Successfully Competing in the Global Marketplace

By ALPA Staff
Nationality and geography might separate airline pilots across the globe, but common interests unify us all: We want our skies to be safe, and we want the environment to be fair. These fundamental principles don’t get lost in translation due to language barriers and cultural differences. In fact, they remove our differences and give us the opportunity to collaborate with our fellow pilots around the world to reach the ultimate end goal of enhancing the airline piloting profession. Although there are scores of international challenges that face different segments of the global pilot population, the next few pages will focus on the following immediate threats: flag-of-convenience business models and the enforcement of Open Skies agreements when there are market-distorting violations. The potential proliferation of both abuses is indeed a global threat. Only by reaching across boundaries and working together will our unified voice be heard.
 

ALPA’s Continued Call to Enforce Open Skies

Over the past 10 years, three Middle East state-owned carriers (Emirates, Qatar, and Etihad = ME3) have received more than $42 billion in subsidies and other unfair benefits from their governments.

These government actions are at odds with the spirit of Open Skies agreements, which is meant to remove government interference from the international air service market and ensure a fair and equal opportunity to compete. ALPA, and its partners in the United States and around the globe, continue to advocate to their respective governments on behalf of fair competition for all airlines and their pilots.

The massive infusion of subsidies to the ME3 has distorted the global marketplace, giving these airlines—which have the luxury of operating without the pressure of making a profit—the advantage of flying routes that aren’t based on supply and demand.

Conversely, airlines that directly compete with the ME3 don’t have that luxury. Since January 2016, both Delta and United have announced service cancellations to Dubai. Delta’s last flight to Dubai took place on February 11; the company reported that the ATL–DXB route lost money for two years before it decided to cancel the route. United discontinued its Washington- to-Dubai flight on January 23, saying an imbalance of supply and demand was created by the “entry of subsidized carriers such as Emirates Airline and Etihad Airways into the Washington, D.C., market.” As a result, the IAD–DXB route was “less profitable.”

Promoting fair competition

Globally, these subsidized carriers have had a negative impact on U.S. and EU airlines. Revenue on EU–Asia routes has dropped by 37 percent within the last few years, prompting the European Cockpit Association to call for fair competition and a level playing field in today’s global marketplace.

Over the past year, economists from Compass Lexecon released report after report demonstrating how the ME3 airlines are undercutting U.S. carriers and costing American jobs as they rapidly expand in U.S. markets. These three carriers have used billions of dollars in government subsidies to add extensive new service in the United States, expanding their daily seats to and from the U.S. by more than 35 percent since January 2015. And more new service has been announced.

The most recent report noted that international passenger bookings on global U.S. carriers and their joint-venture partners from Orlando, Fla.; San Francisco, Calif.; and Chicago, Ill., to the Middle East, Africa, the Indian subcontinent, and Southeast Asia dropped by 13.3 percent, 13.1 percent, and 8.8 percent, respectively, after these Middle East carriers’ most recent entries into those markets.

The evidence of $42 billion in subsidies and the resulting negative impact on U.S. carriers should be enough for the U.S. government to move to enforce Open Skies agreements by opening consultations with Qatar and United Arab Emirates and bringing them into compliance with the agreements they signed.

 

 

Airing the Blarney

The Truth About Norwegian Air’s Boston–Cork Route

Norwegian Air Shuttle (NAS) is holding captive a new Boston, Mass., to Cork, Ireland, route to pressure the U.S. government to ignore a key provision of the U.S.–EU Air Transport Agreement and give the green light to its subsidiary Norwegian Air International (NAI) to fly to the United States. ALPA has looked into why NAI won’t operate the Boston–Cork route—and the facts show that Norwegian’s public statements about its decision are, well, blarney.

Boston-Cork

By fueling news media headlines such as “Norwegian Air delays launch of Boston–Cork flights due to feds” in the Boston Herald, Norwegian appears to be deliberately misleading U.S. passengers about its existing authority to operate Boston–Cork flights.

Despite the headlines, approval of NAI’s application for a U.S. foreign air carrier permit isn’t necessary for Norwegian to fly the Boston–Cork route. Norwegian has publicly admitted it can operate the route now using its own authority, and the application’s status doesn’t affect Norwegian’s freedom to serve Boston, just as it serves other U.S. cities.

“In linking its NAI application to its Boston–Cork service, Norwegian is attempting to hold new Boston flights hostage and mislead the public about who bears responsibility for its failure to provide that service,” said Capt. Tim Canoll, ALPA’s president, in a letter submitted to the Boston Herald’s editor.

ALPA urges DOT to determine employment structure

On February 26, ALPA participated in a joint legal filing in response to a letter submitted by the UK Department for Transport (DFT) that supported an application by another NAS subsidiary, Norwegian Air UK (NAUK), to receive a U.S. exemption and foreign air carrier permit. The DFT letter contained a number of erroneous, misleading, and incomplete assertions about the employment circumstances that would apply to the pilots and flight attendants who are to fly NAUK’s transatlantic services.

The filing asserted that the aircrews will be based in the United Kingdom, be employed under contracts with a UK company that will be governed by UK employment laws, and have the right to choose a representative for collective bargaining. If true, these principles could serve as the foundation of an employment framework that could address ALPA’s and other labor parties’ concerns. However, several significant differences exist between the structure laid out in the UK letter and the actual employment circumstances of NAUK’s aircrews.

The UK DFT’s “support for Norwegian Air UK’s application is based on a wide range of assumptions about the airline’s employment practices that don’t appear to be accurate,” said Canoll. “Given the unprecedented labor issues raised by the NAI application, the UK and U.S. governments should compel NAUK to describe its employment practices in writing on the record as is permitted under the U.S.–EU Air Transport Agreement.”

ALPA’s opposition to NAI and concern about NAUK

NAS’s subsidiary NAI initially didn’t have service scheduled from Ireland and planned to use flight crews provided by a Singapore employment company using individual contracts with compensation substantially below that of Norwegian’s Norway-based employees. This flag-of-convenience business practice, if implemented, would undermine U.S. and EU labor standards, an outcome that is prohibited by Article 17 bis of the U.S.–European/Norway/Iceland Air Transport Agreement, which states that the opportunities created by the agreement are not intended to undermine labor standards. NAI has very recently said that it now only uses flight crews on U.S. and EU employment contracts, but it hasn’t committed that it would only use such crews on future services to the United States.

With respect to NAUK, the employment structure for NAUK’s long-haul pilots and flight attendants is unclear as is its potential effect on U.S. jobs and the international airline industry. “For this reason, the U.S. Department of Transportation must request complete information and allow all parties involved adequate opportunity to evaluate the effects of the Norwegian UK application,” said Canoll.

This article was originally published in the April 2016 issue of Air Line Pilot.

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