Final Exam Blog

One topic that I would like to revisit is the discussion about global airlines and whether or not foreign airlines are given an unfair advantage over the US carriers.  Under this topic I discussed how the Open Skies Agreement created a hands off policy by government in routes and pricing. The stipulation to this is the airline under the Open Skies Agreement must be self-sustaining and not receive government subsidies. Many US carriers said that airlines like Qatar Airways and Emirates are breaching the Open Skies Agreement. Emirates had to receive a bailout be the Investment Corporation of Dubai after a bad call on fuel hedging (Kane 2015).  Another topic that has US carriers on the fritz about foreign air carriers is their ability to buy aircraft at lower interest rates through the export-import bank (Simon 2014). I discussed how the export-import bank really helps Boeing compete with Airbus. The topic that I would like to discuss is the approval of US routes for Norwegian Air International. In this post I will discuss what exactly Norwegian Air does and what the new US approval for routes means. I would like to go over why there was a huge opposition to Norwegian Air being approved for routes in the US and who opposed it. I will then conclude with the question of whether or not Norwegian Air practices are right under the Open Skies Agreement and other opinions concerning their operations.

First off, it is very important to know that Norwegian Air International is a subsidiary of Norwegian Air Shuttle based in Norway, but created and located in Ireland. It is important to understand that the Norwegian Air brand name operates under four different operating certificates (Sumers 2016). Two of which are in Norway, one in Ireland and another in the UK. They all operate under the same name. Now Norwegian Air Shuttle has flown Europe to US routes since 2014 (Sumers 2016). As of December 2, 2016, the United States Department of Transportation has issued a final permit for flight into the Unites States with NAI’s Irish based operation. The Department of transportation stated, “Regardless of our appreciation of the public policy arguments raised by opponents, we have been advised that the law and our bilateral obligations leave us no avenue to reject this application (Martin 2016).” With the DOT’s approval, Norwegian Air’s Irish based operation can now fly into the United States. The new approval will add more routes to different cities in the Unites States. The Irish based Norwegian carrier can add more routes to the US (Sumers 2016).

Norwegian Air's US approval for the Irish airline has brought up many disputes between US carriers and organizations. Norwegian Air outsources most of its operations. For example, Norwegian Air  uses a hiring agency based in Singapore and bases the flight crews in Bangkok (Bachman & Matlack 2015). In addition they are hiring flight attendants based in the United States. By being a subsidiary of a carrier in Norway but operating out of Ireland, the airline can take advantage of the less strict labor laws, wage differences and decreased taxes in Ireland. Norway's tax and labor laws are more restrictive to the business (Mouawad 2016). By doing this they can have much cheaper ticket prices than US carriers. According to Jad Mouawad, Norwegian's Air Shuttle that had previous routes to the US from the Norway airline has had ticket prices of $509 between Oslo and Kennedy airport (US) while the same route offered by United Airlines was $895 (2014). This shows that despite being the Norway certificate operator and not the Irish subsidiary, the outsourcing of labor is still enough for decreased ticket prices.  The opposing party against Norwegian Air Internationals approval claims that the airline is not only trying to avoid the tax and labor laws of Norway but are essentially shopping around by outsourcing much of what they do in countries where the airline can save money (Bachman & Matlack 2015). The three major US air carriers strongly disapprove of the approval because they feel the business practices NAI operates under is a huge advantage (Jansen 2016). This advantage is feared by US air carriers because cheaper tickets will hurt their business as people will follow the cheaper tickets. Organizations such as the Air Line Pilots Association oppose the approval because it is feared that air line pilots and flight crews working under the US carriers will be hurt also. ALPA has also stated, "If one company is allowed to ignore the principles of U.S. air transport agreements, others will try to do so as well, and the result could jeopardize billions of dollars that airlines and their workers contribute to the U.S. economy (ALPA 2016)."

In my opinion, I don't feel that Norwegian Air's operating practices are a breach of the Open Skies Agreement. NAI doesn't receive government subsidies. The advantage they have are a result of business. There is nothing that states outsourcing is not allowed. Competition is fierce within the domains of the airline industry. According to Ted Reed, the profit margin of airlines is quite small, close to 0.1% (2013). That being said, it is quite easy to see why any kind of advantage in the airline industry would create some heated debate. However, as stated by the DOT, legally the US has no right to not allow the carrier to operate despite their operating practices. That being said I still don't condone these operating practices. If other carriers decide to follow these practices it would definitely hurt the US economy. If an airline decides to outsource everything they do, jobs would move over seas and in essence, airlines will search for the cheapest sources of labor. I think it goes without saying that safety is the highest priority. I think that the operating practices that Norwegian operates under needs to be looked over cautiously to make sure they are also doing everything in the bounds of regulations and safety if everything is outsourced in different countries. By having the majority of their practices outsourced to different countries it would be easy to have something overlooked where an airline that does everything in-house with the same country is easily watched over. At the end of the day, with Norwegian Air offering such low ticket prices I would foresee other airlines try to compete by lowering their ticket prices also. If this was to happen it would be good news for passengers as ticket prices would be lower.

References:

ALPA. (2016, July 28). ALPA Hails Congressional Opposition to Norwegian Air International. Retrieved December 13, 2016, from http://www.alpa.org/news-and-events/news-room/2016-04-28-ALPA-hails-congressional-opposition-norwegian-air-international

Bachman, J., & Matlack, C. (2015, February 12). Budget Airlines Shop the World for Cheaper Pilots. Retrieved December 13, 2016, from https://www.bloomberg.com/news/articles/2015-02-12/budget-airlines-shop-the-world-for-cheaper-pilots

Jansen, B. (2016, December 05). Norwegian Air plans U.S. expansion. Retrieved December 13, 2016, from http://www.usatoday.com/story/travel/flights/todayinthesky/2016/12/05/norwegian-air-plans-us-expansion/94986022/

 Kane, F. (2015, March 18). Emirates Airline president denies US rivals’ charges of government bailout over fuel losses | The National. Retrieved November 04, 2016, from http://www.thenational.ae/business/aviation/emirates-airline-president-denies-us-rivals-charges-of-government-bailout-over-fuel-losses 

Martin, H. (2016, December 2). Norwegian Air International gets final approval for flights to U.S., despite opposition. Retrieved December 13, 2016, from http://www.latimes.com/business/la-fi-norwegian-air-20161202-story.html

Mouawad, J. (2014, February 6). Long-Haul Expansion by a Norwegian Carrier Upsets U.S. Airlines. Retrieved December 13, 2016, from https://www.nytimes.com/2014/02/07/business/international/long-haul-expansion-by-a-norwegian-carrier-upsets-us-airlines.html?_r=1

Reed, T. (2013, February 25). Airlines, Not Yet Where They Want To Be, Make 21 Cents Per Passenger. Retrieved December 13, 2016, from http://www.forbes.com/sites/tedreed/2013/02/25/airlines-not-yet-where-they-want-to-be-make-21-cents-per-passenger/#1d0340ab2410

Simon, M. (2014, August 8). The Ex-Im Bank is hurting my business. Retrieved November 04, 2016, from http://www.chicagobusiness.com/article/20140808/OPINION/140809833/the-ex-im-bank-is-hurting-my-business 


Sumers, B. (2016, December 02). Approval of More Norwegian Air Flights Opens Door for Cheaper Transatlantic Travel. Retrieved December 13, 2016, from https://skift.com/2016/12/02/dot-approval-of-more-norwegian-air-flights-opens-door-for-cheaper-transatlantic-travel/

Job Plans and Topic Overview

Have my job plans changed after taking this course?

My previous job plans were to become a flight instructor and build my flight hours and experience. After building enough hours I had previously said that I would like to move on to the regional airlines. After taking this course, my job plans have not changed. I don't think they have changed nearly at all because it goes without saying that pilot wages are on the rise in the airlines and it is finally becoming a job that more people can find practical spending the large amounts of money up front on flight training. There were many guest speakers that discussed the rise of wages in the airlines and how many of us are coming into the industry at the right time. It is unknown how long this positive trend in aviation will continue. However, I am glad to be in it when I am. With that, my overall plans have not changed. I am also working towards my aircraft dispatch certificate on the side of flight training. I wouldn't mind having the chance to work as a dispatcher at some point in my aviation career. However, for now, my overall plans of working as a flight instructor and moving on to the regional airlines has not changed.

I will be graduating this upcoming April (winter 2017 semester). Upon graduation I will be looking to  get a job as a flight instructor. I find this to be the most efficient route to getting flight hours and experience in.

I feel like the most useful topic that we discussed in the course was the flight duty time regulations and whether or not cargo industry be exempt from them. I found this to be the most useful because I didn't exactly know all of the flight duty regulation changes. In order to examine the subject and formulate an opinion on whether or not the cargo industry should be exempt from the newer regulations, you must understand what the regulations are. In addition to helping me understand these regulations better, I felt as though these regulations affect me in a much more direct manner than all the other topics. While I am sure it can be argued most of the topics we covered would affect the industry and therefore my career also, I feel the flight duty time requirements affect me directly as they would govern my work days later on when I am able to have a career in the airlines.

I think the least useful topic that we went over was the Chinese competitor to Boeing and Airbus. I found that the topic itself was very interesting but there wasn't a great deal of discussion. I don't think this topic will effect myself and others as much as the other topics. I say this because Comac is a long ways out from becoming a huge competitor to both Boeing and Airbus. The fact that they have struggled getting certification from the FAA for some time now points to there being some kind of major problem in the certification process. The bottom line is Boeing and Airbus have been tested and proven time and time again. While it is interesting that China wants to join the competition in building aircraft, I feel it will be quite a long time before they would even impact the US.