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Irish Journal of Legal Studies
Vol. 5(2)
Minimum Procedural Delay:
A Legal Analysis of the U.S.-E.U. Open Skies Agreement,
and the Fight to Increase North Atlantic Competition
Taylor Strosnider*
The Atlantic separates two jurisdictions that drastically differ in their view on the importance
of competition in the commercial aviation market. This paper focuses on the current
regulatory environment of the commercial aviation industry, and two particular airlines
facing separate issues on opposing sides of the Atlantic as they desperately attempt to lower
airfare and increase in-flight customer service. Opening with the history of the regulation of
commercial aviation, this paper outlines the freedoms of flight and the general role of the
Federal Aviation Administration (F.A.A.). Stateside, low cost carrier Norwegian Air Shuttle
and their Irish subsidiary, Norwegian Air International, are unfairly barred by the F.A.A.
from obtaining a foreign air carrier permit because of where their aircraft are registered. This
practice by the F.A.A. is a direct contradiction to the general purpose of the U.S.–E.U. Open
Skies Agreement, which continually calls for increased competition in the market. However,
the luxurious Emirati airline, Emirates, recently won its administrative dispute in the Italian
administrative court system regarding their controversial Milan to New York-J.F.K. route.
This decision opened the debate regarding why a foreign carrier can take advantage of the
U.S.–E.U. Open Skies Agreement with service to the United States while a European carrier,
as a signatory to the U.S.–E.U. Open Skies Agreement, is unfairly barred from obtaining its
own foreign air carrier permit from the F.A.A. The Italian courts correctly applied the Open
Skies Agreement by allowing Emirates to fly their new transatlantic route. Furthermore,
using a Chevron two-step analysis and reviewing the language in the U.S.–E.U. Open Skies
Agreement strongly indicates that the F.A.A.’s refusal to issue a foreign air carrier permit is
an arbitrary and erroneous decision against Norwegian Air International.
I - Introduction
On December 17, 1903 in Kitty Hawk, North Carolina, two brothers who conceived the
design for the first successful mechanical airplane in Dayton, Ohio flew for approximately
twelve seconds.1 Although longer flights were to follow on that monumental day – nothing
Fourth year Juris Doctor and Master of Business Administration dual degree student at Michigan State
University. His legal education focuses on transactional commercial law, and utilises his independent study to
focus on aviation law. At the Broad Graduate School of Management at Michigan State, Taylor is a finance
concentration. He serves on the executive board for the International Law Society, MBA Finance Association, and
Military Law Society at Michigan State. In May 2012, he graduated from the George Washington University in
Washington, D.C. with his Bachelor’s in political science. While at George Washington, he travelled the world
competing in Model U.N. In spring of his junior year, he studied abroad at the prestigious Institut d'Études
Politiques de Paris where he began his love for international affairs and humanitarian relief. Taylor’s
undergraduate and graduate career consists of serving as an intern for his U.S. Senator, working for a premier
lobbying firm on K Street, externing in a federal American court, and travelling as a Coordinating Production
Manager for a multi-million dollar production company. Having studied throughout Europe and Japan, Taylor has
*
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over a minute of airtime2 – it ushered in a new century that would be faced with the many
questions regarding air flight.3 The brothers from Dayton were Orville and Wilbur Wright.
Although Wilbur died of typhoid fever in 1912,4 his brother, Orville, would go on to see not
only what became of his invention, but the regulatory environment that followed.
When Orville passed away in 1947,5 he had lived during the signing of the 1919 International
Convention on Air Navigation (“Treaty of Paris”), the 1928 Pan American Convention on
Commercial Aviation, and the pinnacle 1944 International Convention on Civil Aviation
(“Chicago Convention”).
Although Kitty Hawk was a humble beginning that sprang from a bicycle shop in
Dayton,6 the man who helped invent the airplane would die after seeing two world wars, in
which his invention was sought after for dogfights and the dropping of an atomic bomb.
The use of the airplane would gradually progress into the lives of wealthy dignitaries and
tourists in the form of airlines, when Howard Hughes and Juan Trippe began to connect the
world with the Wrights’ brainchild. It is astonishing to think what Orville Wright thought of
his invention as he laid upon his deathbed, but more importantly, and for purposes of this paper,
what he believed was the proper course of action with the regulatory environment and
international negotiations that followed.
This paper will focus on two issues currently affecting the way airlines attempt to
register their aircraft, route their aircraft, and continue to provide a superior service among
also researched extensively others areas pertaining to aviation law that include Montreal Convention compliance
and Cape Town Convention implementation. After graduation, Taylor hopes enter the commercial aviation
industry full time, while also entering the United States military as a reserve officer. Various sections of this paper
are also published by the author in the Journal of Consumer & Commercial Law by the Center for Consumer Law at
the University of Houston Law Center, in Houston, Texas, USA under the title “Freedom to Fly: The Hypocrisy
Surrounding Transatlantic Commercial Aviation Regulation”.
1 P. B. Larsen, J. Gillick and J. Sweeney, Aviation Law: Cases, Laws, and Related Sources, 2nd ed. (Leiden: Martinus
Nijhoff, 2012) at 4, [hereinafter Larsen].
2 Ibid.
3 With the invention of flight, it is important to note how quickly the innovation escalated throughout the first half
of the 20th Century, with the invention of flight immediately came the need for warfare in the air, as well as
international travel, all of which was enjoyed by Orville Wright during his lifetime. Wright’s lifetime is noted in
the paper in order to emphasize how quickly his invention of the mechanical airplane was modified to meet the
needs of the new industrial America, and industrial world market.
4 E. J. Roach, The Wright Company: From Invention to Industry (Ohio: Ohio University Press, 2014) at 98.
5 T. D. Crouch, The Bishop’s Boys: A Life of Wilbur and Orville Wright (New York: W. W. Norton & Company, 2003)
at 523-24.
6 Ibid. at 109-10.
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Irish Journal of Legal Studies
Vol. 5(2)
many of their competitors. Transatlantic routing is often considered the money pot for many
airlines – they are unbelievably profitable.7 The movement of people from the United States to
Europe is constant,8 so much so that British Airways has now instituted flight BA 0178,9 a full
day flight from New York-J.F.K. to London Heathrow landing close to 10:00 p.m., which strays
from the typical red-eye structure.10 The profitability of transatlantic routes has changed airline
focus from the size of an aircraft, with a Boeing 747 or Airbus A380, to frequency with medium
sized long haul aircraft. 11 This frequency is exactly what the rising airline Norwegian Air
Shuttle wants to capitalise on with its low-cost transatlantic structure.
The first issue in this paper will focus on Norwegian Air Shuttle (“Norwegian”) and
their newer wholly owned Irish subsidiary, Norwegian Air International Limited (“Norwegian
Air International”). The aircraft used by the new subsidiary Norwegian Air International have
registered their new Boeing 787 Dreamliners in Ireland rather than in Norway, sparking
controversy with the Federal Aviation Administration and Norwegian civil aviation
authorities.12 The second issue addresses Emirates, the flagship carrier for the United Arab
Emirates, particularly flight EK 205, and its controversial service from Milan Malpensa
Airport to New York-J.F.K. in the Italian administrative court system. EK 205 is a flight
riddled in regulatory dispute, as an Emirati airlines entered service in what was a purely
American and Italian market.
D. Milmo, “B.A. Faces Stiffest Test as Open Skies Treaty Faces Transatlantic Free-For-All”, The Guardian, 30
March 2008), http://www.theguardian.com/business/2008/mar/31/theairlineindustry.britishairwaysbusiness
(date accessed: 24 August 2015) [hereinafter Milmo].
8 Ibid.
9
J.F.K.-L.H.R.
Time
Table
for
March
11,
2015,
British
Airways,
<http://www.britishairways.com/travel/schedules/public/en_gb> (date accessed: 14 February 2015).
10 British Airways also operates two other full-day flights on the J.F.K.-L.H.R. route on Mondays weekly, to meet
current demand.
11 Justin Bachman, “Why Europeans Put Bigger Planes on Trans-Atlantic Flights”, Bloomberg, 11 November 2013,
http://www.bloomberg.com/bw/articles/2013-11-11/why-europeans-put-bigger-planes-on-trans-atlantic-flights
(date accessed: 24 August 2015).
12 J. A. Logan, “D.O.T. Should Reject Norwegian Air's Foreign Air Carrier Application”, The Hill, 27 January
2015, 6:00 A.M., http://thehill.com/blogs/pundits-blog/labor/230764-dot-should-reject-norwegian-airs-foreignair-carrier-application (date accessed: 14 February 2015) [hereinafter Logan]; G. Thornton and C. Quinn, “Irish
Aviation
Sector”,
Matheson,
140-43,
<http://www.matheson.com/images/uploads/documents/Airfinance_Annual_Irish_Aviation_Sector.PDF> (date
accessed: 16 February 2015) [hereinafter Thornton].
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II - The International Commercial Aviation Regulatory Environment
With the start of civil aviation, almost immediately came government intrusion to
regulate the transportation of people in this manner. The 1919 Treaty of Paris became the first
paramount international treaty to outline how countries govern their airspace.13 The Treaty of
Paris clearly outlined in Article 1 the ad coelum idea, that every country has complete
sovereignty over the governing of their airspace,14 similar to the current interpretation of the
Chicago Convention.15 However, it was Article 2 of the Treaty of Paris that provided one of the
first of five freedoms granted to airlines – the right of innocent safe passage.16 This did not
mean that an airline would have the right to land or take off in the state in which it is passing
through, it just meant that a contracting state would allow for safe passage to its destination
through its airspace.17 Having signed the contract on the heels of the First World War, the
Treaty of Paris only applied during peacetime.18
The 1928 Pan-American Convention on Commercial Aviation19 (“Havana Convention”)
mainly pertained to the United States and its Latin neighbours, as individuals like Juan Trippe
with the growing Pan American World Airways began to profit off the Caribbean and Latin
American air mail routes that were beginning to take fold. 20 The general purposes of the
Havana Convention followed many of the provisions outlined previously in Paris, but was
monumental in that it embodied the general conception that international civilian travel was a
commercial right.21
Convention Relating to the Regulation of Aerial Navigation (13 October 1919). Larsen et al., supra note 1, at 35.
Convention Relating to the Regulation of Aerial Navigation (13 October 1919), art. 1. Ad Coelum refers to the
property law principle that one controls everything below and above the property in which they own: Paul B.
Larsen, supra note 1, at 35.
15 Convention on International Civil Aviation (7 December 1944), art. 1.
16 Convention Relating to the Regulation of Aerial Navigation (13 October 1919), art. 2. Larsen et al., supra note 1, at
35.
17 Larsen., supra note 1, at 35.
18 Ibid. at 36.
19 Pan-American Convention on Commercial Aviation (20 February 1928).
20 Ibid. Newsweek Staff, “Pan American World Airways: 1927-1991”, Newsweek, 21 July 1991, 8:00 P.M.),
<http://www.newsweek.com/pan-american-world-airways-1927-1991-204910>.
21 Larsen, supra note 1, at 36.
13
14
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Irish Journal of Legal Studies
Vol. 5(2)
The Chicago Convention ushered into the commercial aviation industry the modern
interpretation of what is now viewed as the model rule within international law.22 Signed in
1944 in Chicago, the International Convention on Civil Aviation was the post war international
convention to replace both the outdated Paris23 and Havana Conventions,24 in an effort to begin
harmonising commercial aviation law.25 Four proposals were presented before the convention,
yet with the United States as a post-war super power; it was the idea of “open skies” that
prevailed over other proposals from Canada, the United Kingdom, and a consortium of
countries from the South Pacific.26 The American proposal of open skies first introduced what
would later encompass five freedoms of flight that are generally adopted among the signatories
of the Chicago Convention.27 The open skies proposal fought for the freedom of flight that
included “the principle of free over-flight” for any commercial aircraft. Under these conditions,
bilateral landing rights could be negotiated by the parties on any conditions agreeable to
them.28 With the American proposal hailing victorious, the outcome of the Chicago Convention
entailed ninety-six articles with twelve annexes.29 Two further conventions were included, the
International Air Services Transit Agreement, and the International Air Transport
Agreement. 30 Since its drafting and entrance into force, from 1971-1998 there have been
thirteen protocols to the Chicago Convention.31
A. The Five Freedoms of Flight
The International Air Services Transit Agreement provided the world with the first
two freedoms of flight, yet it was the second convention, the International Air Transport
Agreement (also known as the Five Freedoms Agreement), that gave the industry the current
full five freedoms of flight many industrialised economies recognize. The five freedoms are:
(1) the privilege to fly across the states of Chicago Convention signatories; (2) the ability to
Ibid.
Convention Relating to the Regulation of Aerial Navigation (13 October 1919).
24 Pan-American Convention on Commercial Aviation (20 February 1928).
25 Larsen, supra note 1, at 37.
26 Ibid. at 36-38.
27 Ibid. at 39.
28 Ibid. at 37.
29 Ibid. at 39.
30 Ibid.
31 Ibid.
22
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land for non-traffic purposes;32 (3) the privilege to deliver aircraft passengers, mail, and cargo
from the home territory “of the flag state of the aircraft”;33 (4) the privilege to accept aircraft
passengers, mail, and cargo from one state destined for the home territory “of the flag state to
another state”;34 and (5) the privilege to accept aircraft passengers, mail, and cargo from one
state to deliver to another state.35
This introduction to the five freedoms of flight is important for further review within
this paper, because it outlines the current issues at hand pertaining particularly to Emirates
flight EK 205, and what authority the Italian courts have over their own airspace with an
American route operated by a foreign carrier flying the flag of neither nation.
B. The “Supplementary” Freedoms of Flight: Freedoms Six, Seven, Eight, and Nine
There are four supplementary freedoms of flight, which are not generally accepted
among all signatories of the Chicago Convention and operators of major commercial airlines.36
The supplemental freedoms include: (6) the freedom to connect two foreign destinations via the
airline’s home country;37 and (7) the freedom to carry passengers between two foreign countries
without stopping in home country.38 Freedoms eight and nine allow a carrier to stop in two
destinations within a foreign country outside the home country. This practice, also known as
cabotage, is extremely rare outside the E.U.39
The first two freedoms of flight are clearly stated in Agreement between the U.S. and the E.U. Air Transport
Agreement, U.S.-E.U. (20 April 2007), art. 3, <http://www.state.gov/documents/organization/114872.pdf> (date
accessed: 24 August 2015).
33 Larsen, supra note 1, at 39.
34 Ibid.
35 Ibid.
36 Recognition of these supplementary freedoms is sporadic and not common. Tahiti openly uses the sixth freedom
with its flagship carrier on flight TN, and the E.U. commonly uses the seventh freedom by operating between two
cities outside of their home country. Furthermore Qantas’ Jetstar service is an example of the very rare 9th
freedom of pure cabotage.
37 B. Havel, Beyond Open Skies: A New Regime for International Aviation (Alphen aan den Rijn: Wolters Kluwer,
2009) at 107 [hereinafter Havel]. An example of this freedom is Air Tahiti Nui connecting Auckland to Los
Angeles via Papeete on flight TN102. Notice it is the same flight number throughout all three countries.
38 Ibid. This freedom is well practiced under the E.U. open skies agreement that allows for low cost carriers to
connect foreign countries without stopping in registered home country.
39 Ibid. at 108.
32
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Irish Journal of Legal Studies
Vol. 5(2)
C. The Federal Aviation Administration
A clear understanding of the Federal Aviation Administration (“F.A.A.”) is crucial for
the understanding of this paper, in order to evaluate the role of this independent agency within
the United States, and what role the United States Congress has in circumventing its
rulemaking. It is quite astonishing to think just how much current power the F.A.A. has over
the transatlantic aviation market. Created by the Department of Transportation Act of 1966,40
the F.A.A.’s powers include administration over air traffic control, aircraft and aircraft engine
standards, airmen certificates, air carrier operating certificates (including foreign air carrier
permits), airport operating certificates, and research on aviation safety.41 The F.A.A. also has an
immense broad power in the way foreign carriers conduct business within the United States.42
With the issuance of “open skies” agreements,43 a number of carriers are given the privilege of
conducting business by means of only flying in and out of the United States, 44 with only
minimal exceptions that are issued by the F.A.A.45 As an independent agency, the rulemaking
process for the F.A.A. is subject to Chevron 46 deference, 47 yet they engage in a practice of
“public interest” when considering the certification of a new foreign carrier for operation to and
Department of Transportation Act, Public Law No. 89-670, § 3 (e) (1), (1966).
Larsen, supra note 1, at 973-75.
42 Havel, supra note 37, at 126.
43 According to the Department of State, Open Skies agreements between the United States and other countries
“expand international passenger and cargo flights by eliminating government interference in commercial airline
decisions about routes, capacity and pricing. This frees carriers to provide more affordable, convenient and
efficient air service to consumers, promoting increased travel and trade and spurring high-quality job opportunity
and economic growth. Open Skies policy rejects the outmoded practice of highly restrictive air services
agreements protecting flag carriers”: “Open Skies Partnerships: Expanding the Benefits of Freer Commercial
Aviation”, Department of State, <http://www.state.gov/documents/organization/159559.pdf> (date accessed: 18
February 2015).
44 Havel, supra note 37, at 126.
45 One of these exceptions is an example of the rare use of the eighth and ninth freedoms of flight that include
Qantas flight QF 107, which services L.A.X.-J.F.K. without disembarkation. However, Qantas is not allowed to
sell any tickets solely for the domestic portion of the flight. The passengers must have an international leg
associated with their itinerary.
46
Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
47 Town of Stratford, Connecticut v. Federal Aviation Administration, et. al., 285 F.3d 84 (D.C. Cir. 2002), (holding that
the F.A.A.’s decision to be viewed by the court using Chevron deference is a correct interpretation).
40
41
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from the United States.48 Carriers may not operate civil aircraft without a valid certificate,49 or
in violation of their current certificate, granted to them by the F.A.A.50
III - An Irish Airline: Norwegian Air International
The corporate structure of Norwegian Air Shuttle A.S.A. is a complicated one, but it is
certainly not uncommon within the industry for airlines and lessors to structure themselves the
same way as Norwegian has done. 51 The company currently has two wholly owned
subsidiaries, Norwegian Air International Ltd. and Norwegian Long Haul.52 As of this writing,
Norwegian still continues to serve the United States, under the name Norwegian Air Shuttle,
by means of its Norwegian subsidiary Norwegian Long Haul, with service to New York-J.F.K.
and Ft. Lauderdale.53 The legal issue that arises is why Norwegian Long Haul is permitted to
service the United States, while Norwegian Air International is barred by the F.A.A. from
obtaining a valid foreign air carrier permit to service the United States.
The reasoning behind the F.A.A.’s decision to bar Norwegian Air International from
servicing the United States is political, economical, and moreover bureaucratic.54 The current
fight for Norwegian Air International to serve the United States is one that calls for increased
competition across the Atlantic,55 and the issue that makes American legacy liners56 weary and
Havel, supra note 37, at 126.
“Airworthiness Certificates Overview”, Federal Aviation Administration (9 August 2015, 1:00 P.M.),
https://www.faa.gov/aircraft/air_cert/airworthiness_certification/aw_overview/ (date accessed 24 August 2015).
An airworthiness certificate is an F.A.A. document, which grants authorisation to operate an aircraft in flight.
50 49 U.S.C. § 44711 (2012). Larsen, supra note 1, at 972. Article 33 of the Chicago Convention requires
contracting states to recognize as valid the certificates of airworthiness and competency licenses from other
contracting states. An airworthiness certificate certifies that a carrier meets its own F.A.A. standards, which are
allowed to be higher than international standards, just not lower.
51
“Ireland – A Location for Aircraft Leasing”, Flynn O’Driscoll Business Lawyers,
<http://www.fod.ie/Ireland_as_a_Location_for_Aircraft_Leasing.pdf> (date accessed: 13 February 2015), 1-7.
52
“Operations
and
Market
Development”,
Norwegian
Air
Shuttle,
<http://annualreport.norwegian.com/2013/operations-and-market-development> (date accessed: 12 February
2015).
53 “Route Map”, Norwegian Air Shuttle, <http://www.norwegian.com/us/flight/route-map/> (date accessed: 12
February 2015).
54 Logan, supra note 12.
55 “OpenSkies.travel to Promote Open Skies Policies and Robust Aviation”, Business Travel Coalition, 22 January
2015,
http://www.businesstravelcoalition.com/press-room/2015/january-22---openskiestrave.html
(date
accessed: 24 August 2015).
56 “American legacy liners” refers to the remaining major American carriers, which include Delta Airlines, United
Airlines, and American Airlines.
48
49
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Irish Journal of Legal Studies
Vol. 5(2)
nervous of the amassed control major airlines currently have as they enjoy hauling 90% of all
transatlantic passengers. 57
I begin with an analysis, which includes the Aircraft Protocol to the Cape Town
Convention,58 a fairly new convention to which the E.U. and the United States are signatories.
A provision within the Cape Town Convention allows for airlines, creditors, and lessors to
register civil aircraft using an Irrevocable De-registration and Export Request Authorisation
(“I.D.E.R.A.”).59 The general purpose of I.D.E.R.A. is for creditors to ensure which country an
aircraft is registered in for insurance purposes in the event of default.60 The I.D.E.R.A. still
allows for the public to know where the aircraft is subject to the home country’s respective
applicable safety laws and regulations.61 Norwegian Air International, rather than register their
new 787 Dreamliner aircraft in Norway like their sibling Norwegian Long Haul, proceeded to
register their aircraft on I.D.E.R.A. in Ireland.62 This is where the controversy for Norwegian
Air International begins in Washington.63
One must note that Ireland plays a significant role in the aviation industry, not only
because the corporate tax rate in the country look heavily favourable compared to many other
European countries, but also because it seems a hub for aircraft finance.64 Many airlines that
wish to purchase their next Boeing aircraft tap into to the capital market of banks in London,65
and then register aircraft in Ireland, for the exact same purpose as Norwegian Air
International. The only difference is that Norwegian Air International wants to take their Irish
registered aircraft across the Atlantic with a Norwegian name painted on the side of the 787.66
Ibid. Logan, supra note 12.
Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (16
November 2001), http://www.unidroit.org/instruments/security-interests/aircraft-protocol (date accessed: 24
August 2015).
59 Ibid. at art. 9 para. 5. Thornton, supra note 12.
60 “Cape Town Convention – Protocol Specific to Aircraft Equipment”, Civil Aviation Authority of New Zealand,
<http://www.caa.govt.nz/aircraft/Cape_Town_Convention.htm> (date accessed: 10 February 2015).
61 Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (16
November 2001), art. 9 para. 5.
62 Thornton, supra note 12.
63 Logan, supra note 12.
64“Ireland – A Location for Aircraft Leasing”, supra note 51.
65 York Aviation, “Aviation Services and the City: 2011 Update”, City of London, January 2011, 22-28,
https://www.cityoflondon.gov.uk/business/economic-research-and-information/researchpublications/Documents/research-2011/Aviation%20Services%20and%20the%20City_2011Update.pdf
(date
accessed: 24 August 2015).
66 Thornton, supra note 12.
57
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Ireland is home to a multitude of the world’s largest aircraft lessors,67 and the home of Europe’s
largest airline, Ryanair.68 The commercial aviation industry has seen resounding success on the
Emerald Isle due to the favourable tax structure and easy access to flight registration for newly
purchased aircraft.69 The proximity to the London banks with a magnitude of liquid aviation
divisions is a mere coincidence and convenience.70
With new Boeing 787s ordered, Norwegian Air International has planned to use their
Irish registered aircraft to connect American cities from major European hubs, but not
necessarily from Norway.71 The fight begins with the powerful lobbying in Washington that
has halted the foreign air carrier permit for Norwegian Air International from obtaining F.A.A.
approval.72 Powerful lobbying organizations such as Airlines for America have represented the
American legacy liners to ensure that a new low-cost model that Norwegian is proposing to
cross the Atlantic does not gain flight.73
What is it exactly that the American legacy liners have to fear? It is the low cost
structure of Norwegian that potentially allows for a $350 round trip flight between New YorkJ.F.K. to Dublin International Airport that could severely undercut the limit pricing 74 on
transatlantic routes now. Once in Dublin, a passenger could than transfer to a Norwegian 737
for further budget service within continental Europe. If there is one aspect of commercial
aviation the Europeans have mastered far better than their American rivals, it is the art of
“Ireland – A Location for Aircraft Leasing”, supra note 51.
“History of Ryanair”, Ryanair, <http://corporate.ryanair.com/about-us/history-of-ryanair/> (date accessed: 12
February 2015).
69 Thornton, supra note 12.
70 “Aviation Services and the City: 2011 Update”, supra note 65.
71 Jad Mouawad, “Long Haul Expansion by a Norwegian Carrier Upsets U.S. Airlines”, International New York
Times, 6 February 2014, http://www.nytimes.com/2014/02/07/business/international/long-haul-expansion-bya-norwegian-carrier-upsets-us-airlines.html (date accessed: 24 August 2015) [hereinafter Mouawad].
72 Bill Carey, “U.S. Denies Exemption as it Mulls Norwegian Air Permit”, AIN Online, 3 September 2014, 8:16
A.M.),
http://www.ainonline.com/aviation-news/air-transport/2014-09-03/us-denies-exemption-it-mullsnorwegian-air-permit (date accessed: 24 August 2015) [hereinafter Carey].
73 Joe Sharkey, “For Domestic Airlines, Open Skies Have Limits”, International New York Times, 9 February 2015,
http://www.nytimes.com/2015/02/10/business/international/for-domestic-airlines-open-skies-have-theirlimits.html (date accessed: 24 August 2015).
74 Paul Milgrom and John Roberts, “Limit Pricing and Entry under Incomplete Information: An Equilibrium
Analysis”, (1982) 50(2) Econometrica 443. Limit pricing is the idea that a firm is able to severely undercut the
current pricing of the market in order to make the market look unattractive thus attempting to bar the entry of
competitors.
67
68
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Irish Journal of Legal Studies
Vol. 5(2)
budgetary travel in the air. 75 Many airlines fear that this could lead to predatory pricing
against the American airliners, 76 which would severely damage their profit margins on
transatlantic routes. Although predatory pricing is illegal according to antitrust law in the
United States, 77 the damage against the American airliners would hinder what profits they
currently enjoy.
Lost cost carrier competition is seemingly the sole reason why the American airline
industry does not want Norwegian Air International to commence service. 78 The arguments to
Washington have proved successful thus far.79 One argument is Norwegian Air International is
evading paying Norwegian taxes by registering their aircraft in Ireland.80 Not only are they
registering aircraft in Ireland to avoid the hefty Norwegian tax burden, but also the stringent
labour laws that come with being Norwegian.81 Currently Norwegian Long Haul pilots, flight
attendants, and ground crew are all subject to Norwegian labour laws that help Norway
consistently gain the reputation of having one of the highest standards of living in the world.82
Norwegian Air international crew, both on the ground and in the air, are subject to Irish law –
simply because that is where the new 787s are registered. 83 In the eyes of Norwegian Air
Shuttle as a parent company, Irish law is seemingly more conducive for their airline’s
operation. 84 The story told to Washington is that this tax evasion and labour law
Brian Graham and Jon Shaw, “Low-cost Airlines in Europe: Reconciling Liberalization and Sustainability”, 2008
Science Direct 1439-1440, http://www.sciencedirect.com/science/article/pii/S001671850800002X# (date
accessed: 24 August 2015).
76 Ruwantissa Abeyratne, “U.S./E.U. Open Skies Agreement – Some Issues”, (2007) 72 J. Air L. & Com. 21, 24;
Russell E. Tanguay, Jr., “The Future of the U.S.-E.U. Agreement: A World of Open Skies?”, (2009-2010) 9 Issues
Aviation L. & Policy 341, 359.
77 Sherman Antitrust Act, 15 U.S.C. § 2. See also, Spirit Airlines, Inc. v. Northwest Airlines, Inc., 431 F.3d 917, 953-54
(6th Cir. 2005), (2007) 72 J. Air L. & Com. 21, 35-36.
78 Carey, supra note 72.
79 Ibid.
80 Justin Bachman and Carol Matlack, “Budget Airlines Shop the World for Cheaper Pilots”, Bloomberg, 12
February 2015, 2:01 A.M.), http://www.bloomberg.com/news/articles/2015-02-12/budget-airlines-shop-theworld-for-cheaper-pilots (date accessed: 24 August 2015).
81 Logan, supra note 12.
82 “Norway
Best Place to Live: U.N. Report”, Huffington Post, 15 May 2011, 2:15 P.M.,
http://www.huffingtonpost.com/2009/10/05/norway-best-place-to-live_n_309698.html (date accessed: 24
August 2015).
83 Duane E. Woerth, “Airline Labor Law in the Era of Globalization: The Need to Correct a Misreading of the
Railway Labor Act”, (2001-2004) Issues Aviation L. & Policy 16,011, 16,013.
84 Thornton, supra note 12.
75
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circumvention goes against the current Open Skies Agreement between the U.S. and Europe,
and should prevent the airline from receiving a foreign air carrier permit from the F.A.A.85
The push in Washington to bar Norwegian Air International from commencing service
became so imperative that Congress eventually circumvented the F.A.A., to pass in a recent
2014 omnibus spending bill to the Department of Transportation, language directing the
agency to only grant Norwegian Air International a foreign air carrier permit if it does not
violate the U.S.–European Union–Iceland–Norway Air Transport Agreement (“Open Skies
Agreement”).86 Both the lobbyists on The Hill and Norwegian welcomed the language, yet it is
still the opinion of Norwegian’s C.E.O. that the company is not breaching the Open Skies
Agreement with Europe.87
As stated, the omnibus bill passed by Congress simply instructs the Department of
Transportation to uphold the Open Skies Agreement with Europe. 88 However, there are a
number of ways to interpret the language of the Open Skies Agreement. 89 The agreement
continually calls for a freer, more open, commercial market in its preamble. 90 Given this
language, it is necessary to delve into the binding text that Congress says the Department of
Transportation must uphold. There is the original 2007 agreement with the European Union,
an important 2010 Protocol that amended provisions of the 2007 Open Skies Agreement, and
finally there is the second 2010 Protocol that actually incorporates both Iceland and Norway
into the international agreement.91
Logan, supra note 12.
Air Transport Agreement, U.S.-E.U. (30 April 2007); Air Transport Agreement, U.S.-E.U. (Iceland, Norway) (21 June
2011) http://www.state.gov/documents/organization/170897.pdf (date accessed: 24 August 2015); Consolidated
and Further Continuing Appropriations Act of 2015, H.R. 83, 113th Cong. § 415(b); Bart Jansen, “Congress Pleases
Both Sides in Norwegian Airline Dispute”, U.S.A. Today, 11 December 2014, 10:50 A.M.,
http://www.usatoday.com/story/todayinthesky/2014/12/11/norwegian-air-international-dot-alpaafa/20240759/ (date accessed: 24 August 2015) [hereinafter Jansen].
87 Jansen, supra note 86.
88 Consolidated and Further Continuing Appropriations Act of 2015, H.R. 83, 113th Cong. § 415(b).
89 Jansen, supra note 86.
90 Air Transport Agreement, U.S.-E.U. (30 April 2007) 4-5.
91 Air Transport Agreement, U.S.-E.U. (30 April 2007); Air Transport Agreement, U.S.-E.U. (Iceland, Norway) (21 June
2011);
Air
Transport
Agreement,
U.S.-E.U.
(24
June
2010)
http://www.state.gov/documents/organization/143930.pdf (date accessed: 24 August 2015).
85
86
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A. The Original 2007 U.S.–E.U. Air Transport Agreement: The Argument for Norwegian
Air International
“Desiring to promote an international aviation system based on competition among airlines in
the marketplace with minimum government interference and regulation ...”92
The original 2007 agreement has a number of articles and clauses that work to the
favour of Norwegian Air International. Amongst these favourable articles, include Article 2, the
“Fair and Equal opportunity” article, which states that “each party shall allow a fair and equal
opportunity for the airlines of both Parties to compete in providing the international air
transportation governed by this agreement”. 93 The idea that this open skies agreement was
originally drafted for the purposes of allowing for more competition in the air only bodes well
for the argument behind granting Norwegian Air International a F.A.A. foreign air carrier
permit with its Irish aircraft.94
Furthermore, there is Article 4, which allows for the applications from an airline of one
Party to be granted appropriate authorisations and permissions with minimum procedural delay.95
Given the pending issue before the F.A.A. regarding Norwegian Air International’s foreign air
carrier permit, the idea of minimum procedural delay is merely laughable for the yearlong
headache it has caused their Irish subsidiary.96 In further support of Norwegian’s argument,
Article 10 governs commercial operations, it is Article 10(2)(b) that allows for the “airline of
each Party [to] be entitled ... [to] entry, residence, and employment, to bring in and maintain
in the territory of the other Party managerial, sales, technical, operational, and other specialist
Ibid. at 4.
Air Transport Agreement, U.S.-E.U. (30 April 2007), art. 2.
94 S. Broderick, C. Buyck and J. Flottau, “Norwegian’s Ambitions Test Open Skies Deal”, Aviation Week, 24
February 2014, http://aviationweek.com/awin/norwegian-s-ambitions-test-open-skies-deal (date accessed: 24
August 2015). “OpenSkies.travel to Promote Open Skies Policies and Robust Aviation”, Business Travel Coalition,
22 January 2015, http://www.businesstravelcoalition.com/press-room/2015/january-22---openskiestrave.html
(date accessed: 24 August 2015).
95 Ibid. art. 4. Article 4(b) goes on to state that a requirement for this privilege of minimum procedural delay is
extended to airlines that are licensed as a E.U. airline, or “Community airline,” and has its principal place of
business in the territory of the European Community. It must be further noted that Norwegian Air International
is an Irish subsidiary, and therefore would be subject to this article beginning with its enforcement in 2007.
96 As of this writing Norwegian Air International’s application for a permit from the F.A.A. has been pending for
over a year. See K. Laing, “Feds Reject Norwegian Air Bid for Expedited US Flight Approval”, The Hill,
2 September 2014, 5:17 P.M.), http://thehill.com/policy/transportation/216434-feds-dismiss-norwegian-air-bidfor-expedited-us-flight-approval (date accessed: 24 August 2015) [hereinafter Laing].
92
93
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staff who are required to support the provision of air transportation.”97 One can argue this is
another fear of American carriers, because the commercial operations for Norwegian Air
International have the potential to further expand on the ground as well as in the air if granted
a permit.98
B. The 2010 Protocol: The Argument for Norwegian Air International Builds
“Intending to build upon the framework established by the Air Transport Agreement ... with the
goal of opening access to markets and maximizing benefits for consumers, airlines, labour, and
communities on both sides of the Atlantic ...”99
The 2010 Protocol to the Open Skies Agreement merely changes the significant
wording in a number of articles pertaining to environment, the social dimension of the
Agreement, and enhances the responsibilities of the presiding Joint Committee to further the
enforcement of the Agreement. 100 However, there is one article that was amended by the
Protocol that works to Norwegian’s favour to ensure F.A.A. certification.101 Article 6 of the
2010 Protocol amends Article 21 of the original 2007 Agreement, and replaces it with an article
entitled, “Further Expansion of Opportunities”.102 Article 21(1) in the Agreement now reads,
“The Parties commit to the shared goal of continuing to remove market access barriers in order
to maximize benefits for consumers, airlines, labour, and communities on both sides of the
Atlantic”.103 Paragraph 1 continues to state how the Agreement is to serve as a model for other
countries to encourage the opening up of their own air service markets.104
For Norwegian’s C.E.O., Bjørn Kjos, it is seemingly baffling to read such a language in
both the original draft of the agreement, and the 2010 Protocol, and read such language
continuing to the furtherance of a more open market, while his company is instead continuing
Air Transport Agreement, U.S.-E.U. (30 April 2007), art. 10 (2) (b).
A great example of the European furthering of ground commercial operations that have overcome American
completion in the United States is the Lufthansa subsidiary LSG Sky Chefs, which has strongly competed against
its American rival Gate Gourmet.
99 Air Transport Agreement, U.S.-E.U. (24 June 2010), 4.
100 Ibid. arts. 3, 4, and 5.
101 Ibid. art. 6.
102 Ibid.
103 Ibid. art. 6 § 1.
104 Ibid.
97
98
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to having play to the regulatory environment the United States has created. In principle, it is
the United States, not Norwegian Air International that is in breach of the Agreement for
failing to allow for the minimisation of regulation regarding transatlantic travel, and for failing
to remove such “market barriers” as the airline continues to have to overcome just for foreign
air carrier permit from the F.A.A.105
C. The 2010 Air Transport Agreement incorporating Iceland and Norway
“Desiring to promote an international aviation system based on competition among airlines in
the marketplace with minimum government interference and regulation ...”106
Generally speaking, the Open Skies Agreement incorporates both Iceland and Norway
into the application of the original 2007 Air Transport Agreement under Article 2 of this new
2010 Agreement with Iceland and Norway, so that Iceland and Norway shall have “all of the
rights and obligations of Member States under [the] agreement.”107 The majority of the new
agreement specifies the registration process with the International Civil Aviation Organization
and its entry into force.108 There is little that is altered in the Open Skies Agreement with
Iceland and Norway that differs from the 2007 Agreement, or the 2010 Protocol. Luckily for
Norwegian Air International, this ensures that Norway is subject to the current provisions of
the Open Skies Agreement between the U.S. and the E.U., including all of its encouraging
competitive terminology throughout the various agreements and introductory preambles.
D. Chevron and the F.A.A.’s Denial of Norwegian Air International of a Foreign Air
Carrier Permit in Accordance with the Open Skies Agreement
Due to Congress’ speaking of the issue in its recent omnibus bill, should Norwegian Air
International begin to pursue the F.A.A. in the District of Columbia District Court, it is likely
that the court would apply the “Chevron two-step”, 109 normally applied to the rule-making
process of federal independent agencies.110 The Supreme Court ruled in Chevron that a two-step
test is applied to the rule-making process and conclusion of agency reasonableness using,
The breach referenced would include Article 4 of the original 2007 Agreement, and Article 6 in the Protocol
(now Article 21 in the Agreement).
106 Air Transport Agreement, U.S.-E.U. (Iceland, Norway) (21 June 2011), 4.
107 Ibid. at art. 2.
108 Ibid. arts. 4, 6.
105
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(1) “whether Congress has directly spoken to the precise question at issue,” and (2) “the court,
as well as the agency, must give effect to the unambiguously expressed intent of Congress.”111
A careful analysis of applying the Chevron two-step is necessary in order understand the
outcome of the court, in the event Norwegian comes to the decision to pay for the expensive
litigation that comes with American court system, and the potential for repeated appeals. First,
one must ask if the Congress actually spoke directly to the precise question as to whether
Norwegian Air International was prevented to enter the market and receive a foreign air
carrier permit from the F.A.A. An argument can be made Congress spoke twice to this precise
issue. First, with the agency passage of Section 119.1 of the Code of Federal Regulations, which
grants the F.A.A. the authority to grant and relinquish any operating certificate for any airline
carrier.112 Secondly, Congress explicitly spoke to the issue with passage of the recent omnibus
bill, which called for the Department of Transportation to consistently follow the provisions of
the Open Skies Agreement with Iceland, Norway, and the E.U.113
With Congress speaking directly to the precise question at issue, the next step Chevron
gives the court is to ask whether the F.A.A. was unambiguous in expressing the intent of
Congress.114 For Norwegian Air International, this is the defining step that would determine
whether the F.A.A. ambiguously applied its regulatory authority in failing to grant the airline
carrier a foreign air carrier permit. The strongest, and most logical, conclusion is yes, the
F.A.A. did ambiguously apply their regulation. Given the current situation at hand, Norwegian
Air International is merely an Irish airline operating under a Norwegian name. It is an Irish
subsidiary with Irish registered aircraft.115 The failure to grant a foreign air carrier permit is an
erroneous application of the regulation, because it is applied to an airline that sought out a
more favourable labour and tax environment by creating a new subsidiary. The F.A.A. is not a
foolish independent agency, yet for fear of public scrutiny, it will likely not base its certification
Chevron, 467 U.S. 837 (1984).
The District of Columbia Circuit Court has applied the Chevron two-step to the F.A.A. in the recent past, most
notably in Aeronautical Repair Station Association, Inc. v. F.A.A., 494 F.3d 161, 166-67 (D.C. Cir. 2007).
111 Chevron, 467 U.S. at 842–43. See also Aeronautical Repair Station Ass'n, Inc. v. F.A.A., 494 F.3d 161, 166 (D.C. Cir.
2007).
112 14 C.F.R. § 119.1 (2007).
113 Consolidated and Further Continuing Appropriations Act of 2015, H.R. 83, 113th Cong. § 415(b).
114 Chevron, 467 U.S. at 842-43.
115 Thornton, supra note 12.
109
110
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decision on the protectionist premise that Norwegian Air International was not granted a
foreign air carrier permit due to the fact that American carriers must drastically lower prices to
compete against a low cost carrier entrant on the transatlantic market.
A question arises as to what the difference is between Norwegian Air International
(operating as Norwegian Air Shuttle), and the Irish flagship carrier, Aer Lingus, from flying
across the Atlantic with F.A.A. a foreign air carrier permit on Irish registered aircraft.
If Norwegian Air Shuttle would simply relinquish full corporate control of Norwegian Air
International, and call the airline “Irish Air International,” would Congress and the F.A.A. then
allow for the low cost structure to fly across the Atlantic to compete against American
airliners? Arguably, no. Norwegian has far bigger plans with the 787 Dreamliner. 116
The aircraft are simply registered in Ireland, but for purposes of connecting major American
cities to major European cities, not just directly to Norwegian and Irish cities.117 Norwegian
Air Shuttle sees the profits on the New York to London routes and the Los Angeles to Paris
routes – they want in on the profitable action.
In the event that the F.A.A. would make the argument that the granting of
Norwegian Air International an airline a foreign air carrier permit is not consistent with the
U.S.-E.U.-Iceland-Norway Air Transport Agreement, the agency would be inconsistent with
Article 2, also known as the “Fair and Equal Opportunity” article in the Open Skies
Agreement;118 furthermore, the agency would continue its breach of Article 4 of the Agreement
as they continue to bar Norwegian Air International a foreign air carrier permit with continued
procedural delay rather than “minimum procedural delay”. 119 While applying Chevron, the
argument that the F.A.A. acts ambiguously by denying Norwegian Air International a foreign
air carrier permit holds a tremendous amount of credence, and would therefore be inconsistent
with the administrative rule-making process. Given the forgoing arguments, whichever court
should hear a case brought by Norwegian Air International against the F.A.A. should be
Mouawad, supra note 71; R. Wall, “Norwegian Air C.E.O. Seeks More Boeing 787-9s”, The Wall Street Journal, 3
July 2014, 12:24 P.M., http://www.wsj.com/articles/norwegian-air-ceo-seeks-more-boeing-787-9s-1404404649
(date accessed: 24 August 2015).
117 Mouawad, supra note 71.
118 Air Transport Agreement, U.S.-E.U. (30 April 2007), art. 2.
119 Air Transport Agreement, U.S.-E.U. (30 April 2007), art. 4.
116
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reminded of the infamous Article 20 within the 2007 Open Skies Agreement that explicitly
states its competitive intent.
1.
The Parties recognize that competition among airlines in the transatlantic
market is important to promote the objectives of this Agreement, and confirm that
they apply their respective competition regimes to protect and enhance overall
competition and not individual competitors.
2.
The Parties recognize that differences may arise concerning the application of
their respective competition regimes to international aviation affecting the transatlantic
market, and that competition among airlines in that market might be fostered by
minimising those differences.120
IV - If not the Agency, then the Court(s): Emirates and the Milan Malpensa – New YorkJ.F.K. Route
Unlike Norwegian’s situation with the F.A.A., Emirates is a completely different
situation, mainly because as of 17 December 2014, the Italian Supreme Administrative Court
ruled in favour of the airline’s maintaining their Milan to New York route. The flight, also
known as EK 205, caused a firestorm from the Italian equivalent of Airlines for America,
Assaereo, which represents flagship carrier Alitalia and other Italian airlines.121 The issue arose
from the same fear Norwegian brings to American carriers – competition. The Emirati airline
filed with the Italian Civil Aviation Authority (“E.N.A.C.”) to operate the Milan Malpensa to
New York-J.F.K. route, and was granted permission to operate the route. Not surprisingly,
given the political clout of Emirates in the American decision making process, the airline faced
little opposition stateside when reviewing its foreign air carrier permit on the route from the
F.A.A., and its airport slot at New York’s J.F.K. International Airport. Unlike Norwegian, the
fight has been completely in Europe in the Italian administrative court system.
Air Transport Agreement, U.S.-E.U. (30 April 2007), art. 20 (emphasis added).
D. Cameron, “Italian Court Rules Against Emirates’ Milan – New York Route”, The Wall Street Journal, 10
April 2014, 4:20 P.M., http://www.wsj.com/articles/SB10001424052702303873604579493643517437548 (date
accessed: 24 August 2015) [hereinafter Cameron].
120
121
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The Italian administrative court system is broken into twenty-one regional
administrative tribunals in Italy, which all appeal to the Council of State. 122 The region
governing Malpensa International Airport in Milan is in the Lombardia region of Italy. Shortly
after Emirates received its certification from E.N.A.C. to begin its Milan to New York route,
it was Assaereo who filed in the regional administrative court, also known as the Tar Lazio or
the Tribunali Amministrativi Regionali,123 to bar any further flights on this route operated my
Emirates, merely because they were not an America or Italian carrier, and therefore were in
breach of the Open Skies Agreement between the U.S. and the E.U. 124 The regional
administrative court in Lombardia agreed with Assaereo’s argument, 125 and halted the
servicing of the Milan–New York route operated by Emirates. 126 Emirates hurried for an
appeal to be heard before the Supreme Administrative Court, the court granted Emirates an
appeal, and further provided a stay against the ruling of the regional administrative court, so
the airline could continue its servicing on the transatlantic route.127 On 17 December 2014, the
Supreme Administrative Court, also known as the Consiglio di Stato (“Council of State”),128
granted permission for Emirates to continue operating the Milan–New York route, rejecting
the opposing argument brought by Assaereo.129
“Administrative Justice in Europe – Report for Italy”, Associations of the Councils of State and Supreme
Administrative
Jurisdictions
of
the
European
Union,
<http://www.juradmin.eu/en/eurtour/i/countries/italy/italy_en.pdf> (date accessed: 18 February 2015), 3.
123 “Organisation of Justice – Italy”, European Judicial Network in Civil and Commerce Matters, 7 May 2006,
http://ec.europa.eu/civiljustice/org_justice/org_justice_ita_en.htm (date accessed: 24 August 2015).
124 Cameron, supra note 121.
125
Council
of
State
(Section
4),
No.
01811/2014,
https://www.giustiziaamministrativa.it/cdsintra/cdsintra/AmministrazionePortale/DocumentViewer/index.html?ddocname=VS4BFG
WOODPHROSZKN37OISEF4 (date accessed: 24 August 2015).
126 “Italian Court Against Emirates Airline, Cattaneo: ‘Administrative Madness’”, Italia UAE, 4 November 2014,
http://italiauae.com/en/news/36-italian-court-against-emirates-airline-cattaneo-administrative-madness
(date
accessed: 24 August 2015).
127 A. Lala, “Emirates to Appeal Against Milan-New York Route Ban”, Arabian Business, 16 April 2014, 1:52 P.M.,
http://www.arabianbusiness.com/emirates-appeal-against-milan-new-york-route-ban-546787.html (date accessed:
24 August 2015).
128
Council
of
State
(Section
4),
No.
06
167
/
2014,
https://www.giustiziaamministrativa.it/cdsintra/cdsintra/AmministrazionePortale/DocumentViewer/index.html?ddocname=AYP4N
OYU6ZLIGHVFVQB7Q2ZXJU (date accessed: 24 August 2015); “Association of the Councils of State and
Supreme Administrative Jurisdictions of the E.U. (ACA-Europe)”, European Commission, July 2014, https://ejustice.europa.eu/fileDownload.do?id=5d3170d3-5df5-45e8-a0b2-7b8de22a34a8 (date accessed: 24 August 2015).
129 Danilo Masoni, “Italian Court Lifts Block on Emirates’ Key Milan-New York Route”, Reuters, 17 December
2014, 1:28 P.M.), http://www.reuters.com/article/2014/12/17/emirates-italy-idUSL6N0U149M20141217 (date
accessed: 24 August 2015).
122
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Milan is no exception to the profitability of the transatlantic routes; it is Italy’s largest
city by gross domestic product.130 What seemingly frightened Assaereo was the threat against
the Italian airlines from continuing to capitalize on what is already a profitable route for them.
Furthermore, as a member of Skyteam,131 Alitalia has the opportunity to operate the route, and
participate in profit sharing with its alliance partner Delta Airlines, which also services a New
York–Milan flight.132
What was a quietly-kept secret throughout the administrative proceedings was
Alitalia’s newest venture with another Emirati airline, Etihad Airways. Etihad had not only
began a code-sharing campaign with Alitalia for passengers to conveniently transit through
Rome en route to the Middle East, Etihad had further purchased a 49% stake in Alitalia.133
Luckily for Emirates, the purchasing of the stake in Alitalia on behalf of Etihad took place in
the midst of the pending appeal of before the Supreme Administrative Court in Italy – almost
four months after the original regional administrative court’s decision in Lombardy to bar the
Emirates operation.134
Emirates’ ability to fly from Milan to New York and return daily is a fifth freedom of
flying, meaning they have the right as an airline to carry revenue traffic between foreign
countries as a part of services connecting the airline’s own country.135 The airline continues to
operate a Boeing 777-300ER on the route. Delta Airlines flies a slightly smaller aircraft, an
A330-300, and code-sharing partner Alitalia, an even smaller variation, an A330-200. 136
Emirates services the route with a higher seat capacity, and therefore is able to generate a
V. Bhaskara, “Italian Court Rules Against Emirates’ Milan – New York Route”, Airways News, 11 April 2014,
http://airwaysnews.com/blog/2014/04/11/italian-court-rules-against-emirates-milan-new-york-route/
(date
accessed: 24 August 2015) [hereinafter Bhaskara].
131 “SkyTeam Members”, Skyteam, <http://www.skyteam.com/en/About-us/Our-members/> (date accessed: 12
February 2015).
132
“(DL)
Delta
Air
Lines
418
On-time
Performance
Rating”,
FlightStats,
<http://www.flightstats.com/go/FlightRating/flightRatingByFlight.do?airlineCode=DL&flightNumber=418&d
epartureAirportCode=JFK&arrivalAirportCode=MXP> (date accessed: 18 February 2015).
133 D. Kamel and V. Silver, “Etihad Seals $2.4 Billion Deal to Buy 49% of Ailing Alitalia”, Bloomberg, 8 August
2014),
http://www.bloomberg.com/news/articles/2014-08-08/etihad-seals-2-4-billion-deal-to-acquire-49-ofailing-alitalia (date accessed: 24 August 2015).
134 Ibid.
135 Larsen, supra note 1, at 39.
136 “Flight Review: Alitalia A330 New Magnifica Business Class Milan – J.F.K.”, The Points Guy, 3 June 2013,
http://thepointsguy.com/2013/06/flight-review-alitalia-a330-new-magnifica-business-class-mxp-jfk/
(date
accessed 24 August 2015).
130
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larger profit on the Milan–New York route due to the capacity of the aircraft it uses. Emirates
is one of Boeing’s largest operators of the Boeing 777 aircraft and is the world’s largest
operator of wide body aircraft with superior cabins,137 while Alitalia continues to fly a large
fleet of aging Airbus aircraft that continue to fail to provide the same in-flight passenger
experience that Boeing aircraft can for their customers.138 The aircraft Emirates flies tend to be
not only very new, but also very well serviced. Emirates is a state-supported airline out of the
United Arab Emirates.139 This is all said to beg the question, where was the fight on the other
side of the Atlantic? Why must Norwegian continue to put up such a fight for a foreign air
carrier permit with similar American-made 787 aircraft, yet with Emirates, there is the
possibility that this inaugural flight between Europe and the United States is to later further
expansion of using Milan Malepensa International Airport as a new European hub? According
to the Council of State, the operation between the United States and Europe solely by an
Emirati airline does not break the Open Skies Agreement between the U.S. and E.U., it actually
furthers the “fifth freedom” rights for airlines to fly between both continents.140 If the Italian
court would, for whatever reason, not rule in favour of Emirates, it would be in direct
contradiction with a number of other fifth freedom flights between the U.S. and E.U. Member
States.141 The argument could be made that, had Etihad held off on their 49% stake in Alitalia
until the pending appeal before the Council of State came to a decision, the outcome could have
very well been different. The influence of having Eithad, a direct competitor against
Emirates,142 could only have fuelled the argument for the Emirates’ legal team to make the
argument that they were being strong-armed out of the route for the business purposes of their
Emirati competitor.
J. Bachman, “Emirates Adds Non-Dubai Flight and Enters Trans-Atlantic Fray”, Bloomberg, 28 August 2013,
http://www.bloomberg.com/bw/articles/2013-08-28/emirates-adds-non-dubai-flight-and-enters-trans-atlanticfray (date accessed: 24 August 2015).
138 “In most ways that matter, the 777 is much the better airplane”: J. Newhouse, Boeing Versus Airbus: The Inside
Story of the Greatest International Competition in Business (New York: Vintage Books, 2007) at 8.
139
M.
Maier,
“Rise
of
the
Emirates
Empire”,
CNN,
1
October
2005,
http://money.cnn.com/magazines/business2/business2_archive/2005/10/01/8359251/index.htm (date accessed:
24 August 2015).
140 M. Rivers, “Emirates Wins Appeal Over Milan New York Route”, FlightGlobal, 19 December 2014, 12:53 P.M.,
www.flightglobal.com/news/articles/emirates-wins-appeal-over-milan-new-york-route-407317/ (date accessed
24 August 2015).
141 Note other Fifth Freedom flight examples: Air New Zealand Flight 2 (Los Angeles - London Heathrow), and
Air Tahiti Nui Flight 8 (Los Angeles - Paris C.D.G.).
142 “Emirates Increases Competition with Etihad and Qatar as it Adds Chicago to its US Network”, CAPA Centre
for Aviation, 5 March 2014, http://centreforaviation.com/analysis/emirates-increases-competition-with-etihadand-qatar-as-it-adds-chicago-to-its-us-network-155806 (date accessed 24 August 2015).
137
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One would think that Emirates’ entrance into Milan would only further the Italian
economy, and be well welcomed by the Italian authorities. The answer is simple: the
competition is too much for Alitalia and its 49% owner Etihad to want to compete against. Both
Emirates and Etihad could have plans for expanding European service, 143 yet one thing is
certain: they both have their eyes on Milan.144 There is little to expand on the current situation
surrounding Emirates and its operating of Milan to New York, because the Italian Council of
State has already ruled in their favour, and the F.A.A. continues its favourable affirmation for
Emirates. Thus, this potentially opens the floodgates for a second hub for Emirates outside of
Dubai Intentional Airport, and in the largest G.D.P.-yielding Italian city of Milan.145
V - Concerns Related to the U.S.–E.U. Open Skies Agreement
A growing number of concerns have surrounded the Open Skies Agreement since its
signing in 2007. There is a growing concern surrounding the ownership of aircraft, and the
potential to allow for European investors to own more than the current allotment that is 49.9%
of an American carrier. 146 Predatory pricing, a “free for all” transatlantic competitive
environment,147 and the possibility of waning profitability for the American carriers,148 tops the
list of current concerns for what the 2010 Protocol and the original 2007 Open Skies
Agreement bring to the minds of those heavily invested in the aviation industry – rightfully so,
considering that North America and Europe make up 64% of the world’s global employment in
aviation. 149 However, this section will focus on what is believed to be two of the most
transformative provisions in the current version of the Open Skies Agreement, while the issues
R. Jones, “Etihad Airways Seeks Deeper European Foothold”, The Wall Street Journal, 7 April 2014, 11:44 A.M.,
http://www.wsj.com/articles/SB10001424052702304640104579487044183280088 (date accessed: 24 August
2015); M. Fabey, “Emirates Orders More Airbuses as It Seeks Europe Expansion”, Travel Weekly, 9 July 2010,
http://www.travelweekly.com/Travel-News/Airline-News/Emirates-orders-more-Airbuses-as-it-seeks-Europeexpansion/ (date accessed: 24 August 2015).
144 S. El Gazzar, “Etihad Alliance Stands to Benefit from Ban on Emirates Flying Milan-New York”, The National,
19 August 2014, 5:03 P.M., http://www.thenational.ae/business/aviation/etihad-alliance-stands-to-benefit-fromban-on-emirates-flying-milan-new-york (date accessed: 24 August 2015).
145 Bhaskara, supra note 130.
146 (2009-2010) 9 Issues Aviation L. & Policy 341, 355.
147 Milmo, supra note 7.
148 J. Mouawad, “Open-Skies Agreements Challenged”, International New York Times, 6 February 2015,
<http://www.nytimes.com/2015/02/07/business/us-airlines-challenge-open-skies-agreements.html>.
149 North America accounts for 37% global employment in aviation, Europe accounts for 27% of air-transport
employment and GDP. See (2007) 72 J. Air L. & Com. 21, 38.
143
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with Norwegian Air International and Emirates continue to remain controversial on both sides
of the Atlantic.
A. Emerging Competitors for American Carriers
The entrance of foreign carriers into the market is among the largest concern for
carriers in the United States.150 With this emergence of foreign airlines, especially in Europe,
there is a strong pressure for the U.S. to remove barriers to the market for emerging strong
global competitors. 151 This urge to remove barriers is seen in direct correlation with the
current situation with Norwegian Air International. With the liberalisation of the U.S. barriers
to entry, there will come a growing competitive environment for the American carriers to
provide the same service at such a low, more competitive, price point.152
C.E.O. of the Irish carrier Ryanair, Michael O’Leary, has begun toying with the idea of
the $12 transatlantic ticket for Americans and Europeans to affordably cross the Atlantic;153
in March 2014, the Ryanair board approved plans to commence transatlantic flights by the
Irish ultra-budget airline.154 Are American carriers really in a position to compete with prices
such as this? Furthermore, will American carriers begin to scream foul as they claim predatory
pricing according to Brooke?155 This argument will hardly hold water, considering that the
Brooke dealt with an oligopoly setting,156 and the transatlantic commercial aviation market is
anything but an oligopoly with the current number of carriers. The fear for this price
competition came from the large number of aircraft orders that were expected for delivery in
2007 given that “in the event demand growth in services takes a downward path, large scale
C. Elliot, “Should Foreign Airlines Be Allowed to Fly Domestic Routes?”, U.S.A. Today, 6 January 2014, 11:25
A.M.,
http://www.usatoday.com/story/travel/flights/2014/01/05/elliott-let-foreign-airlines-fly-domesticroutes/4329825/ (date accessed: 24 August 2015) [hereinafter Elliot].
151 (2009-2010) 9 Issues Aviation L. & Pol’y 341, 359.
152 “OpenSkies.travel to Promote Open Skies Policies and Robust Aviation”, supra note 55.
153 (2009-2010) 9 Issues Aviation L. & Policy at 343.
154 J. Wild, “Ryanair Board Approves Plan for Transatlantic Travel”, Financial Times, 16 March 2015 6:05 P.M.,
http://www.ft.com/cms/s/0/4822a29e-c995-11e4-b2ef-00144feab7de.html (date accessed: 24 August 2015).
155 Brooke Group Ltd. v. Brown and Williamson Tobacco Corp., 509 U.S. 209 (1993) (holding that the United States
takes a staunch approach against cut-throat predatory pricing in an oligopoly setting).
156 Ibid.
150
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new deliveries could force airlines to enter into cutthroat competition just as airlines are
beginning to make a profit ...”.157
Competition within the aviation industry consists of the business and leisure markets.158
For the business sector, the passenger typically flies on the company’s dime, so the priceconscious passengers show little concern for the fare, and more concern for the service
provided.159 However, for the leisure market, which Norwegian Air International would mainly
serve, there is a great demand for lower fares.160 The leisure market merits a different kind of
competition where the fare is the utmost of consideration, while other aspects such as facilities
may only play a part in the passenger’s consideration to fly on the carrier.161 Specifically, the
American legacy liners can make an argument for the F.A.A. to continue its stringent
regulating of the transatlantic market so that “mushroom” airlines that undercut pricing of the
larger carriers do not upset the current price balance in the market.162
B. The Eighth Freedom in Europe
The eighth freedom of flight grants the right of cabotage, meaning that a foreign carrier
can operate domestically within the borders of the foreign territory.163 In accordance with the
2007 Open Skies Agreement Article 3 paragraph 1(c)(i), airlines of the United States have the
right to fly from Europe to the United States via “intermediate points in any E.U. Member
State”.164 The E.U. has granted the U.S. this intra-E.U. traffic right – however, there is no
comparable right for European carriers to operate within the U.S.165 This remains an issue for
the E.U., because from the E.U.’s perspective there should be a mutual benefit for both sides of
(2007) 72 J. Air L. & Com. 21, 24. “Mushroom airlines” refers to spontaneous airlines that quickly form and
enter the market without much profitability or success, yet can disturb the price point of the market. For an
example, see the history of Silverjet, which first attempted an all-business class configuration from London-Luton
to Newark-Liberty International and Dubai International airports. The airline went bankrupt after about fourteen
months of service. “Silverjet Calls in Administrators”, B.B.C., 30 May 2008, 5:35 P.M.),
http://news.bbc.co.uk/2/hi/business/7427056.stm (date accessed: 24 August 2015).
158 (2007) 72 J. Air L. & Com. at 32.
159 Ibid.
160 Ibid. at 32-33.
161 Ibid.
162 Ibid. at 33.
163 F. Allen Bliss, “Rethinking Restrictions on Cabotage: Moving to Free Trade in Passenger Aviation”, (1994) 17
Suffolk Transnational L. Rev. 382, 389 ft. 25.
164 C. Westra, Note, “The April 2007 U.S. – E.U. ‘Open Skies’ Agreement: A Dream of Liberalization Deferred”,
(2009) 32 B. C. Int’l & Comp. L. Rev. 161, 168.
165 (2009-2010) 9 Issues Aviation L. & Pol’y 341, 354.
157
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the Atlantic to enjoy all rights and benefits granted to parties by the Open Skies Agreement.166
Despite this, this does not remain a “deal breaker” for E.U.,167 as the Union still signed the 2010
Protocol.168
Europe has always had a far more liberal stance on the commercial aviation market than
their counterpart across the Atlantic.169 From the view of European carriers, they would like to
have the right to service routes between the E.U. and the United States, and further that right
for service within the United States.170 To state the point bluntly, European carriers would like
the same privilege of foreign domestic service American carriers can enjoy in the E.U.
Although the eighth freedom of flight is not widely practiced in the E.U., it is likely not
exercised for strategic reasons.171 The last idea that American carriers want to put in the minds
of their European competitors is the thought that they deserve the same right to operate
domestic service in the United States. Furthermore, the impression of a third protocol to the
Open Skies Agreement that allows for foreign carriers to operate in the United States is a
growing concern for airlines.172 The question remains, how far is too far when it comes to
liberalising the market?
VI - Conclusion and Results
Although the situation surrounding Norwegian Air International and Emirates differs
in many ways, they both share one crucial aspect in common: they serve as a reminder that
sovereign territories still hold the right to regulate their own airspace.173 It is the 1944 Chicago
Convention that allows for states to decide on the regulatory environment of their own air
space.174 Despite the age of the Chicago Convention, its force still remains as the pinnacle for
countries to retain their sovereignty. Both the United States and Italy have multiple bilateral
Ibid.
Ibid.
168 Air Transport Agreement, U.S.-E.U. (24 June 2010).
169 (2009-2010) 9 Issues Aviation L. & Policy 341, 348.
170 R. Abeyratne, “Effects of United States/ European Union Open Skies on Competition”, (2009) 40 J. World
Trade 1099, 1103.
171 No specific example of an American carrier exercising the eighth freedom of flight, or cabotage, within the E.U.
could be found to show as an example. It is likely that this practice is done for strategic reasons by American
carriers.
172 Elliot, supra note 150.
173 Convention on International Civil Aviation (7 December 1944), art. 1.
174 Ibid.
166
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and multilateral open skies agreements with various foreign jurisdictions. It was under the
regulatory authority granted by the Chicago Convention that these various open skies
agreements were signed.
The Council of State has already ruled in favour of Emirates, yet in retrospect, and
according to Article 1 of the Chicago Convention, a state does have the sovereign rule to
regulate its own airspace.175 Had the Council of State applied a Chicago Convention test rather
than one that incorporates the 2007 Open Skies Agreement, Emirates could have seen an
unfavourable outcome. The E.U. must fully define whether Member States, or the economic
union, control the air space above their respective countries. There is now a grey area as to how
the “Single European Sky” initiative brought forth in 2004 for by the European Parliament,176
affects Article 1 of the Chicago Convection, or Article 6 of the 2007 Open Skies Agreement.177
However, from a legal perspective, “carriers of [Member States] of the E.U. cannot have a
European nationality since the E.U. does not have the sovereign status of a state”. 178
Regardless of the influence with Etihad’s stake in Italian flagship carrier, Alitalia, Etihad
cooperated with Article 20 of the Open Skies Agreement, which does not allow for NonMember States to own more than 49.9% total equity of a European carrier.179 Etihad played the
game according to the provisions of the Open Skies Agreement to break into the European
market, rather than immediately beginning service as Emirates has done. Luckily, on appeal,
the Council of State felt the need to apply a test provided by the Open Skies Agreement, rather
than one that would encompass the ad coelum legal argument behind Article 1 of the Chicago
Convention.180
The supposed circumvention of Norwegian labour standards and taxes should not be a
concern for the governing Federal Aviation Administration, and should not be taken under
consideration for Norwegian Air International’s application for a foreign air carrier permit to
service the United States. Despite “Norwegian” in the name of the airline, the aircraft are Irish
Ibid.
Official Journal of the European Union, O.J. L. 96 1-42, http://eur-lex.europa.eu/legalcontent/en/ALL/?uri=OJ:L:2004:096:TOC (date accessed: 24 August 2015).
177 Air Transport Agreement, U.S.-E.U. (30 April 2007), art. 6 annex 4 para. 1. I. H. Ph. Diederiks-Verschoor,
An Introduction to Air Law, 8th ed. (Alphen aan den Rijn: Wolters Kluwer, 2006), 94-96.
178 (2007) 72 J. Air L. & Com. 21, 28.
179 Air Transport Agreement, U.S.-E.U. (30 April 2007), art. 6 annex 4.
180 Convention on International Civil Aviation (7 December 1944), art. 1.
175
176
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and were granted an Air Carrier Operating License by the Irish Commission for Aviation
Regulation and an Air Operator’s Certificate by the Irish Aviation Authority.181 Therefore, this
question of why the aircraft were registered in Ireland should not be considered as
circumventing any Norwegian law, it is a conscious business practice the Irish authorities are
well aware of with Norwegian Air International’s potential to operate the majority of its
business mainly outside of Ireland.182 It was up to the Irish government’s discretion to grant
the aircraft the registration to begin with – thus the airline should be considered as Irish, not a
shifty Norwegian skinflint corporation.
Furthermore, the F.A.A. is failing to uphold the Open Skies Agreement by not granting
Norwegian Air International a foreign air carrier permit to operate. 183 As it was outlined
previously in this paper, every variation of the Open Skies Agreement and its amending
protocols, there is a consistent call for the opening of the commercial aviation market to allow
for more competition. 184 Norwegian Air International is continually having to undergo an
invasive procedural conundrum, and is suffering as a result.185 A case could easily be brought
against the F.A.A. for causing undue harm against the airline, for failing to grant a foreign air
carrier permit when all procedures are met.186 An airline, or any corporate entity, should not be
punished for outsmarting a regulatory agency within the boundaries of the agency’s own
ambiguous regulations.187 Rather than argue, American carriers, such as Delta Airlines, should
adopt a similar flag-of-convenience approach by registering their aircraft in Ireland to take
advantage of this current version of the Open Skies Agreement.
The strongest argument against Norwegian Air International, when addressing the
issue of complying with the U.S.-E.U. Open Skies Agreement, is the idea that the airline is
circumventing labour laws thus breaching Article 17 bis by undermining the high standards of
Thornton, supra note 12.
Ibid.
183 Laing, supra note 96.
184 “OpenSkies.travel to Promote Open Skies Policies and Robust Aviation”, supra note 55.
185 Norwegian recently launched an online campaign called “Open our Skies” to emphasise the loss of employment
the company is suffering from the F.A.A.’s continual stalling to grant a foreign air carrier permit. Further
information can be found at www.openourskies.com .
186 P.Davies, “Norwegian Crew Lobby Washington for U.S. Permit Approval”, Travel Weekly, 19 February 2015,
8:21 A.M., http://www.travelweekly.co.uk/Articles/2015/02/19/53224/norwegian-crew-lobby-washington-forus-permit-approval.html (date accessed: 24 August 2015).
187 City of Arlington, Texas v. Federal Communications Commission et. al., 133 S.Ct. 1863, (2013) (holding that the
F.C.C. can go no further than the ambiguity will fairly allow).
181
182
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Norwegian labour law.188 Norwegian Air International needs to be viewed, not only by the
F.A.A., but by the international aviation industry, as an Irish airline – it is simply their parent
company that is a Norwegian airline, similar to that of an American automotive subsidiary
whose parent company may be in Japan or Europe, thus avoiding importation duties. Rather
than accuse Norwegian Air International of social dumping by taking advantage of the aviation
industry in Ireland, they are moreover taking advantage of the benefits of jurisdiction that has
clearly understood what creates a lucrative attraction for those in the aviation industry while
remaining a party to the agreement. In the event Norwegian Air International, or any airline
for that matter, in Europe or the United States were to undermine the labour law of the parties
in the agreement, they would use a cabin crew that does not adhere to American or any
European labour law while flying on a European flagged aircraft across the Atlantic. In fact,
Norwegian Air Shuttle has already begun doing this with a Thai cabin crew on their
Scandinavia to Bangkok routes;189 however, there has been no indication of Norwegian Air
International using a foreign cabin crew to cross the Atlantic and serve the United States.
If this were a concern to the F.A.A. or any American airline lobbying organisation, then a
granting of a foreign air carrier permit for Norwegian Air International is still in order with
proper language included reiterating Article 17 bis to avoid any future thought of a foreign
cabin crew flying on a European carrier during transatlantic service. Despite this, what
continues to scare the political giants in the American aviation industry – the idea of having
European competition enter the market with newer aircraft at a lower price – only pushes for
the American carriers to lessen their profit margins in order to continue to operate at their
current capacity and remain competitive when servicing their transatlantic routes.190
Protocol to Amend the Air Transport Agreement Between the United States of America and The European Union
Community and its Member States, art. 17 bis, http://www.state.gov/documents/organization/143930.pdf (date
accessed: 24 August 2015).
189 “Norwegian Air Shuttle’s Long-Haul Business Model. ‘Flag of Convenience’ or Fair Competition?” CAPA
Centre for Aviation, 8 January 2014, http://centreforaviation.com/analysis/norwegian-air-shuttles-long-haulbusiness-model-flag-of-convenience-or-fair-competition-146928 (date accessed: 24 August 2015).
190 “OpenSkies.travel to Promote Open Skies Policies and Robust Aviation”, supra note 55.
188