the U.S.-EU Agreement. FedEx notes that the intent of the U.S.-EU Agreement was not to probe the decision of a national regulator in matters of fitness and qualification, but rather to make applications less burdensome. FedEx asserts that once an AOC is issued to NAI by a European Member State, a rejection of NAI s application would constitute a rejection of that Member State s regulatory scheme and would violate the terms of the U.S.-EU Agreement. FedEx further asserts that there is no reason to deny NAI s application for safety, noting that Ireland is rated as Category 1 under the FAA s International Aviation Safety Assessment (IASA) program, and that in 2010 the Irish Aviation authority ranked in the top ten agencies in the world by the International Civil Aviation Organization (ICAO). 2 FedEx disagrees with the position taken by some parties in this docket that a difference in hiring practices, organizational results, and employment terms should disqualify a carrier from serving the United States under the U.S.-EU Agreement. 3 Rather, FedEx takes the position that there are many different ways that employees of both U.S. and European airlines have chosen to organize (or not to organize) themselves, and that, thus far, no government has found those to be an indicium of a lack of fitness. It states that there is not a single labor law standard in the U.S.-EU Agreement under which all carriers must operate. Instead, the history of the U.S.-EU Agreement clearly demonstrates that it was intended to permit application of the individual national laws governing employee/employer relationships, rather than to set up a single trans- 1 Comments of WATF, at Answer of FedEx, at Answer of FedEx, at 3.

21 Atlantic labor standard. FedEx notes that, while some participants in the talks did seek for the United States to submit itself to a single labor standard along with Europe, they did not prevail. Rather, FedEx maintains that Article 17 bis instead references "labor standards or the labor-related rights and principles contained in the Parties' respective laws, recognizing the continuing governance of each side's carriers by their own national labor laws. It offers that for the U.S. to hold otherwise would be the worst kind of revisionist history and would open a door that U.S. employees might later regret, noting that if the U.S. can question EU labor practices, what would stop the EU or other aviation partners from questioning U.S. airlines' labor practices? FedEx states that it has benefited greatly from the U.S.-EU Agreement, and strongly opposes any Department action that could cause other nations to limit the benefits or invite restrictive reading of the Agreement s terms. 4 In its reply, FedEx points out that the NAI AOC has now been issued, indicating that the Irish government, a signatory to the U.S.-EU Agreement, has certified NAI as one of its air carriers and thus has stated that it is an airline entitled to exercise rights under the U.S.-EU Agreement. FedEx disagrees with the objectors argument in favor of the need for a more detailed inquiry because the Department must consider the competitive impact on U.S. carriers of a new entrant. FedEx contends that U.S. law does require that the Department take into consideration the need to "strengthen the competitive position of air carriers," but that is in the context of a negotiating policy, not as a factor to be considered in interpreting a treaty that has been already negotiated and agreed to. FedEx states that it also disagrees with the suggestion that the "public interest" standard of 49 U.S.C requires a detailed inquiry before granting a foreign air carrier permit. FedEx takes the position that the public interest question was decided when the U.S. agreed to the open market access of the U.S.-EU Agreement and the streamlined procedures. 5 While this "public interest" argument was raised and was decisive in recent cases involving extrabilateral requests, FedEx contends that NAI s application is squarely within the four corners of an agreement which mandates the broadest access. FedEx adds that, even if the Department were to undertake a detailed public interest analysis, it should still grant NAI s application because the procompetitive aspects of the application would meet the public interest test. Answer of ALPA ALPA questions the content and accuracy of the information provided by the European delegation as specified in the JC Notice. First, ALPA asserts that the reasons provided by the European delegation why Ireland is preferred by NAI over Norway seem insubstantial and materialized only after opposition to its application appeared. It states that NAI s claim of access to additional financing options under Organization for Economic Cooperation and Development (OECD) rules; Cape Town Convention benefits; and access to significant additional traffic rights, are all available to it as a carrier of Norway. It contends that the assertion that the local labor laws at the operating base will apply appears to be false with respect to pilots, noting that 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 argues that NAI s effort to move to Ireland directly undermines Norwegian labor standards and the labor-related rights and principles contained in Norway s laws, an outcome that would violate Article 17 bis of the U.S.-EU Agreement. 4 Answer of FedEx, at 6. 5 Reply of FedEx, at 3. 2

22 ALPA also questions the salary information provided in the JC Notice and notes that social compensation is not included in those figures. With respect to comments regarding NAS relationship with labor unions, ALPA states that 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. 6 It points out that 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. With respect to flag of convenience concerns, ALPA contends that 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. In response to comments that the Department should under Article 6 bis of the U.S.-EU Agreement recognize the determinations made by the Irish authorities regarding NAI, ALPA notes that while the U.S.-EU Agreement established a mutual recognition procedure for fitness and citizenship determinations, it did not diminish DOT s authority to determine whether approval of an application for foreign air carrier permit is consistent with the public interest. 7 ALPA states that it welcomes and recognizes the airline efficiency and consumer benefits of competition, but argues that competition only works if it is fair, and fair competition does not exist when carriers game the system to play by different rules and garner a competitive advantage by actively seeking to undermine labor standards. It takes the position that this is what NAI seeks to accomplish and this is what Article 17 bis seeks to prevent. ALPA also submits a list of questions it developed prior to an earlier Joint Committee meeting and in its own answer to NAI s application that it contends must be answered to shed further light on NAI s proposed operations. ALPA also references in its answer comments made by Mr. Siim Kallas, the European Commission Vice President responsible for air transport, at the time the Protocol to the U.S.-EU Agreement was completed. ALPA asserts that these comments touted 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 U.S.-EU Agreement contributes to high labor standards. ALPA also provides and calls attention to subsequent correspondence sent to Mr. Kallas by Mr. Ketil Solvik-Olsen, the Minister of Norway s Ministry of Transport and Communications, which ALPA claims expressed Norway s various questions associated with labor concerns about operations such as those proposed by NAS/NAI. 8 ALPA contends that such questions are certainly challenging for the EU and should be thoroughly examined and satisfactorily answered before an operation such as that proposed by NAS/NAI receives government approval. Answer of the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) & the Transportation Trades Department, AFL-CIO (TTD) AFL-CIO and TTD support the comments filed by ALPA, and adopt ALPA s analysis and response to each point made by the European delegation. AFL-CIO and TTD further state their belief that the case presented by the European delegation is fundamentally flawed and ignores Article 17 bis in the U.S.-EU Agreement. AFL-CIO and TTD contend that the intentions of NAI leave little in doubt, claiming that the carrier s true purpose in going to Ireland was to evade Norway s labor and other social laws, evade its existing collective 6 Answer of ALPA, at 9. 7 Answer of ALPA, at Answer of ALPA, at

23 bargaining agreements, and undercut existing U.S. and European airlines and their workers. AFL-CIO and TTD maintain that, by basing its crews in Thailand and employing them on individual contracts governed by the laws of Singapore, NAI is clearly undermining labor standards on both sides of the Atlantic. They contend that Article 17 bis was included in the U.S.-EU Agreement precisely to prevent this practice, yet now, when NAI is attempting to do precisely that, the European delegation appears to be abandoning the principles that guided their negotiations, and walking away from their commitments under the U.S.-EU Agreement. Joint Answer and Joint Reply of Delta, United, and American Delta, United, and American (the Joint Carriers) contend that the JC Notice raises more questions than it answers. They maintain that the information contained in the JC Notice is not sufficient to establish the facts necessary to decide this application, as NAI has avoided providing any evidence or verified statements on the record regarding its true motives. The Joint Carriers further maintain that the information contained in the JC Notice does not resolve any of the important outstanding questions about NAI, its fitness, and how granting it a permit would be consistent with Article 17 bis of the U.S.-EU Agreement and the DOT s public interest mandate. 9 They argue that, before acting on NAI s application, the Department should, to ensure consistency with its public interest mandate and the rights and expectations of U.S. aviation interests under the U.S.-EU Agreement, critically examine and conclusively establish the facts regarding the proposed formation and certification of NAI. The Joint Carriers state that, according to the JC Notice, the decision to establish NAI in Ireland, and dissolve NLH in Norway, had nothing to do with labor issues, but instead was motivated by unrelated business issues such as 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. The Joint Carriers dispute these claims, noting that establishment of NAI in Ireland would give it no additional traffic rights to serve the United States than NLH already enjoys in Norway; that Norway, like Ireland, has ratified the Cape Town Convention; and that OECD financing benefits are also available to carriers of Norway. 10 Furthermore, the Joint Carriers state that Ireland allows cabin crew to work on Irish-registered aircraft without the requirement of a work permit, which would otherwise be a prerequisite for a Norwegian licensed carrier; and that Ireland also allows carriers to employ pilots and other crew through recruitment companies and other personal service corporations, rather than requiring pilots to be directly employed by the airline; and that as a result, NAI can avoid social insurance taxes required by the country of Norway. They assert that it is difficult to see, based on the current evidence, how NAI s motivation is anything more than a clever attempt to circumvent Norway s labor laws in contravention of Article 17 bis. 11 The Joint Carriers argue that the Answer filed by the Norwegian Trade Association Parat lays bare any claim that NAI s decision to form in Ireland is anything other than a brazen effort to evade Norway s labor laws, consistent with the other evidence of record including the Netskar Declaration, NAS s public statements, and other documentary evidence provided by ALPA Answer of the Joint Carriers, at Answer of the Joint Carriers, at Id. 12 Reply of the Joint Carriers, at 1. 4

24 Answer of ELFAA ELFAA again states its support for NAI s application and notes that, since liberalization of market access as part of the European single market, ELFAA and its members, including Norwegian, have introduced the intended and sorely needed competition to air transport within the EU/EEA, which was the primary intent of deregulation. It contends that safe, reliable air transportation has now become affordable to many more citizens that were previously unable to afford the high fares of the uncompetitive established carriers. ELFAA cites its commitment to further increasing competition in air transport, and notes that it welcomed the conclusion of the U.S.-EU Agreement, which offered the possibility to any EU-registered carrier to conduct EU-U.S. services. It contends that Norwegian, a major contributor to increased competition in Europe, now seeks to avail itself of the very freedom extended by the U.S.-EU Agreement. ELFAA asserts that the parties to the U.S.-EU Agreement further committed to mutual recognition of designation by appropriate regulatory bodies in both the EU and United States, and it fully supports the EU position that the United States should, in accordance with the U.S.-EU Agreement, recognize Ireland s determinations regarding NAI under Article 6 bis. It also calls attention to Ireland s competence and excellent record in the regulation of aviation safety, and asserts that now that Ireland has issued NAI its AOC and Operating License, the Department should issue NAI the necessary operational authority without further delay. 13 Comments and Reply of NAI 14 In its comments to the JC Notice, NAI maintains that the issuance of its AOC and operating license reflects the Irish government s confidence in and formal confirmation of NAI s operational and safety profile. It asserts that the public benefits that its services will produce for American tourism, American consumers, and the American economy are confirmed by the many parties who have publicly supported NAI. 15 NAI claims that the information provided by the EU delegation summarized in the JC Notice supports the conclusion that NAI is fully qualified and entitled to provide the new service proposed in its application. NAI states that sound business reasons support their choice of headquarters location in Ireland, citing access to significant additional traffic rights not available to it as a Norwegian carrier, access to additional financing options under OECD (Organization for Economic Co-operation and Development) rules, and access to insurance and financing rebates due to the fact that Ireland is a Cape Town Convention Signatory. It maintains that it is entitled to apply for and obtain an Irish AOC under the Community airline concept that is at the core of the U.S.-EU Agreement. NAI also contends that what attracted them to Ireland in the first place is the distinguished oversight record of the IAA, which NAI argues was unfairly and inaccurately tarnished by the Objecting Parties. In response, NAI cites various factors in support of the effectiveness of the IAA. 16 NAI asserts that its compensation and labor practices are fair and globally-competitive, and that it recruits highly qualified European-licensed pilots and cabin crew, and compensates them at levels commensurate with what others in the industry are paid. 17 NAI contends that its decision to use employment firms for the 13 Answer of ELFAA, at In its answer to the Joint Committee Summary Notice, NAI included its Air Operator Certificate (AOC) and /Operating License that were issued by the Irish Aviation Authority (IAA). 15 Comments of NAI, at Comments of NAI, at Comments of NAI, at 6. 5

25 initial hiring of long-haul personnel is part of a strategy to control overall start-up costs by relying on proven outside expertise rather than, for example, immediately expanding the company s internal human relations and regulatory departments. It further contends that the use of employment firms does not entail any reduction in the training, qualification, oversight, or compliance of NAI s crew members. NAI points out that the Objecting parties attempt to rest their arguments on Article 17 bis of the U.S.-EU Agreement. NAI argues that the language, intent, and negotiating history of Article 17 bis make it clear that it does not create new labor standards or override the existing laws, regulations, and practices of either the EU and its Member States or the United States that address airline employment and labor issues. NAI asserts that, with the submission of its AOC and Operating License from Ireland, it has now provided all the information required of EU applicants under the Department s published application procedures and that its application should be approved without delay. Indeed, it adds that the opponents arguments provide no legal basis to deviate from these procedures. 18 NAI further asserts that approval of its application is consistent with Articles 4 and 6 bis of the U.S.-EU Agreement. It states that it has also received explicit endorsement for Departmental approval from the delegation of the EU and its Member States at the Joint Committee meeting on January 2014; from the Norwegian Minister of Transport and Communications Ketil Solvik-Olsen; and from the Irish Minister for Transport, Tourism and Sport Leo Varadkar. 19 NAI states that filings by the Objecting Parties distort the meaning and purpose of the U.S.-EU Agreement. NAI disagrees with the Objecting Parties assertion that Article 17 bis was included in the U.S.-EU Agreement precisely to prevent the practice of enticing airlines to shop around for a better deal. NAI argues that such an interpretation would eviscerate the most important right obtained by the EU and its Member States in the U.S.-EU Agreement, which is the right of every European citizen to establish, own, and control an airline in any EU Member State, and to operate that airline from any point in the EU to any point in the United States. 20 NAI maintains that the Objecting Parties contention that NAI would undermine labor standards and that its actions and business plans violate Article 17 bis are incorrect because it is offering competitive wages and working conditions to all of its employees. NAI further argues that the Objecting Parties have pointed to nothing in the respective laws of the European Union or any of its Member States that NAI s business model would violate. NAI maintains that the facts in the JC Notice support NAI s pro-consumer business model and that its business decision to establish its principal place of business in Ireland was lawful, rational, and based on many commercial factors. NAI argues that its motivations should not be second-guessed by the United States any more that the EU should second-guess the decisions of American, Delta, and United to incorporate in the State of Delaware rather than in Texas, Georgia, or Illinois. 21 NAI asserts in the JC Notice, the EU delegation stated that Norwegian group employees are organized in labor unions, and that the group has no tradition of discouraging unionization. NAI contends that it cannot understand how it is a threat to the three major U.S. carriers and their European alliance partners, since those carriers control 87 percent of the transatlantic market and hold grants of antitrust immunity that allow them to set prices and capacity jointly. NAI asserts that for competition, for economic growth, and for consumers, the Department should grant NAI s application, which would be in accordance with the Department s wellestablished precedents. 18 Reply of NAI, at 4, note Reply of NAI, at Reply of NAI, at Reply of NAI, at 9. 6

26 Answer and Reply of Parat Parat states that it is a Norwegian trade union that represents members, more than 4,300 of whom work in aviation, and almost 2,000 that work in NAS and its affiliated companies. Parat further states that it has negotiated the collective bargaining agreement for both the pilot and cabin crew at NAS for the last 10 years. Parat contends that the information passed on to the U.S. delegation by the European delegation is full of misleading, incomplete, and even inaccurate answers. It again asks that DOT deny NAI s application. Parat asserts that there can be no doubt that NAI is being established in Ireland because it wishes to get out from under Norwegian labor laws. Parat contends that NAS started out trying to pressure the Norwegian government to amend its immigration laws. Parat alleges that, following hearings held by the Norwegian government in 2012 regarding possible changes in those laws, NAS threatened to move its operations to another country if the laws were not changed to accommodate its plans. Parat states that in January 2013 it became clear that the laws would not be changed, and NAS started working on splitting up the company and the pilot union. In support of its claims, Parat includes in its answer a letter from the Royal Norwegian Ministry of Transport and Communication in which it indicates the Ministry says the following: "NLH has, inter alia, in a letter to the Ministry of Translation and Communications dated 3 July 2013, been very clear about that the company's planned moving of its long haul activity to Ireland is due to that the Norwegian immigration legislation was not amended." 22 Parat asserts that, contrary to the information passed on by the European delegation, NAI does not follow local labor laws of the countries where the crew are based. Specifically, Parat asserts that, according to pilot contracts, it appears that Singapore labor laws will apply to pilots even though these pilots have their official home base in Bangkok. It further asserts that the salary information provided in the JC Notice is inaccurate and that the indicated payments raise more questions than they answer; for example, the Norwegian amount does not reflect the additional costs of pension and social security, while the Thailand numbers do not reflect that the NLH pilots must pay for any pension or social benefit costs out of the flat salary payments they receive. Parat also points out that none of NAI's employees have union representation. It says that the pilots have individual contracts based out of Singapore, with an alleged home base in Bangkok. They have no collective agreement and no representation. Parat also states that union representation in NAS has been cut in half over the last three years. 23 In providing a recent example of the labor practices of NAS and its affiliated companies, Parat claims that the company fired all Swedish cabin crew, just to hire them through a professional recruitment company, which hires them out to an affiliate company, which then again hires them out to one of three possible Norwegian affiliates. 24 In reply to NAI s JC Notice comments, Parat reiterates that it has shown that the information provided by the EU delegation is inaccurate and in many cases deliberately misleading. It also points out that European Aviation Safety Agency regulations do not prescribe important working conditions, that while such regulations concern fatigue risk management and minimum safety standards, they are in no way enough to cover the entire working environment that collective bargaining agreements address. 22 Answer of Parat, at Answer of Parat, at Answer of Parat, at 6. 7

27 Parat asks that the Department deny NAI s permit application. If DOT does not deny the application, Parat asks that it request NAI and NAS to provide additional information addressing the matters Parat raised. Answer of the Southwest Airlines Pilots' Association (SWAPA) SWAPA argues that NAI s application should be rejected because it does not meet U.S. law, specifically Title 49, and does not meet the U.S.-EU Open Skies treaty requirements under Article 17 [sic], which was drafted specifically to prevent this type of flag of convenience strategy proposed by NAI. It contends that NAI s application doesn t pass even a cursory examination of whether it meets the intent of international treaties and regulatory agreements, and argues that there is a lack of sufficient information in the NAI verbal discussion summary to allow a determination of whether the fair wages and working conditions requirement will be met under 49 U.S.C (a)(5). 25 In arguing that grant of a foreign air carrier permit to NAI is not in the public interest, SWAPA makes comparisons to the United States giving up oversight of the maritime industry. SWAPA states its specific concern that approval of NAI s application would not meet the strengthening the competitive position of air carriers to at least ensure equality with foreign air carriers, including the attainment of the opportunity for air carriers to maintain and increase their profitability in foreign air transportation stipulation of 49 U.S.C (a)(15). SWAPA claims that the fact that Norwegian Air has been fined by various EU countries, such as France and Spain, is a clear indication that the flag-of-convenience strategy has overstepped legal boundaries even within the EU. Answer of the ECA The ECA reiterates its position that the Department should deny the application of NAI. It asserts that the statements and information made/provided by the EU Commission on behalf of the EU delegation contain a number of inaccuracies, fail to provide elements that are required to allow the Department to take an informed view, and seem to be rather close to the commercial interests of NAS/NAI. 26 The ECA also contends that the summary does not provide any new and valid information that would allow reassessing the situation and deflecting from the fact that the business and employment model used by NAI is incompatible with the U.S.-EU Agreement, against the public interest, and would promote and legitimize practices of social dumping, forum shopping, and a race to the bottom. The ECA specifically counters each of the reasons given in the Joint Committee Summary Notice as the impetus for NAI s desire to obtain licenses in Ireland. It also characterizes as incorrect and misleading the indication of the European delegation that company employees are organized in labor unions. In support of its view, the ECA states that while NAS does engage with unions in Norway as regards the operations performed by NAS, NLH employees are not unionized and do not have any form of collective representation nor negotiations with their management, and it appears that NAI pilots will not be able to be organized either. ECA states that allowing an airline to set up an AOC in one country, recruit pilots and cabin crew in another country and base them in a third country, is an attempt to undermine fundamental workers rights and discourage unionization, and is against the public interest. 27 The ECA also disputes the accuracy of the NAI salary information proposed in the Joint Committee Summary Notice. 25 Answer of SWAPA, at Answer of ECA, at Answer of ECA, at 5. 8

28 ECA asserts that the European Commission is wrong to deny that Ireland is being used as a flag of convenience. It states that NAI s structure is designed deliberately to avoid financial charges or restrictive regulations for its long haul operations, i.e. cheap social and labor cost in Asia, and the low taxation regime in Ireland, as compared to Norway. ECA again highlights its safety concerns with NAI s proposal including the obstacles created by the NAI employment model to an open incident reporting. Finally, ECA points out that the position taken by the Commission at the EU-US Joint Committee meeting may not represent the view of all the Member States present at the meeting. 28 Answer of the APA The APA contends that what little information the JC Notice does contain suggests that NAI s proposed offerings neither encourage fair wages and working conditions as required by 49 U.S.C (a)(5), nor do they strengthen the competitive position of [U.S.] air carriers to at least insure equality with foreign air carriers, as required by 49 U.S.C (a)(15) and (e)(1). 29 The APA also states that the summary information contained in the JC Notice is not sufficient to enable the Department to make an informed determination about whether NAI s proposed service offerings fall within the letter or the spirit of the U.S.- EU Agreement. Rather than engaging in a detailed legal analysis of the arguments advanced by the European delegation, in its answer APA compiles a list of questions raised by parties in previous filings that were not answered or not adequately addressed by the JC Notice, and also identified a number of questions newly raised by the European delegation s statement. APA s questions go to the relationship among the Norwegian carriers and NAI; labor and staffing; the positions of the Norwegian and Irish Governments; and NAI s explanation for pursuing a non-norwegian AOC. APA concludes by saying that if the Department does not immediately reject NAI' s application, it should - at a minimum - require NAI to answer in full the questions raised by APA. Answer of the Association of Flight Attendants-CWA, AFL-CIO (AFA) AFA filed in opposition to NAI s application and agrees with comments of the other objecting parties that NAI is seeking to circumvent air services agreements and that NAI service will degrade labor standards. AFA specifically references comments made on the record regarding the cabin crew salaries and hiring practices of NAI, and says they will undermine the career path for U.S. Flight Attendants and fail to adhere to the minimum labor standards contained in Article 17 bis of the U.S.-EU Agreement. AFA contends that all NAI U.S. cabin crew will be employees of a hiring company, OSM Aviation Inc. (OSM). It points out that cabin crew hired by OSM will be hired and governed by one-year renewable contracts, rather than serving as employees of NAI. AFA states its belief that this appears to be a scheme simply intended to keep pay low and refuse recognition for experience or longevity. AFA asserts that NAI cannot operate under U.S. law because the Attendants employed by NAI through their hiring agent OSM are not certified to U.S. FAA standards, and regardless cannot be certified because NAI will operate under the authority of the Republic of Ireland. It takes the position that confusion could result regarding which member state has the oversight authority on certification and training standards, which could ultimately affect cabin crew performance in an actual emergency event. 30 AFA contends that the record indicates 28 Answer of ECA, at Answer of APA, at Answer of AFA, at 3. 9

29 misrepresentation of gross salary offered, noting that the OSM pay rates are lower than the potential earnings of the Flight Attendants who work international routes at U.S. carriers. Consolidated Reply of Atlas Air, Inc. (Atlas) Atlas supports grant of NAI s application and contends that the arguments put forth by the objecting parties are invalid and represent an attempt to turn back the clock on aviation liberalization. It states that no party has presented legitimate grounds to deny or even delay granting the NAI application, or for the Department to conduct a thorough evaluation of consistency of the application with the U.S.-EU Agreement. Atlas further states that either course would be unjustified legally and ill-advised from the standpoint of U.S. aviation policy. 31 Atlas asserts that the points made by the objectors can be reduced to the flag of convenience argument, an ownership and control argument, and the argument that NAI plans to rely on low-cost labor acquired in other countries, a practice allegedly contrary to Article 17 bis of the U.S.-EU Agreement. Atlas submits, without conceding the merits of any of those arguments, that it is unnecessary for the Department to pour through the hundreds of pages of comments because the U.S.-EU Agreement renders it improper for the Department to resolve the issues that have been raised. In support of its position, Atlas points to the provisions of Articles 4 and 6 bis of the U.S.-EU Agreement, as well as Article 2 of the 2011 U.S.-EU Agreement that extended the applicability of the 2007 U.S.-EU Agreement to Norway and Iceland as if they were EU Member States, as justifying grant of NAI s application. 32 With respect to the objectors argument that Article 17 bis of the U.S.-EU Agreement justifies the Department's involvement in the minutia of NAI's labor relations and vendor contracting practices, Atlas contends that that argument similarly misses the mark by a wide margin, maintaining that all Article17 bis contains are general principles that affirm the importance of high labor standards. It argues that Article 17 bis does not confer on the Department the right to delve into the specifics of the labor situation at an EU airline applicant, such as how much it pays its pilots and flight attendants. Atlas asserts that a decision to do so likely would be viewed by the European Commission as an extremely unwelcome development --- especially because the Department does not review labor relations, employee pay scales, or vendor contracting when it processes U.S. carrier license applications. Atlas states that it strongly endorses the comments of FedEx especially the point about the need for the Department to resist calls to turn back aviation liberalization. Atlas contends that, although the U.S.-EU Agreement failed to satisfy every interested party in every respect, its adoption significantly advanced the pre-existing state of affairs by establishing common, market-driven standards for air services between and beyond the United States and the European Union. It asserts that the U.S.-EU Agreement produced significant benefits on both sides of the Atlantic for passengers and shippers alike, citing as an example the benefits the U.S.-EU Agreement provided to Atlas. Atlas urges the U.S. government to resist taking actions that might be requested by certain constituencies to "level the competitive playing field" (supposedly) and secure short-term pecuniary benefits, but which would actually do grave harm to broader U.S. aviation interests. 31 Consolidated Reply of Atlas, at Consolidated Reply of Atlas, at

30 Joint Reply of ALPA, TTD and ECA ALPA, TTD, and ECA (the Labor Parties) maintain that evidence they and other parties to the proceeding have submitted demonstrates that approval of NAI s application for a foreign air carrier permit would not be consistent with the public interest and Article 17 bis of the U.S.-EU Agreement. 33 They contend that the record reflects that NAS established NAI as an Irish company in order to avoid Norway s labor laws and is using an opportunity created by the U.S.-EU Agreement to undermine labor standards and principles. The Labor Parties assert that NAI flight crews will be deprived of bargaining rights by virtue of NAS s unilateral decision to move its long-haul operations out of Norway and put them under an Irish AOC. The Labor Parties argue that the assertion that the Norwegian Group has no tradition of discouraging unionization lacks merit, pointing out that PARAT the union for NAS s pilots and flight attendants has convincingly shown that NAS has engaged in a systematic effort in the last few years to discourage unionization and that this effort has resulted in the portion of NAS employees who are unionized dropping from nearly 96 percent to under 50 percent. 34 The Labor Parties state that if NAI s business plan is allowed to proceed, it will undermine the principles of Article 17 bis of the U.S.-EU Agreement, which is intended to do just what it says: to deter and prevent the use of opportunities made available by virtue of the U.S.-EU Agreement to undermine the existing laws, regulations, and practices of the Parties that address labor and employment law. The Labor Parties contend that the main purpose of Article 17 bis was to prevent forum shopping by which European airlines try to take advantage of more favorable labor standards in another EU Member State, and maintain that Article 17 bis should be interpreted in accord with its plain meaning and intent. The Labor Parties state their belief that the other parties supporting NAI have not addressed the undermining of labor standards that NAI s business plan would bring, and that NAI s business plan would put U.S. carriers such as United, Delta, and American and their employees at a competitive disadvantage vis-à-vis NAI. The Labor Parties also assert that the Irish and Norwegian transport ministries do not meaningfully address the Labor Parties concerns. The Labor Parties also take the position that NAI s application does not satisfy all the applicable requirements for receiving a foreign air carrier permit, and is not consistent with precedent and the public interest. In conclusion, the Labor Parties state that their filings throughout the proceeding have shown that the Norwegian Group s service proposal is starkly at odds with the U.S.-EU Agreement. They say that the Department should notify the aeronautical authorities of Ireland that it intends to deny the application. 35 Should the EU or a Member State seek consultations under Article 6 of the U.S.-EU Agreement, the Department should require additional information from the Norwegian Group and from the European Commission, Norway, and Ireland. Joint Replies of Air France and KLM Royal Dutch Airlines (KLM) & Deutsche Lufthansa (Lufthansa) and Scandinavian Airlines System (SAS) Air France/KLM and Lufthansa/SAS each submitted joint replies expressing effectively the same position against NAI s application. Air France/KLM and Lufthansa/SAS assert that to grant the application the 33 Joint Reply of ALPA, TTD, and ECA, at Joint Reply of ALPA, TTD, and ECA, at Joint Reply of ALPA, TTD, and ECA, at

31 Department must determine that the application complies both with the provisions of the U.S.-EU Agreement and with U.S. domestic law. The carriers contend that the NAI application raises questions under Article 17 bis of the U.S.-EU Agreement regarding the maintenance of "high labor standards," and under Article 6 bis' reciprocal recognition provisions, which allow a receiving party to challenge a submitting party's fitness and/or citizenship determination if the determination presents "substantive reasons for their concern." Air France/KLM and Lufthansa/SAS state that they are convinced, along with other objecting parties, that the reason for NAI's establishment in Ireland is to avoid Norwegian labor laws and social insurance obligations that would bar NAI from continuing its affiliate Norwegian Long Haul (NLH)'s practice of employing pilots and cabin crew based in Thailand and governed by Singapore law (at least as to the pilots) on U.S.-EU routes that undermine the "high labor standards" for EU-U.S. markets secured by Article 17 bis. The carriers state their belief that a compelling case exists for the Department to avail itself of the rights under Article 6 bis of the U.S.-EU Agreement to seek consultations and further information from the EU and Irish authorities before proceeding further with the NAI application. Air France/KLM and Lufthansa/SAS suggest that there could be a further referral to the Joint Committee as envisioned by Article 6 bis(l)(a), and they urge the Joint Committee to establish a working group that would investigate in depth all the factual issues surrounding the NAI application and prepare a report for the full Joint Committee to review at its then next scheduled meeting in Vienna on June 10, Air France/KLM and Lufthansa/SAS also state that they concur fully with the Joint Comments of American, Delta, and United, and the ALPA comments, among others, that the after-the-fact, counterfactual rationale for establishing NAI in Ireland is without basis in fact. Air France and KLM submit that if this NAI business model is accepted as compliant with Article 17 bis and other provisions of the ATA, the U.S.-EU market will begin a descent to the lowest common denominator and the competitive playing field for U.S. and EU carriers will suffer. The Joint filings of the carriers also call attention to a statement by the Norwegian Transport and Communications Minister cited by ALPA in its comments that notes labor concerns that appear to conflict with the Minister's February 2, 2014 letter to the Department endorsing NAI's application. 36 Air France/KLM and Lufthansa/SAS conclude by urging the Department either to deny NAI s application outright or defer action on it and pursue the remedies available under Article 6 bis. 36 Joint Reply of Air France/KLM at3-4 and Joint Reply of Lufthansa/SAS at 4. 12

32 Summary of Pleadings Filed in Response to the August 4 Department Notice (Notice) Joint Answer and Joint Reply of Delta, United, and American Airlines (the Joint Carriers) Appendix D In their Joint Answer, the Joint Carriers state that no new information was developed in the Notice that would support the approval of NAI s application. They argue that the Commission s position that Article 17 bis does not provide a basis for the Department to unilaterally deny NAI s application ignores the objective of Article 17 bis, which is to maintain high labor and social standards in the transatlantic market, and to prohibit the establishment of flags of convenience that seek to evade labor protections and create an unfair competitive advantage. Citing paragraph 5 of the 2010 Memorandum of Consultations, the Joint Carriers state that the U.S.-EU Agreement specifically acknowledged that the Department was not ceding its authority to conduct its critical public interest review of airline certification requirements. The Joint Carriers further state that, under Article 4, the airline [must be] qualified to meet the conditions prescribed under the laws and regulations normally applied to the operation of international air transportation by the Party considering the application... The Joint Carriers acknowledge that the Department is obligated to recognize regulatory determinations of the other Party and act promptly on applications for certification approval. However, they assert, in a case such as this where there are legitimate reasons for concern, the U.S.-EU Agreement provides for appropriate consultation processes. The Joint Carriers argue that the Commission s position ignores the independent public interest standard that the Department must apply to certification requests. They state that one of the Department s guiding policy principles under 49 USC is to encourag[e] fair wages and working conditions, and that the Department is also directed by statute to strengthen the competitive position of [U.S.] air carriers to at least ensure equality with foreign air carriers. 49 U.S.C (a)(15) and (e)(1). 1 They maintain that these policy mandates are clearly called into question by NAI s unique and unprecedented attempt to evade the labor laws of Norway in order to achieve a competitive advantage in the marketplace. The Joint Carriers assert that the Department should deny NAI s exemption request, which is a discretionary and special process available to expedite consideration under appropriate circumstances when the application is clearly in the public interest. 49 U.S.C They further assert that denial would be without prejudice to later consideration of NAI s permit application after sufficient facts are established and made available and time allotted for careful consideration from all Parties of this novel permit application. The Joint Carriers argue that Article 17 bis core objectives would be fatally undermined if the Department approved the NAI application. They state that the views obtained during the meeting with DG MOVE represent the position of DG MOVE only, and to the extent that the views of the EU are relevant to decisions of the Department regarding the application of NAI, it would be necessary to understand the views of the remaining 34 parties to the Agreement before drawing any conclusions regarding the EU's position on Article 17 bis. In their Joint reply to NAI, the Joint Carriers state their belief that the arguments advanced by NAI in its reply and in the accompanying joint declaration of John Byerly and Daniel Calleja do nothing to counter 1 Answer of the Joint Carriers, at 2.

33 the clear and express objective of Article 17 bis: to maintain high labor and social standards in the transatlantic market, and to prohibit the establishment of flags of convenience that seek to evade labor protections and create an unfair competitive advantage. They assert that the Department should accord no weight to John Byerly s declaration because he is a registered lobbyist acting on behalf of NAI. And they say Daniel Calleja s declaration is entitled to little weight because it represents the views of only one of 34 European Parties to the U.S.-EU Agreement. The Joint Carriers also assert that a comparison of Article 17 bis with other provisions of the Agreement clearly demonstrates that the Parties intended it to have legal effect, a point reinforced by the Labor parties in their Reply comments. The Joint Carriers state that, during the course of negotiations, the U.S. Government sought to ensure that a European airline must have its primary place of business in the EU member state where it is organized, and that the EU delegation affirmed that under European Community legislation, a Community airline must receive both its AOC and its operating license from the country in which it has its principle place of business (March 2, 2007 MOC, Para 7). The Joint Carriers express their view that the Department should carefully scrutinize and compel NAI to produce evidence of how its proposed business model could satisfy this standard when it has -and would have- no aircraft, no crews, and no transatlantic operations from Ireland. They maintain that it is clear that Norway, not Ireland, is NAI s principle place of business, which in any event the Department should establish through an appropriate investigation. The Joint Carriers cite comments by former ICAO Ambassador Duane Woerth that NAI s proposal is not just a regulatory subterfuge; it could have serious safety implications. The Joint Carriers note that, while describing the Irish Aviation Authority as among the world s finest stewards of aviation safety, the Ambassador expressed his concern about the ability of any regulator to provide safety oversight of longhaul, transoceanic operations that are conducted without ever transiting home soil. 2 The Joint Carriers also state their high regard for the oversight and safety culture of the Irish authorities, but contend that the Department needs to fully consider the Ambassador s concerns in this and any other proceeding where a carrier proposes to operate all of its operations to the U.S. from a country outside its home base. In closing, the Joint Carriers reiterate that the core objectives of Article 17 bis would be critically undermined if the Department approved the NAI application in its current form, and request that the Department deny the NAI application. Joint Comments and Reply of the Air Line Pilot Association, AFL-CIO Transportation Trades Department, and the European Cockpit Association (the Labor Parties) The Labor Parties contend in their Joint Comments that the Department should reject DG MOVE s interpretation of Article 17 bis and deny NAI s application for exemption authority and issue a show-cause denial of NAI s application for a foreign air carrier permit. The Labor Parties assert that the Department has clear authority to deny unilaterally NAI s application for an exemption. The Labor Parties state that, under Article 4(c) of the U.S.-EU Agreement, an airline must be qualified to meet the conditions prescribed under the laws and regulations normally applied to the operation of international air transportation by the Party considering the application. Here, the statute provides that the Secretary of Transportation may exempt to the extent the Secretary considers necessary a foreign carrier from the requirement to hold a foreign air carrier permit when the Secretary decides that the 2 Reply of the Joint Carriers, at 2. 2

34 exemption is consistent with the public interest. The Labor Parties argue that the exemption test is not met here. The Labor Parties argue that grant of an exemption to NAI is not necessary because NAI s parent company Norwegian Air Shuttle owns another airline subsidiary Norwegian Long Haul that holds authority and is already conducting services on behalf of NAS. The Labor Parties also argue that grant of exemption authority to NAI is not in the public interest. The Labor Parties state that the encouragement of fair wages and working conditions and strengthening the competitive position of U.S. air carriers to at least ensure equality with foreign carriers, are among the policy objectives that DOT is to seek in determining whether a proposal is in the public interest. The Labor Parties argue that the record shows NAI s proposal is inconsistent with the public interest based on, among other things, NAI s planned use of crew supply companies governed by Singapore law and the inferior conditions of employment. 3 The Labor Parties also contend that the Department s public interest analysis should consider the provisions of Article 17 bis, and that Article 17 bis does provide a basis to unilaterally deny operating authorizations to NAI, contrary to the contention of DG MOVE (who, in the Labor Parties view, appears not to have been speaking on behalf of any party to the U.S.-EU Agreement). The Labor Parties argue that, read as a whole, Article 17 bis provides each Party to the U.S.-EU Agreement the ability to ensure that the opportunities provided for under the agreement are not used to undermine labor standards or labor-related rights and principles that contribute to high labor standards. 4 The Labor Parties argue further that the same reasons calling for denial of NAI s exemption also call for denying its request for a foreign air carrier permit. The Labor Parties add, however, that should the Department decide that it needs additional information before reaching a decision on the foreign air carrier permit request, then the Department should request such information, or hold an evidentiary hearing at which representatives of NAI may be examined about the company, including compensation laws that would apply to NAI s air crew. 5 In their joint reply, the Labor Parties maintain that, for the reasons outlined in their Joint Answer, the Department should deny NAI s application for exemption authority and issue a show-cause denial of NAI s application for a foreign air carrier permit. The Labor Parties state that, contrary to NAI s assertions, the text of Article 17 bis is not hortatory or aspirational, but rather provides clear instruction to the Parties as they unilaterally or collectively implement the U.S.-EU Agreement. 6 The Labor Parties also take issue with NAI s assertion that Article 17 bis was intended only to address labor s concerns regarding the EU s efforts to liberalize ownership and control standards. In this regard, the Labor Parties assert that Article 17 bis was equally based on the concerns that European airlines could establish themselves in a particular country for the purpose of undermining labor standards. 7 In response to the Joint Declaration of Mr. John Byerly and Mr. Daniel Calleja, the Labor Parties argue that the opinions expressed regarding Article 17 bis are at odds with the text of article and with the 3 Joint answer of the Labor Parties, at 6. 4 Joint answer of the Labor Parties, at Joint answer of the Labor Parties, at Joint reply of the Labor Parties, at 4. 7 Joint reply of the Labor Parties, at 5. 3

35 understanding of the Labor Parties at the time the text was negotiated. Had the declarants views been disclosed at the time of the negotiation, the Labor Parties contend that they would have refused to support it. 8 The Labor Parties also responded to the assertions made by several NAI supporters about the possibility of retaliation by European parties. The labor parties call those concerns unfounded, and assert that the U.S.- EU Agreement has established a clear mechanism in the Joint Committee for resolving disputes over interpretations of the agreement. 9 They state that it must first be determined through the Joint Committee mechanism that a Party s actions are contrary to the U.S.-EU Agreement before the other side may take responsive action, and they see the likelihood of retaliatory measures as remote. Lastly, the Labor Parties argue that approval of NAI s application would not be consistent with the essential spirit of the U.S.-EU Agreement. The Labor Parties assert that the spirit of the agreement encompasses not only the desire to provide benefits to airlines and consumers, but also that those benefits are not achieved at the expense of airline employees. The Labor Parties maintain that NAI s business model is expressly calculated to undermine labor standards and labor-related rights, and they urge the Department to promptly deny NAI s application for exemption and propose, by show-cause order, to deny NAI s application for a foreign air carrier permit. 10 Answer and Reply of the Allied Pilots Association (APA) In its answer, the APA expresses its disagreement with the position of the European Commission's DG MOVE that Article 17 bis of the U.S.-EU Agreement does not afford a party a unilateral basis for denying an application for operating authority. It takes the position that the language of Article 17 bis does not in any way suggest that the Parties must act collectively rather than individually, nor restrict the Parties' ability to take unilateral action. The APA asserts that Article 17 bis makes clear that resort to the Joint Committee is simply one option available to the parties alongside other options, such as being guided by the principles referenced in paragraph 1 of the Article in considering an application for operating authority. The APA asserts that the position expressed by DG MOVE does not address the statutory standard by which an exemption application is to be decided, including the requirement, under 49 U.S.C , that such applications be "in the public interest." The APA further asserts that NAI' s proposed service offerings would undercut labor standards and therefore neither encourage "fair wages and working conditions," 49 U.S.C (a)(5), nor "strengthen the competitive position of [U.S.] air carriers to at least insure equality with foreign air carriers." 49 U.S.C (a)(l5) and (e)(l). 11 The APA contends that the permit requested by NAI would therefore not be "in the public interest," as required by 49 U.S.C , and should be denied. The APA also filed a reply to the comments of NAI and the Joint Declaration of John Byerly and Daniel Calleja. The APA first asserts that the plain language of Article 17 bis belies NAI s assertion that DG MOVE is correct that Article 17 bis of the U.S.-EU Agreement does not afford a Party a unilateral basis for denying an application for operating authority. The APA notes that, in arguing for an interpretation of Article 17 bis contrary to its plain language and based on unexpressed, supplemental notions, NAI relies 8 Joint reply of the Labor Parties, at Joint reply of the Labor Parties at Joint reply of the Labor Parties, at Answer of APA, at 2. 4

36 heavily on the Joint Declaration of John Byerly and Daniel Calleja, which it states purports to affirm that the views of DG MOVE are consistent with the intent of the U.S.-EU Agreement negotiators. However, APA claims that the testimony offered by Mr. Byerly is misleading, in that Mr. Byerly fails to disclose that he is a paid lobbyist for NAI whose portfolio is specifically focused on assisting NAI with its applications. APA includes with its reply a declaration of Mr. Robert P. Coffman, the Chairman of the Government Affairs Committee for the APA, who was a member of the U.S. Delegation in the negotiation of both the original and current U.S.- E.U. Agreements. Mr. Coffman states that, as a Labor Representative, he was directly involved in the negotiation and drafting of the final form of Article 17 bis of the 2010 U.S.-EU Agreement. He contends that U.S. and E.U. negotiators formulated the language of Article 17 bis, with input from stakeholders, including Labor Representatives, due to concerns that carriers might engage in venue-shopping in order to avoid the social laws and labor standards of particular Party states. Mr. Coffman further contends that, among other things, the Labor Representatives further conveyed to the U.S. negotiators their concerns that such venue-shopping would undermine the labor standards of the respective Parties to the 2010 U.S.-EU Agreement. APA asserts that Mr. Coffman s declaration confirms that Article 17 bis was formulated broadly to give the Parties maximum flexibility in applying its principles, and that NAI s view that Article 17 bis is merely precatory is inconsistent with the bargaining history. Joint Submission and Joint Reply 12 of the Association of Flight Attendants-CWA (AFA), the International Association of Machinists and Aerospace Workers (IAM), and the Transport Workers Union of America (TWU) The AFA, IAM and TWU state that they are opposed to the application of NAI. They call on the Department to deny NAI s application for an exemption so that the proper evaluation, consultation, and adjudication processes can be completed. The AFA, IAM, and TWU further state that Article 17 bis, which states that the opportunities created by the U.S.-EU Agreement are not intended to undermine labor standards or the labor-related rights and principles contained in the Parties respective laws is central to the debate over NAI s application and to any future implementation of the U.S.-E.U. Agreement. They maintain that the evidence and arguments surrounding NAI s application show that the application would undermine labor standards and labor-related rights, and is therefore in violation of Article 17 bis. 13 They ask the Department to enforce Article 17 bis by denying NAI s application for a permit. In their joint reply the AFA, IAM, TWU, and TTD state that NAI s argument that Article 17 bis cannot be unilaterally used to deny an application, undermines the spirit of the U.S.-EU Agreement, and ignores the intent of the parties to the agreement. AFA, IAM, TWU, and TTD also state that Mr. John Byerly (whom they note is a paid registered lobbyist for NAI) and Mr. Daniel Calleja have only now for the first time disclosed that they did not intend for Article 17 bis to provide a legal basis for unilaterally denying an application. AFA, IAM, TWU, and TTD assert that had this been disclosed during the negotiating process, they would not have supported the agreement. 14 They assert further that at no time in its August 18, 2014 comments does NAI deny their assertion that NAI s proposed business model would undermine labor standards; nor does NAI deny that its business model violates the terms of Article 17 bis. They conclude by again calling on the Department to deny NAI s application for a permit and exemption. 12 The Joint Reply also included the Transportation Trades Department, AFL-CIO (TTD) as a party. TTD was also a party to a joint reply with the ALPA and ECA. 13 Joint Submission of AFA, IAM, and TWU, at Joint reply of AFA, IAM, TWU, and TTD, at 2. 5

37 Reply of Southwest Airlines Pilots Association (SWAPA) SWAPA states that it strongly opposes the application of NAI under Article 17 bis of the U.S.-EU Agreement, 49 U.S.C (a)(5), and 49 U.S.C (a)(15). SWAPA further states that it bases its position on the intent of NAI to utilize a flag-of-convenience regulatory schema, which would not be in the public interest of the United States, as is clearly stated in the statute. SWAPA is specifically concerned that approving NAI would not meet the strengthening the competitive position of air carriers to at least ensure equality with foreign air carriers, including the attainment of the opportunity for air carriers to maintain and increase their profitability in foreign air transportation stipulation 49 U.S.C (a)(15). SWAPA further contends that the language found in 49 U.S.C (a)(5) is applicable and defines fair wages and working conditions as a criteria for an applicant. 15 SWAPA objects to the EU assertion that a foreign air carrier permit application must be a joint decision, noting its opinion that the United States would not enter into an agreement, nor should it have, that usurps the U.S. right to determine fitness of a carrier by any means other than internal processes which are defined by statute. SWAPA asserts that Article 17 bis of the U.S.-EU Agreement was drafted specifically to prevent this type of flag of convenience strategy. SWAPA argues that 49 U.S.C clearly delineates that the decision to issue a permit is that of the Department and does not make any reference to a third party such as the Joint Committee under U.S.-EU Agreement. SWAPA concludes by stating its belief that the working conditions under the NAI application do not rise to the level of fair due to the schema put in place to avoid their home country labor protections. Joint Submission of the European Transport Workers Federation (ETF) and Transportation Trades Department (TTD) The ETF and TTD state that they disagree with the position expressed by DG MOVE regarding the legal meaning and applicability of Article 17 bis of the U.S.-EU Agreement, asserting that DG MOVE does not represent the views of all the European signatories of the U.S.-EU Agreement. Specifically, they state that they cannot accept the Commission s conclusion that this article can only be assessed jointly and believe that the United States is entitled to assess it alone. The ETF and TTD also take issue with NAI s interpretation of Article 4 of the U.S.-EU Agreement, asserting that NAI s proposal facilitates social dumping and does not meet the standard for receipt of operating authorizations. The ETF and TTD also identify safety and security concerns that they claim are raised by NAI s business model. With respect to safety matters, they call attention to allegations made in the declaration of ex- Norwegian Air Captain S. Colman regarding the complicated nature of his relationship with NAS/NAI, as well as difficulties in submitting (mandatory) flight safety reports and the retaliatory actions from NAS management. 16 As far as security issues, ETF and TTD voice their doubts that Thailand-based cabin crews hired through a hiring agency as utilized by NAI guarantee the same level of background checks that exist for European and U.S. based aircrews. In conclusion, ETF and TTD dispute claims that denial of NAI s request could lead to retaliation, noting the dispute resolution and arbitration mechanisms built into the U.S.-EU Agreement, most notably Article Reply of SWAPA, at Joint Submission of ETF and TTD, at 4. 6

38 Responses of Air France and KLM Air France and KLM each submitted responses expressing effectively the same position regarding DG MOVE s interpretation of Article 17 bis of the U.S.-EU Agreement. They begin by highlighting that the views conveyed to Department officials were only those of DG MOVE, and assert that if the Department seeks the views of the EU on Article 17 bis, it should seek them in an official statement of the EC and the Member States as well. Air France and KLM further assert that Article 17 bis formulates legal principles that ought to be taken into account in an Article 4(c) application. They state that the implementation of the U.S.-EU Agreement s provisions, including Article 4, should not undermine labor standards or the laborrelated rights and principles in the Parties respective laws. Air France and KLM contend that the fact that Article 4 makes no reference to Article 17 bis is not compelling, as there is no language in Article 4 stating that Article 17 bis does not apply. Air France and KLM maintain that Article 4(c) of the Agreement imposes on the Department an obligation to grant appropriate authorization to an applicant if the airline is qualified to meet the conditions prescribed under the laws and regulations normally applied They argue that those laws and regulations should include the protection of the high labor standards secured by Article 17 bis, as well as the policy objectives provided for by U.S. statutory law (49 U.S.C (a)(5), 40101(a)(15) and (e)(1)). 17 Air France and KLM take the position that Article 6 bis on reciprocal recognition of citizenship and fitness determinations does not prevent the Department from applying public interest considerations in deciding whether to grant or deny NAI s exemption application. They maintain that, to the extent that the Department needs to act on NAI s exemption application to meet a statutory deadline (e.g., 49 U.S.C ), the Department is entitled to examine the exemption application based on the applicable public interest standard that governs actions under 49 U.S.C Air France and KLM contend that consideration of the public interest would require that the Department deny NAI s exemption application at this stage. They further contend that to the extent Article 6 bis applies, the Department may then notify the European Party that it has questions whether the requirements of Article 4(c) have been met by NAI s application. Answer of Scandinavian Airlines System (SAS) SAS asserts that the Director of Aviation for DG MOVE was at best expressing the views of DG MOVE only, and was not speaking for the whole European Commission, let alone the European Union (consisting of the EC and the 28 Member States). SAS claims that the DG MOVE position has not been adopted or endorsed by the full Commission, and it has not been endorsed by the Member States as a whole. In support of its claim, SAS states that it is aware that a number of Member States, including Germany, France, Italy, and the Netherlands, have contested DG MOVE's interpretation of Article 17 bis, and therefore contends that the views of DG MOVE should be accorded no weight in the Department's consideration of the merits of NAI's application. SAS contends that the DG MOVE position that Article 17 bis cannot be invoked unilaterally by a Party would render it a nullity, stating that the bar to unilateral action would frustrate the Department's ability to act to protect the "high labor standards" Article 17 bis was intended to secure. 17 Response of Air France, at 3; Response of KLM, at 4. 7

39 SAS asserts that the fact that Article 4 makes no reference to Article 17 bis is not at all compelling and that its alternative explanation is equally wanting, arguing that, in fact, Article 17 bis does "formulate a legal rule" that can be applied to an Article 4(c) application. That "rule" is that implementation of the Agreement's provisions, including Article 4, should not "undermine labor standards or the labor-related rights and principles in the Parties' respective laws." SAS states that the Department may have an obligation to grant appropriate authorizations to an EU applicant, but only if "the airline is qualified to meet the conditions prescribed under the laws and regulations normally applied... " It contends that those "laws and regulations" include not only the protection of the "high labor standards" secured by Article 17 bis but also the policy objectives provided for by U.S. statutory law (49 U.S.C (a)(5), 40101(a)(15) and (e)(l)). 18 SAS asserts that Article 6 bis on reciprocal recognition of citizenship and fitness determinations does not require a contrary result, as it does not prevent the Department from applying "public interest" considerations in deciding whether to grant or deny NAI's application. SAS contends that the public interest standard requires the Department to take into account considerations such as whether granting of NAI's application would be contrary to Article 17 bis; whether Article 17 bis should be taken into account in an Article 4( c) licensing proceeding; whether NAI meets the "principal place of business" test under Article 4(b) and EU regulation 1008/2008; and whether granting NAI's application would be consistent with Sections 40101(a)(5) and (a)(15)'s policy objectives to strengthen U.S. carriers and encourage fair wages and working conditions for U.S. airline employees. SAS contends that NAI s exemption application should be denied based on these public interest considerations and, to the extent that the Department desires to continue to consider NAI's application for a foreign air carrier permit under 49 U.S.C , SAS suggests that the Department should determine, on the record, after consultations with the EC and the Member States whether DG MOVE's interpretation of Article 17 bis is supported by the full Commission and the Member States. SAS asserts that use of Thai-based cabin crews and European-licensed pilots employed by Singapore-based subsidiaries (fictitiously based in Thailand) totally undermines the labor protections guaranteed by Article 17 bis. Response of Austrian Airlines AG (Austrian) Austrian supports the positions taken by SAS, Air France, and KLM in their responses filed in respect to the Department s August 4, 2014 Notice. Austrian expresses its agreement that the same rationale noted in those commentaries and prior filings in this Docket should guide the Department to deny NAI s application. Austrian states that to the extent that the Department desires to continue to consider NAI s application for a foreign air carrier permit, the Department should pursue further on the record consultations with the EC and the Member States as to whether DG MOVE s interpretation of Article 17 bis is supported by the full Commission and the Member States and if so, the impact that such finding may have on NAI s foreign air carrier application Answer of SAS, at Response of Austrian, at 2. 8

40 Comments of the Signatories to the Joint Declaration Against EU-Based Flags of Convenience in Aviation as Endorsed on 5 June 2014 by the Air Crew Working Group of the Sectoral Dialogue Committee (The Signatories) The Signatories assert that during the July 14, 2014 meeting, the Director of DG MOVE spoke only on behalf of his colleagues at DG MOVE, and did not represent the views of the European Commission as a whole, nor of the Member States who are parties to the U.S.-EU Agreement. The Signatories claim that some Member States have expressed concerns with DG MOVE, and that the Department might want to consult with EU Member States directly. 20 The Signatories contend that DG MOVE s interpretation of Article 17 bis is partial only, disregarding or failing to accurately interpret certain elements of the article s wording. The Signatories note that Article 4(c) states that a party shall grant appropriate authorizations, provided that the applicant is qualified to meet the conditions prescribed under the laws and regulations normally applied to the operation of international air transportation, and that Article 17 bis is one such normally-applied regulation with which the United States is unilaterally obliged to abide. The Signatories further argue that NAI s operation is not in the public interest, and that NAI is established as a flag of convenience in Ireland. The Signatories call NAI a mail box enterprise established in a country where corporate taxes and labor costs are low, where labor regulations are more lenient than in Norwegian s home country, and where it has no flight operations. The Signatories say that the only purpose for such a set-up is to avoid paying social taxes in the United States, Norway, and the EU, and in general to benefit from more lenient labor regulations. 21 The Signatories assert that NAI s business model raises serious concerns, and urges the Department to deny NAI s application. Declaration and Additional Information of Captain Stephen Colman (Captain Colman) Captain Colman states that he is a former contract pilot for Norwegian Air Shuttle and Norwegian Long Haul. He identifies what he terms significant problems and regulatory failures he faced when attempting to seek redress from multiple European countries regulators for adverse employment actions taken against him because of his safety reporting. He asserts that he cannot conceive how the business model to which he was subjected could be consistent with the spirit and intent of Article 17 bis. Captain Colman argues that a crewmember who is not a direct employee of the Norwegian Airline Group, and therefore is without union and Norway legal protections, has no redress if managers at Norwegian take punitive and discriminatory action against him, up to termination and even after. 22 He alleges that the quagmire of legislative jurisdictions makes such relief extremely difficult, if not impossible. Captain Colman contends that it is implausible to suggest that such an abhorrent working environment is conducive to a culture that promotes safety and requests that NAI s application be denied. 20 Comments of the Signatories, at Comments of the Signatories, at Declaration of Captain Colman, at 5. 9

41 Comments and Reply of Norwegian Air International (NAI) NAI states that the Director of Aviation for DG MOVE correctly offered the Commission s interpretation of the meaning and applicability of Article 17 bis by (1) claiming that Article 17 bis does not provide a legal basis for unilaterally denying an application under article 4; and (2) that any unilateral decision to deny an application using Article 17 bis would run against the letter and spirit of the Agreement. NAI asserts that the Department should apply the principles of customary international treaty law, as expressed in the Vienna Convention on the Law of Treaties, by applying the ordinary meaning and context of the terms of the U.S.-EU Agreement. NAI asserts that the ordinary meaning and context of Article 17 bis does not establish a legally binding rule, because its text is aspirational instead of obligatory. By contrast, NAI asserts that Article 4 and 6 bis use mandatory language. NAI further asserts that Article 17 bis does not enable a Party to unilaterally deny operating authority to an airline from the other party, because the text of Article 17 bis contemplated joint action only. NAI also contends that the central goal of the U.S.-EU Agreement was to open air service markets. In this regard, NAI states that three former U.S. Secretaries of Transportation have stated that breaking down barriers and increasing competition are core values that the United States sought in promoting Open Skies agreements. NAI asserts that the Article 17 bis language concerning opportunities not intended to undermine labor standards, is noticeably absent from the preambles to the 2007 Agreement and the 2010 Protocol, showing that the intentions of Article 17 bis are peripheral from the U.S.-EU Agreement s central objective. 23 NAI states that its service will promote the benefits sought by the framers of U.S. Open Skies policy by challenging the dominant position of the legacy transatlantic alliances, promoting competition, and lowering fares in the marketplace. NAI argues that the Department has recognized that where operating authority is authorized by a bilateral agreement, the public interest virtually demands approval of that authority, and that it meets the two conditions for approval of foreign air carrier permits set forth in 49 U.S.C , because it is (1) fit, willing and able to provide the foreign air transportation, and (2) qualified to provide the foreign air transportation under an agreement with the United States. NAI requests that the Department advance the public interest by approving NAI s application within the timeframe established by 49 U.S.C As an exhibit to NAI s answer, it included a joint declaration of Mr. John Byerly, who served as Deputy Assistant Secretary for Transportation Affairs at the U.S. Department of State from , and Mr. Daniel Calleja, who served as Director for Air Transport, Directorate-General for Energy and Transport (later Directorate-General for Mobility and Transport), European Commission from The declaration states that as Delegation Chairmen at the time of the negotiation of the Air Transport Agreement, including the negotiation of the text of Article 17 bis, the following two statements are consistent with every respect of their intentions: (1) Article 17 bis does not provide a legal basis for unilaterally denying an application under Article 4; and (2) any unilateral decision to deny an application using Article 17 bis runs against the letter and spirit of the Agreement Answer of NAI, at Exhibit A of NAI, at 2. 10

42 In its reply, NAI reasserts that the Commission s views on Article 17 bis are correct, and that NAI s opponents have not provided any supportable legal basis to deny NAI s application. NAI argues that the use of the words shall guide in Article 17 bis does not establish a legally binding rule, and that the use of Parties does not empower each of the parties to act unilaterally under Article 17 bis. 25 NAI contends that the opposing parties did not like the views expressed by the Director of DG MOVE at the July 14 meeting, and decided to blame the messenger by questioning his authority, attacking the Commission views that were expressed, and asserting, without evidence, that some EU Member States may have differing views on Article 17 bis. 26 NAI argues that grant of its exemption request is in the public interest and that 49 U.S.C (b)(1)(A) mandates that the Secretary of Transportation shall act consistently with obligations of the United States Government under an international agreement. NAI states that the United States has undertaken an obligation in Article 4 of the U.S.-EU Agreement to grant operating authorizations to EU airlines when specified conditions have been met, and those conditions do not include Article 17 bis. 27 NAI further argues that Congress has dispensed with the requirement for a public interest finding for foreign air carrier permits, noting that once the Department has determined that an applicant is fit, willing, and able to provide foreign air transportation, 49 U.S.C authorizes the Department to grant a permit either if the applicant has been designated to provide the foreign air transportation under an agreement with the U.S. Government or if the foreign air transportation to be provided under the permit will be in the public interest. 28 NAI asserts that, in addition to the virtually unrebuttable presumption that grant of the application is in the public interest if it is authorized by a bilateral agreement, other factors show that its proposed service is in the public interest. NAI states that it will offer competitive fares, award-winning service, service to previously under-served markets, and support for the U.S. aviation industry through multibillion-dollar commitments to Boeing, the hiring of hundreds of U.S.-based cabin crew, and support for hundreds of jobs at U.S. airports. NAI notes that in each case, local labor laws of the country in which an individual employee is hired and domiciled will apply, and that NAI has provided information to the Joint Committee that puts to rest any questions about NAI s employment conditions. 29 NAI lastly argues that the Department has a stark choice in considering its application. On the one hand, NAI contends, the Department could bow to political pressure from special interests, who seek to block a new competitor. Or, on the other hand, NAI states that the Department could stay the course of the U.S. Open Skies policy, and promote a pro-growth, pro-competition, and pro-consumer policy by approving NAI s application without further delay. 30 Answer of FedEx FedEx notes that the parties to the U.S.-EU Agreement agreed to the mutual recognition of national regulatory decisions, and that the Department has formally incorporated that special treatment into its procedures by adopting an abbreviated application format for applicants from the EU. FedEx states that 25 Reply of NAI, at Reply of NAI, at Reply of NAI, at Reply of NAI, at Reply of NAI, at Reply of NAI, at

43 NAI has received an air operator s certificate from the Irish regulator, and FedEx does not see any reason for the Department to further delay the granting of NAI s application. FedEx also states that it agrees with the conclusion of the European Commission (EC) that Article 17 bis does not provide a legal basis for unilaterally denying an application under Article 4. FedEx asserts that the inclusion of the word respective in Article 17 bis, means that each participating nation would retain and enforce its own laws on its own carriers, rather than create a new standard to which all parties would adhere. 31 FedEx claims that further delay by the Department in granting NAI s application could result in possible retaliation by the EC. Such potential retaliation, FedEx asserts, would not be in the interests of the U.S. traveling and shipping public, U.S. airlines, or U.S. airline employees. Comments and Reply of Atlas In its initial comments, Atlas states that the legal interpretation advanced by DG MOVE is correct and supports the legal conclusion that the Department lacks authority under Article 4 of the Agreement to take action against an EU-licensed airline to effectuate "the importance of the social dimension" under Article 17 bis. Atlas asserts that Article 17 bis is hortatory in nature and not even mentioned in Article 4. Atlas maintains that if the U.S. Government believes that a Member State has licensed an EU airline in violation of Article 17 bis, its sole recourse is to submit the issue to the Joint Committee for consideration pursuant to Article 18, and should the Joint Committee be unable to resolve the issue, arbitration then would be possible under Article Atlas asserts that NAI s opponents have twisted the wording of the U.S.-EU Agreement to argue that the Department should constrain labor practices that the civil aviation authority of the applicant s homeland has not found objectionable. Atlas contends that the NAI application merits prompt approval and that the proposed air services further the purpose of the Agreement. Atlas also filed a reply asserting that the comments submitted by the opponents of the NAI application go well beyond the legal questions posed in the Department's Notice and advance arguments that are imaginative, but unsound. With respect to the position of several parties that the views expressed by DG MOVE do not represent the opinions of the broader European Union constituency, Atlas submits that the point is irrelevant because the U.S.-EU Agreement speaks for itself. 33 Atlas dismisses claims of safety concerns with NAI s operation, noting the Category 1 status of Ireland under the FAA s International Aviation Safety Assessment Program. Atlas disagrees with the argument that the Department has a responsibility to make public interest findings independently from its Article 4 obligations and needs to evaluate NAI's labor arrangements in that context. Atlas contends that acceptance of the argument could create precedent for DOT review of labor conditions at U.S. and foreign airlines generally - a dramatic departure from the principles of airline deregulation. Atlas further contends that the argument ignores the key fact that the Department historically has deemed the existence of an open skies agreement (like the U.S.-EU Agreement) to be one of the most important factors supporting its public interest findings. Atlas concludes by stating its belief that the NAI application merits prompt approval. Answer of the Washington Airports Task Force (WATF) The WATF highlights the key points made by the European Commission s DG MOVE regarding the legal meaning and applicability of Article 17 bis as specified in the Department s Notice and fully endorses the 31 Answer of FedEx, at Comments of Atlas, at Reply of Atlas, at 1. 12

44 Commission's views as being consistent with the language of Article 17 bis and the Parties' intent of opening markets and encouraging competition among, and innovation by, airlines. Specifically, the WATF agrees with the Commission s view that Article 17 bis does not provide a legal basis for unilaterally denying an application. The WATF further states that for the Department to take a contrary view at this time would place the U.S. Government in direct conflict with the EC s clearly expressed legal position and potentially invite retaliation and a trade war. 34 In closing, the WATF reiterates its strong support for the application of NAI and points out the potential benefits of its proposed services. Comments of the American Society of Travel Agents (ASTA) ASTA filed an answer to the Department s August 4 Notice, expressing support for approval of NAI s application. ASTA asserts that competition in the transatlantic air service market has been reduced to an oligopoly model, with the three largest immunized carrier groups carrying over 82 percent of the U.S.-EU passenger traffic. 35 ASTA claims that global long-haul travel has increased by 61 million passengers from 2000 to 2010, but the number of visitors to the United States has remained flat. ASTA also claims that Norwegian Air Shuttle has already introduced service in the New York-London and New York- Copenhagen markets with fares hundreds of dollars less than competitors fares. 36 ASTA argues that NAI will inject sorely needed competition into the trans-atlantic air service market, create U.S. jobs, and stimulate new travel between the U.S. and Europe consistent with the Administration s goals of increasing international travel to the United States. ASTA suggests that the Department should consider the situation in reverse. For example, would the Department consider it acceptable for an EU Member State to reject an application under Article 17 bis from a U.S.-based airline that proposed low-cost trans-atlantic service? ASTA argues that if the Department were to find such a scenario to be unacceptable, then it would seem obvious that NAI s application should be granted. ASTA urges the Department to approve NAI s application for an exemption and foreign air carrier permit without delay. Answer of the European Low Fares Airline Association (ELFAA) ELFAA states that it strongly supports the position taken by the European Commission with regard to the interpretation of Article 17 bis. ELFAA further states its support for the Commission s submission that Article 17 bis sets out certain principles but does not create a right for any one party to withhold an operating permit. ELFAA contends that, in the event the concerns raised by one party are found by both parties to be legitimate, then the matter should be referred for discussion in the Joint Committee. ELFAA believes that the legal text of the U.S.-EU Agreement does not permit of any interpretation of Article 17 bis which would justify a unilateral decision by one of the parties to withhold an operating permit to a carrier that has been already awarded a license and operating permit by a properly-designated approval authority of the other party. 37 ELFAA asserts that such a unilateral withholding of a permit would constitute a direct breach. ELFAA urges the Department to honor its obligations under the U.S.-EU Agreement and grant the requisite operating permit to NAI. ELFAA says that open skies agreements have 34 Answer of WATF, at Answer of ASTA, at Answer of ASTA, at Answer of ELFAA, at 1. 13

45 revolutionized access to affordable air travel for millions of consumers, and it is time for the United States to demonstrate its continued commitment to open skies by granting an operating permit to NAI. Comments of Broward County Aviation Department (Broward County) Broward County and Fort Lauderdale-Hollywood International Airport state that the non-stop Scandinavian services that Norwegian began from Fort Lauderdale in November 2013 are the only nonstop Scandinavia services to Fort Lauderdale. They highlight the importance of the service to Broward County and South Florida, asserting that Scandinavia is one of the largest European origin markets for inbound tourism to the region, as evidenced by the estimated almost quarter million visitors from Scandinavia contributing $25.5 million to the regional economy in Broward County maintains that it depends on convenient, low cost air transportation to maintain its ability to compete for tourist dollars, and contends that the service provided by Norwegian offers a low cost alternative to other Florida gateways and provides the commercial stimulus crucial to the present and future economic development of Broward County. In conclusion, Broward County states that the Department should approve NAI s application for an exemption and a foreign air carrier permit in order to permit the carrier to provide international travelers with competitive, low cost air transportation and to encourage tourism and economic growth. Reply of the Greater Orlando Aviation Authority (GOAA) GOAA replied to the answers filed on the record, and supports expeditious approval of NAI s application. GOAA states that continued delay is unwarranted and deprives Central Florida travelers of a new competitive choice in air travel, and the Orlando area s tourism-related economy of an important boost of foreign visitors. GOAA asserts that the Department should place great weight on the submission from John Byerly and Daniel Calleja, the respective delegation chairman who negotiated the U.S.-EU Agreement. GOAA considers there to be no one with more credibility or authority to speak to the letter and intent of the provisions of the U.S.-EU Agreement. GOAA concludes that based on the legal views of the EC presented in the Department s August 4, 2014 Notice and supported by the Byerly-Calleja Joint Declaration, it is unequivocally clear that NAI s application should be approved. 38 Comments of Broward County, at

46 Appendix E

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52 Appendix F

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