Bill Carey

Norwegian Air Shuttle’s drawn-out effort to obtain a foreign air carrier permit for its subsidiary to fly to the U.S. is creating drag on its bottom line. The carrier released financial results for 2014 on February 12 showing its first net loss in eight years, a result it blamed in part on the delayed permit.

 


Norwegian applied to the U.S. Department of Transportation (DOT) in December 2013 for both a foreign air carrier permit and an exemption for its Ireland-based Norwegian Air International (NAI) subsidiary to operate to and from the U.S. <a href="http://www.ainonline.com/aviation-news/air-transport/2014-09-03/us-denies-exemption-it-mulls-norwegian-air-permit">Last September, the DOT dismissed the airline’s request for an exemption</a>, which would have allowed NAI to operate while the department reviews its permit application. The latter application is pending.

 


Labor unions in the U.S., the trade union Parat in Norway and several major U.S. and European carriers oppose the application. They allege that Norwegian seeks to evade both Norwegian and international labor laws and pay pilots less by establishing NAI as an Irish airline.

 


Norwegian reported a net loss&nbsp;of&nbsp;1.05 million Norwegian krone ($137 million) compared to profit of NOK 322 ($42 million) in 2013—its first loss after seven profitable years. Total revenue was NOK 19.5 billion, a 25-percent increase over the previous year.

 


The negative result was mainly caused by fuel hedging and a weak Norwegian krone, the airline said. Costs related to the delayed permit application in the U.S. amounted to NOK 117 million ($15 million). A strike by Parat in May cost Norwegian NOK 101 million ($13 million). “There is no denying that 2014 has been a weak year for Norwegian,” said CEO Bjørn Kjos.

 


More recently, a new challenge has arisen. Delta Air Lines, Hawaiian Airlines and the Air Line Pilots Association (ALPA) have petitioned the U.S. Export-Import Bank to deny Norwegian’s application for a loan guarantee in excess of $100 million to purchase Boeing 787 Dreamliners.

 


The bank’s “below-market financing saves foreign airlines millions of dollars in financing costs when purchasing widebody airliners. These foreign airlines then use these U.S.-taxpayer-subsidized state-of-the-art aircraft to compete with U.S. airlines in the international marketplace,” ALPA president Tim Canoll stated in a press release on February 9. “The Ex-Im Bank must conduct the economic review Congress requires and ensure that U.S. industry and jobs aren’t compromised by its response to financing requests such as this application from Norwegian Air,” he added.

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Delayed Permit Application Hurts Norwegian Air Financials

Norwegian Air Shuttle's drawn out application for a U.S. foreign air carrier permit is creating drag on its bottom line.

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