U.S. Airline Industry In 'Survival Mode,' Says Pilots Union

 - May 29, 2014, 1:31 PM
Norwegian's Ireland subsidiary would create a 'flag of convenience' business model, ALPA says. (Photo: Norwegian Air Shuttle)

The U.S. airline industry is in “survival mode” against competition from foreign carriers, some of which are using “extreme new measures” to gain access to Americans flying internationally, said the president of the Air Line Pilots Association (ALPA). Lee Moak sounded the alarm during a May 29 press briefing that touched on the union’s hot-button issues, chief among them Norwegian Air’s application to the U.S. Department of Transportation (DOT) for a foreign air carrier permit.

Moak called on the DOT to reject that application, charging that Norwegian seeks to evade Norway’s labor laws and circumvent international labor agreements by establishing a subsidiary in Ireland—Norwegian Air International—to access traffic rights to and from the European Union, including to the U.S., for its widebody fleet. Norway is not a member of the EU. The carrier’s approach, if accepted, would establish a “flag-of-convenience” business model similar to the model that led to the decline of the U.S. maritime industry, he said. In late April, Reuters reported that Norwegian Air was reconsidering its operation in Dublin and had suspended negotiations to acquire 20 new Boeing 787s.

Moak, a Delta Air Lines Boeing 767 captain, said the U.S. has negotiated 110 “open skies” agreements with other countries, allowing “practically unlimited entry” by foreign carriers into the U.S. market. His briefing coincided with ALPA’s release of a new report, “Leveling the Playing Field 3.0: Survival Mode,” containing policy recommendations for U.S. lawmakers. The report states that U.S. airlines are operating in a “hypercompetitive” environment against foreign carriers that are either state-owned or heavily state subsidized. One result, it says, is that the U.S. share of the international widebody fleet has declined over the last two decades from 45 percent to 17 percent in June 2012, and is forecast to shrink to 5 percent by 2025.

ALPA also calls for reform of the U.S. Export-Import Bank, which makes available financing to foreign carriers to purchase Boeing widebody airliners at rates and terms that are not available to U.S. carriers, the union contends. The bank provided $34.5 billion in financing for some 634 aircraft from 2005 to 2010 and another $23 billion in 2011-2012 alone, according to the report.

As directed by the 2012 Ex-Im Bank reauthorization act, the U.S. government “should immediately” begin negotiations with the four European countries that have export credit agencies supporting Airbus sales “to eliminate export credit agency financing of all widebody aircraft,” the report says. “We do not expect the Export-Import Bank to unilaterally disarm in the widebody aircraft subsidy back-and-forth with Europe, putting our U.S. manufacturing workers at a disadvantage; however, both sides have an incentive to wind this financing down,” it states.