ALPA feared allowing this Flag of Convenience into US
Rapid Expansion and Dismal On-Time performance raise Flags
Financial Indicators not Strong
Is IAA looking?
ALPA and other interested parties have asserted that Norwegian Air Shuttle operates under a flag of convenience and thus poses a threat. One of the arguments raised at the time of that debate was whether the regulatory authorities could surveil such a far flung operation. As that baseball savant, Yogi Berra, once said “it’s déjà vu all over again?.”
The US Government issued a foreign air carrier permit to the Irish-based airline. Actually, Norwegian holds four different authorities as it explains on its website for all four airlines:
Norwegian currently holds four Air Operator’s Certificates (AOC). An AOC is an operational and technical approval issued by a country’s Civil Aviation Authority which grants the holder the right to conduct commercial flights.
Norwegian has been granted two AOCs by the Civil Aviation Authority in Norway. One is for Norwegian Air Norway (NAN), which operates from the company’s Scandinavian bases, while the other is for Norwegian Air Shuttle (NAS), which operates routs outside of Scandinavia. Norwegian has also been granted an Irish AOC for its subsidiary Norwegian Air International Limited (NAI), which is based in Dublin. The company's UK subsidiary based in London, Norwegian UK, also holds a UK AOC.
That is a complex regulatory structure and add to that dynamic, its route structure has quickly expanded. Recently, it launched 19 transatlantic routes over a period of just four months last year. Norwegian now has 145 aircraft, compared to 68 in 2012, the year it placed a mammoth order for more than 200 new planes
One of the indicators of an airline which is well managed is its on-time performance and these charts are testament to NAS’ struggle.
Structurally, NAS lists a large number of operating bases:
|Operating bases||· Alicante
Equally significantly, Aviation Analytics’ January 18, 2018 article noted:
“The average Loss per Seat on Norwegian’s unprofitable sectors was -€43 (the average Profit per Seat on profitable sectors was €37 ($46.23), or €29 ($36.23) if summer only routes are excluded). This compares to an average Loss per Seat on EasyJet’s unprofitable sectors of -€12 ($14.99).” However, it is Norwegian’s long-haul business that is the biggest drag on its profitability. The following graphic shows average Profit per Seat on Norwegian’s transatlantic routes by origin airport.
Norwegian Air Shuttle USA Destination Routes Average Profit per Seat by Origin Airport 2017
Reuters six months ago highlighted NAS’ financial weakness with this quote:
“What gets me with Norwegian…is the balance sheet should be better. It is so low on equity, so high on debt, it would be safer if they had a bit more equity behind it…This is a cyclical industry and if something goes wrong, it can drastically wrong.” Further, disturbing comments: “It did not book enough pilots for its summer schedule this year and had to cancel flights for the second time in two years.”
In summary, it would seem that there is an adequate basis for NAS’ regulator, the Irish Aviation Authority to initiate a heightened surveillance of the carrier.
European Union: 10 Things To Know About The Aviation Industry In Ireland
Last Updated: 23 January 2018
Article by Christine O’Donovan
#10 The Irish Aviation Authority has responsibility for regulating and promoting the highest levels of safety in Irish aviation. Amongst its functions, are the registration of aircraft by qualified owners and/or operators, implementing Article 83bis arrangements with other aviation authorities, and the supervision and safety assessment of foreign aircraft (SAFA). The IAA has a team of trained and authorised inspectors available to perform required inspections in accordance with the European Aviation Safety Agency programs.
14 airlines, 1,250 aircraft, more on IAA registry
Ireland – The Centre of the Global Aviation Industry – from the IAA website.
There is no announcement of an NAS investigation on the IAA website- it may not be its practice.
Aside from the almost constant complaints about the Ryanair operations and the attendant questions whether it has been adequately scrutinized, the Irish Aviation Authority is defending its decision to accept the surveillance of Norwegian Air Shuttle. The IAA points to its positive ratings by ICAO and the Eurocontrol Performance Review Body to defend the integrity of their processes and standards. Those audits reviewed IAA when their primary responsibilities were regulating carriers all contained in the 32,595 square mile land mass (roughly the size of South Carolina) and headquartered completely within a small sovereign nation.
The NAS operation will be flagged in Ireland, will draw employees from around the world, may originate flights from anywhere within the EU and may operate to points within the EU and to cities around the world (subject to approvals). This scope raises significant questions:
- Does the IAA have the human resources and the budget needed to be able to actively surveil NAS’ people and procedures at places around the EU and the world? For example, how will IAA assess NAS’ opening of a new station in East Asia prior to its first flight and over time?
- Will the NAS headquarters, not just the box office but the facility where manuals are written, and maintenance policy decisions are made, be in Ireland or Norway? If it is out of Ireland, will IAA have the sovereign powers needed to compel the production of documents and witnesses? If there is a need to take enforcement action, will the courts of Norway give the deference which a court normally affords to its executive branch?
- Will/can IAA rely on its own inspectors to watch over NAS? Must the Irish regulator use the staffs of other EU nations to help observe the daily operations of this far flung airline? If yes, what can be IAA’s expectations for consistency of interpretations from a multi-jurisdictional work force?
The controversy over the FAA’s jurisdiction over foreign repair stations is instructive. The US government (particularly the legislative branch) insisted that drug and security tests must be imposed. For a variety of reasons it took the TSA 10 years to establish such a regime. Ostensibly that decade was needed to consider the application of rules on a transnational basis. That was bad; a comparable delay involving the safety of a carrier is unacceptable. Is it clear that IAA can move swiftly in dealing with the truly multi-national airline?
Flags of convenience are common practice in the global ship cargo business. Quite callously the decision to place a shipment on a ship carrying a flag of a lesser safety authority is a risk adjusted by insurance; if the ship sinks, the proceeds from policy will cover the loss. This practice is not acceptable for aviation safety.
Before the world accepts IAA’s claim of competence to regulate NAS based on past performance, the Irish government should articulate a plan which fully demonstrates that the country has the resources committed to this regulator to practically regulate this truly global airline. It must have the budget to station inspectors in appropriate places where the carrier intends to operate; this includes human resources, budget and legal powers necessary to do the job. This is not a static model either; IAA must be able to move swiftly as NAS conquers the globe.
So that leads to the question:
Déjà vu all over again: is IAA keeping an eye on Norwegian Air Shuttle?
PS: The State of Connecticut might agree that NAS deserves some scrutiny:
Share this article: