EU Steps Up Dispute With U.S. Over Trans-Atlantic Flights

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EU Steps Up Dispute With U.S. Over Trans-Atlantic Flights


Category: Airline / Travel

The European Union took the unprecedented step Thursday of accusing Washington of breaching the so-called Open Skies pact aimed at liberalizing trans-Atlantic air travel—opening a high-profile trade rift just before the Trump administration takes office.

The challenge centers on a relatively obscure application by European budget carrier Norwegian Air Shuttle ASA, which is seeking to expand low-cost flights to the U.S. and has faced extensive delays. It represents the biggest international dispute yet over the hot-button global trade issue of foreign-airline market access.

Some U.S. airlines leaned on the Obama administration to slow the growth of foreign rivals accessing the U.S., in particular the rapidly expanding Persian Gulf carriers such as Emirates Airline and Qatar Airways. The American airlines accuse them of benefiting from government subsidies, a charge they deny.

The Norwegian Air dispute centers on the carrier’s plans to use an Ireland-based affiliate to operate long-haul flights from Europe to Asia and the Americas, including to the U.S. It is seeking a “foreign air-carrier permit,” essentially a seal of approval from American regulators for the Irish structure.

Norwegian Air operates some flights between Europe and the U.S. under an already-approved Norwegian structure. The airline says the Irish structure will help it cut costs and offer more flights. The application, however, has faced fierce opposition from U.S. labor groups and carriers, including Delta Air Lines Inc.

The EU is backing Norwegian Air. Brussels has argued that under the Open Skies agreement, which was signed in 2007 and implemented in 2011, the U.S. should have granted the application without delay.

Norwegian Air filed its application almost exactly three years ago. The U.S. government gave preliminary approval in April, but has since held off on granting the final green light.

A spokesman for the U.S. mission to the EU couldn’t immediately be reached for comment.

Norwegian Air has already delayed some U.S. expansion plans because of the delay, including flights from Cork, Ireland, to Boston. That service was set to commence last May.

Under the Open Skies treaty, officially called the EU-U.S. Air Transport Agreement, the accusation by Brussels triggers an arbitration process. It is the first time either side has invoked arbitration under the accord.

The EU named Giorgio Sacerdoti as its arbitrator. The U.S. has 20 days to name its representative. The two sides then have 45 days to agree on a third arbitrator who would preside over the tribunal to resolve the dispute. Though the U.S. needs to name its arbitrator before Donald Trump is inaugurated on Jan. 20, the arbitration proceedings won’t conclude until after the president-elect is in the Oval Office.

Commission spokeswoman Anna-Kaisa Itkonen said the EU “regrets that no suitable solution could be found despite intensive discussions at all levels.”

Norwegian Air said it welcomed the commission’s action and that it was “confident that any arbitration case will recognize Norwegian’s clear right to a foreign carrier permit.”

Source: Nasdaq