Budget carrier flies in face of trans-Atlantic establishment

Johan Nilsson / TT / AP

Parked Boeing 737-800 aircrafts belonging to budget carrier Norwegian Air Shuttle are seen at Stockholm Arlanda Airport Thursday, March 5, 2015.

First there was Laker Airways. Then there was People Express. Both airlines shared a similar, if ultimately unsuccessful, goal: to bring low fares to the trans-Atlantic market.

Now, there is Norwegian Air Shuttle.

In the past three years, Norwegian, one of Europe’s biggest low-cost airlines, has quietly established a beachhead in the trans-Atlantic market by offering low-fare, no-frills service on long-haul flights.

Thanks to a small but expanding fleet of fuel-efficient planes combined with deeply discounted ticket prices, Norwegian Air Shuttle has attracted a growing number of leisure travelers looking for cheap flights.

Norwegian made its Southern Nevada debut last fall with nonstop flights between Las Vegas and Copenhagen, Denmark, or Stockholm, Sweden.

It is all part of the vision of Norwegian’s outspoken chief executive, Bjorn Kjos, who is determined to force the same kind of low-fare competition on international routes that has been so successful in domestic markets for airlines like Southwest and Spirit, and Ryanair in Europe.

That is not currently happening on long-haul routes, particularly in the North Atlantic market, which is essentially locked up by three global airline alliances.

The upstart airline — Norwegian was created in 1993 as a domestic carrier and still has portraits of famous Scandinavians on the tails of its planes — is now threatening these cozy arrangements among legacy airlines in the United States and Europe that have long viewed the trans-Atlantic market as their backyard.

But Norwegian’s expansion has been stymied by vigorous opposition. Legacy airlines on both sides of the Atlantic see a low-cost competitor on their cash-cow routes as a major threat to their long-term profitability. Labor unions object to Norwegian’s plans to hire flight crew from Thailand, a practice they have repeatedly described as “labor dumping.”

The airline has also faced lengthy delays in receiving regulatory approvals in the United States. The Department of Transportation has so far failed to certify subsidiaries based in London and Cork, Ireland, that Norwegian is counting on for expansion.

But despite these hurdles, Norwegian’s growth has been swift. By the summer, Norwegian expects to offer at least 37 nonstop routes between Europe and the United States — more destinations than any other foreign carrier. Last week, it announced plans to start new flights between Paris and New York, Los Angeles and Fort Lauderdale, Florida, with one-way fares starting at $175.

“It’s a shame,” said Kjos, who is one of the airline’s co-founders. “They are protecting that high-fare environment instead of create jobs. Think about how many more tourists you could have over the Atlantic if you had lower fares.”

The issue has become a test case for the global aviation industry and whether new practices — like outsourcing some of its functions — can shake up the traditional business and bring down the cost of flying.

It comes at a time when incumbent carriers have become more powerful thanks to mega-mergers that allowed them to carve out profitable businesses through trans-Atlantic joint ventures with foreign airlines.

The fight also raises the question of whether regulators should focus on passenger rights, and push for more competition and cheaper fares, or promote a strong domestic industry.

The United States is only one part of Kjos’ global ambitions.

A few years ago, Norwegian ordered 222 aircraft from Boeing and Airbus worth a total of $21.5 billion. These included 100 Boeing 737 MAX and 100 Airbus A320neo, the latest generation of more fuel-efficient narrow-body airplanes from both manufacturers.

Norwegian plans to use them on its European network and said it might add them on future routes in North America, as well as new routes between Southern Europe and Africa, citing as examples possible connections between Rome or Barcelona to Nigeria or Kenya.

But the backbone of the airline’s long-haul network is the fuel-efficient Boeing 787 Dreamliner. Norwegian operates eight 787s, and has orders and options for an additional 40 as it seeks to expand in India, South Africa and other points in Asia, Africa and Latin America. After facing some operational problems when the Dreamliners were first put into service, the planes are now performing well, Kjos said.

Last year, Norwegian carried 26 million passengers, a small number compared with behemoth airlines like Delta Air Lines or Lufthansa.

A spokeswoman for the Transportation Department did not give any reasons for the delays that have left Norwegian in bureaucratic limbo in the United States. The airline’s first request was filed more than two years ago. A second application for a British subsidiary was made two months ago.

The long delay in approving the application “does not reflect well on the political independence of the Department of Transportation with respect to the free trade principles behind the E.U.-U.S. open skies agreement,” according to a report by analysts at the CAPA Center for Aviation. “The calculated inaction only serves to restrict competition and to deny consumer choice.”

Norwegian can count on the support of the European Union as well as British aviation authorities, who are keen to develop more traffic and foster competition among carriers flying into the United States.

Civil aviation authorities in Britain said they supported Norwegian’s application to certify its British subsidiary based at London’s Gatwick Airport because it would provide more choice for consumers and businesses on both sides of the Atlantic. They noted that while the U.S. Transportation Department typically grants authorization to European carriers within 53 days, on average, Norwegian’s application had been in limbo for longer than that.

The airline says it is counting on these new air permits to be able to get greater traffic rights — thanks to the open skies agreement between the European Union and the United States — than those it is allowed to fly under its Norwegian air license, since Norway is not part of the European Union.

But unions in the United States have accused the airline of using a “flag of convenience” strategy, shopping around for the lowest labor protections and subcontracting employees. By doing so, they contend, Norwegian is not abiding by the open skies agreement between the United States and the European Union.

The airline disputes that its strategy is based on low-cost labor. It said that it had hired 300 cabin crew in the United States for its bases in New York and Fort Lauderdale, and would have 450 by the end of the year.

But having a base in Ireland, where labor laws are more flexible than in Norway, would allow the airline to hire foreign employees to fly its long-haul routes. The airline has said it would have only nationals from Europe and the United States working the trans-Atlantic routes, to win approval for its permit.

For now, Norwegian plans to start nonstop service to Boston from London in March, Oslo in April and Copenhagen in May. And in December, it started flying from airports in the Northeast to the French Caribbean islands of Guadeloupe and Martinique.

“There is still a lot to do,” Kjos said. “We have to think about how to fly more people more cheaply. There are hundreds of millions of people that don’t have access to cheap flights.”