Capturing the Flag-of-Convenience Model Before It Costs U.S. Airline Jobs
Congress Must Act to Permanently Defend Fair Competition
By Capt. Don Wykoff (Delta), ALPA International Affairs Committee Chair
Resounding opposition from ALPA pilots has helped cause one foreign airline with a flag-of-convenience business model to change the way it’s doing business, but the solution to protecting U.S. workers is for Congress to permanently block these schemes. Lawmakers must ensure that foreign airlines can’t skirt tax, labor, and safety regulations to do business with an unfair advantage over U.S. airlines, and ALPA pilots continue to lead the charge.
The flag-of-convenience business model isn’t new in commerce or exclusive to aviation. The practice began nearly a century ago in the maritime industry. Countries such as Panama created “open registries” that allowed other nations’ shipping companies to flag their ships in their countries. The resulting flag-of-convenience business model permitted these shipping companies to dodge their home nation’s employment, tax, and safety laws and regulations and provide their workers with subpar pay, benefits, and work rules.
Decades later, the flag-of-convenience business model has become the dominant practice for the world’s shipping fleet. U.S. shipping companies that work under and abide by U.S. laws and regulations face a nearly insurmountable challenge in competing against foreign businesses that can choose their rules of doing business. As a result, U.S. companies have been pushed out of the international market, and the number of U.S. mariners working on U.S.-flagged ships in international service has plunged from more than 64,000 in 1951 to only 7,600 in 2017.
ALPA supports “Open Skies”
ALPA supports the U.S. “Open Skies” policy that led to international liberalization, provided the U.S. government enforces its air service agreements, maintains labor standards, and provides a fair and equal opportunity to compete for American workers. The Association adamantly opposes foreign airlines serving the United States with the flag-of-convenience business model.
The labor article contained in the U.S.–EU Air Transport Agreement (ATA) was a history-making achievement for workers. ALPA was instrumental in the effort and worked hard to obtain the protections in Article 17 bis. It states that the parties intended that opportunities provided by the agreement were not to be used to undermine labor standards—an outcome that would result from a flag-of-convenience business model.
At the time this provision was agreed to, the U.S. State Department characterized it as a “groundbreaking article on the importance of high labor standards.” The European Commission maintained that the provision “will not only ensure that existing legal rights of airline employees be preserved, but that the implementation of the agreement contributes to high labor standards.”
Pilots raise the red flag on NAI
ALPA opposes any flag-of-convenience airline business model that it believes violates the terms of the ATA and Article 17 bis. The Association has been exposed to one foreign airline clearly focused on doing just that: Norwegian Air International (NAI). While Norwegian already served U.S. destinations with one subsidiary, Norwegian Air Shuttle (NAS), the company applied to the U.S. Department of Transportation (DOT) for U.S. foreign air carrier permit approval for a second subsidiary, NAI.
In a 200-page answer to NAI’s application, ALPA worked with Airlines for America, Delta Air Lines, United Airlines, American Airlines, the European Cockpit Association, the AFL–CIO, and other U.S. unions to lay out its opposition since, based on its application, it appeared that NAI planned to staff its transatlantic services with pilots and flight attendants who were employed under Asian contracts.
NAI sought to gain a tremendous competitive advantage over U.S. airlines and their workers who do conduct business under the rules of the agreement. ALPA, along with other fair-market advocates, asked the DOT to enforce its own trade agreement in numerous legal filings both individually and jointly with other U.S. and European labor unions.
In December 2016, the DOT issued an order approving NAI’s application without performing a public-interest assessment or placing conditions on the permit. ALPA strongly opposed this decision, and Capt. Tim Canoll, ALPA’s president, stated that the action “demonstrates an egregious lack of support for working men and women in this country.” In January 2017, ALPA and others filed a petition for review of the DOT’s order with the U.S. Court of Appeals for the District of Columbia Circuit. In May of this year, the court denied the petition.
ALPA members turn up the pressure
Despite the legal outcome, ALPA’s commitment to fight for fair competition didn’t waver. The Association has succeeded in intensifying the public pressure to stop these antifair-competition business plans. Since 2014, the Association has raised the profile of the flag-of-convenience issue at every ALPA Government Affairs Legislative Summit. ALPA staff and pilot volunteers have conducted hundreds of meetings with elected federal officials and policymakers in Washington, D.C., and throughout the country.
Canoll has made ALPA’s position clear in major speeches at D.C. policymaker events and in opinion pieces designed to reach key influencers. Through a series of white papers and outreach to leading international and national outlets, ALPA’s stand on the flag-of-convenience issue has been mentioned prominently in news coverage. The Association also helped lead a “day of action” on May 12, 2016, in which hundreds of ALPA pilots picketed the White House. ALPA members have also spoken out on social media and engaged in the Association’s Calls to Action, sending more than 23,000 letters to Congress.
NAI’s change of plan
While ALPA deployed a broad range of tactics, the union’s overarching goal has always been for NAI to employ its pilots in transatlantic service under U.S. or EU labor contracts. Because of ALPA’s advocacy, Norwegian appears to have departed from its original intent with respect to its pilots as presented in its application to the DOT.
Of Norwegian’s total 2,500 pilots, the vast majority are represented by unions in Norway, Sweden, Denmark, Finland, Ireland, Italy, Spain, and the United Kingdom and work under collectively bargained EU contracts. In the Netherlands and France, the pilots are union-represented and are negotiating their first labor agreements.
While NAI’s current practices have changed from the original plan, the company could change its behavior at any time. As a result, a higher hurdle is needed to block foreign airlines seeking to serve the United States with flag-of-convenience business models in the future.
Congress must act to defend fair competition
Thanks in large part to ALPA members’ dedication in contacting Congress on this issue, the U.S. House FAA reauthorization bill includes the text of H.R. 2150, a bill sponsored by Reps. Peter DeFazio (D-OR), Frank LoBiondo (R-NJ), Rick Larsen (D-WA), and Drew Ferguson (R-GA). If passed, this legislation will require the DOT to ensure that foreign air carrier permits are in the American public’s interest, will force the DOT to focus on flag-of-convenience airlines in its public-interest analysis, and deter such airlines from serving the United States in the future. As the U.S. Senate considers the FAA reauthorization bill, Senate lawmakers must also defend U.S. trade agreements and protect fair competition for U.S. airline industry workers.
While NAI’s change in plans may be the positive result of ALPA’s actions, the U.S. government must permanently defend a fair and free marketplace for U.S. airlines and their employees. Preventing the flag-of-convenience business model from taking root in the United States, and before it costs U.S. airline jobs, is critically important for American airline workers.
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