Business World

Friday 22 September 2017

Viking raider's US assault heralds latest salvo in the low-cost transatlantic battle

A bruising international row erupted over Norwegian Air International's plans to use Ireland as an EU base, but this Saturday sees it all set for take-off, writes John Mulligan

Tore Jenssen, CEO of Norwegian Air International, at Imbus House, Dublin Airport. Photo: Caroline Quinn
Tore Jenssen, CEO of Norwegian Air International, at Imbus House, Dublin Airport. Photo: Caroline Quinn

Today in Seattle, Norwegian CEO Bjorn Kjos is preparing to take delivery of the airline's first 737 Max jet. The handover ceremony at the Boeing factory will involve plenty of razzmatazz for airplane geeks before Kjos steps on board for the flight to Oslo. But it also marks an important step in the evolution of Norwegian, with the high-tech jet being a linchpin of the group's efforts to provide low-cost transatlantic travel between Ireland and the US.

But Tore (pronounced Tor-eh) Jenssen won't be there. The CEO of Dublin-based Norwegian Air International (NAI), a subsidiary of Norwegian Air Shuttle, will instead be rubbing shoulders with passengers taking off on the first-ever scheduled transatlantic service from Cork this weekend.

NAI had intended to use the Max aircraft for its inaugural services between Ireland and the US; flights also start from Dublin, Shannon and Belfast on Saturday. But delivery delays mean for now all the routes will use Boeing 737-800 aircraft, which carries fewer passengers, until the Max comes into full service in a few weeks' time.

"We hope to get them on the routes in two to three weeks," says Jenssen (39), over coffee at the small, nondescript NAI headquarters at Dublin Airport where about 80 staff are employed.

"We need to get it into service and see if it works as planned, which we assume it does. Boeing is claiming that the Max will be fantastic (the plane maker promises it's as fuel-efficient as a hybrid electric car in terms of fuel used per 100 passenger kilometres) and we do believe Boeing but we want to try it out first." NAI already has almost 60 aircraft registered in Ireland.

NAI was established in Ireland more than four years ago as the stock market-listed parent group sought to establish a subsidiary within the European Union that would enable it to avail of the Open Skies agreement that exists between the United States and the EU. That agreement allows any EU-based carrier to fly to any destination in the US from any airport in the EU, and vice versa.

In what Jenssen and the Norwegian board reckoned would be a relatively straightforward process, NAI applied in 2013 to US authorities for the necessary permit (in February 2014, it got its air operator's certificate from the Irish Aviation Authority).

But their optimism was misplaced. Instead of an easy ride, NAI became the eye of a storm that first erupted into a major bun fight with US aviation unions and airlines, and then into an almost unthinkable but threatened wider trade war between the US government and the European Commission.

"We thought it would take four or five weeks," Jenssen says with a chuckle, insisting that Norwegian was prepared to wait as long as it took to get the permit from the US Department of Transportation (DOT). "As the years rolled on, I guess we thought we had waited this long that we could wait longer. The longer we waited the more sure we were that we were going to fight this. It wasn't in our minds to give up on this."

And the years did indeed roll on. As a group, Norwegian buys tens of billions of dollars worth of Boeing aircraft (among its Boeing orders are 110 Max jets and options on another 90, as well 32 787 Dreamliners) and supports thousands of US jobs. But it wasn't enough. As well-oiled US union and airline opposition got into gear, NAI's application languished in Washington DC under the Obama administration.

The 'DenyNAI' slogan devised by US unions became a mantra that gathered significant momentum Stateside, with a huge PR battle and cash fanning the flames. The NAI application became a political hot potato. Almost 200 US congressmen and women rowed in behind the unions, urging rejection of NAI's application and claiming that it would put domestic US carriers at an unfair disadvantage. The first NAI flight to TF Green Airport in Providence, Rhode Island last week - from Edinburgh - was greeted by a picket of 30 US pilots.

Tore says he wasn't necessarily surprised by the opposition, but what caught him off guard was the mudslinging.

"I was surprised that is seemed to be OK to just throw out false statements - things that are so far from the truth", he says, citing claims by the unions that NAI was simply trying to avoid stricter labour laws in Norway, and that it would use cut-price Asian crews on the routes between Ireland and the United States.

Does Jenssen think there were any legitimate grounds to any of the union opposition (the Irish Airline Pilots' Association also railed against NAI as it tried to secure its permit)? "No, I don't," says Jenssen, who's sporting an NAI pin on his suit lapel, matter-of-factly. "Allegations were made that because we were an Irish carrier under the IAA that it would be unsafe to fly with us. It's so far-fetched and unprofessional to play cards like that."

But opposition intensified. US union leaders visited Norway and Ireland to make their case against NAI. The EC finally threatened an all-out trade war with the US unless the permit was granted to NAI. It was unprecedented that one company's travails could spur such action. Was Jenssen taken aback?

"Yes and no. I didn't think it would go that far, but I'm not surprised in some ways that it did," he says as the airport's busy schedule makes itself heard through the windows.

Unions and US congressmen and women insisted that granting the NAI permit would go against the spirit and the letter of the accord. But Jenssen adds: "We have an Open Skies agreement between the EU and the US and one new player (NAI) that complies with everything that Open Skies is about.

"And what, they won't do it because they want to protect the market? That's everything that Open Skies was not intended for."

Jenssen wasn't the public face of the battle on the Norwegian side; that was largely left to boss Bjorn Kjos. But he was the one liaising with politicians, unions and other parties as the saga dragged on and reached its peak - or nadir, depending on your perspective - last year. The permit was finally granted to NAI last December, but US unions have now appealed it in court.

The aviation boss pulls no punches about his views on US carriers. They've opposed Gulf carriers Qatar, Etihad and Emirates flying to the US because they insist the airlines unfairly benefit from state-backed financial crutches (the Gulf airlines deny it), and are hugely protective of their turf. It's understandable, but the aviation market has evolved rapidly and continues to do so. It can only be blocked for so long.

"Are they dinosaurs? Absolutely," says Jenssen of his US rivals. "A young fleet is important for us - look at Europe, a lot of new airplanes. The Middle East - fantastic fleets. And go to the US and it's like an airplane cemetery. They're still the biggest operators of Boeing 717s and MD-80s (production stopped in 2006 and 1999 respectively). It's crazy." Norwegian's average fleet age is 3.6 years.

But it's about more than just fleet age, insists Jenssen.

"I laugh about the US airlines because they never get subsidies but they're happy to do Chapter 11 (file for bankruptcy) every time they're in trouble and wipe out all the pensions for their employees and then continue to compete and at the same time try to stop aviation from evolving.

"Low-cost transatlantic is coming. So why stop it? Try to make yourself more efficient instead of doing like the Americans do and trying to stop this for whatever it's worth," he says. "They know it's coming, but they try to stop it and milk the market for as long as they can. All they can do is slow it down because it is coming."

Interestingly, Ryanair chairman David Bonderman has said Ryanair won't get involved in low-cost transatlantic travel, saying routes between Ireland and the US can't be stimulated by pricing.

Tore disagrees. He points to between 140,000 and 150,000 tickets sold by Norwegian (albeit at very low, introductory fares). And flyers are also prepared to jet to secondary airports. The NAI New York service is to Stewart International Airport, about 80 minutes north of Manhattan. What NAI describes as a Boston service is actually to Providence, Rhode Island, about 70 minutes away. It remains to see now how self-sufficient the routes will be.

Meanwhile, Jenssen has immersed himself in Ireland. He sold his apartment in Norway when he left to set up NAI.

"I miss the mountains and the snow," he says. But there are benefits. In September, he's marrying an Irish woman he met days after arriving here. He sheepishly admits that he still has to organise the honeymoon. At least there should be plenty of options.

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