The U.S. Department of Transportation (DOT) has dismissed an application by the UK subsidiary of Norwegian Air Shuttle to operate flights to the United States on “procedural grounds.” While airline industry unions praised the decision, Norwegian Air said the DOT continues to review the subsidiary’s foreign air-carrier permit.

In an order released on June 30, the DOT cited overlapping issues with Norwegian’s Ireland subsidiary—Norwegian Air International (NAI)—which also sought an exemption to begin operating to the U.S. while the DOT considers its permit application. The DOT dismissed that exemption in September 2014, but the department indicated in April that it was inclined to approve the foreign air-carrier permit.

The British subsidiary—Norwegian Air UK (NUK)—applied for an exemption and permit to operate flights to the U.S. from London’s Gatwick Airport in December. The DOT’s latest action was to dismiss the exemption, which would have expedited NUK’s proposed service.

“As we have previously stated, the Department typically reserves its exemption powers in awarding foreign air carrier authority to situations where the circumstances of a case are sufficiently clear-cut to permit acting, at least for a limited term, without the additional procedural protections of show-cause procedures and (regulatory) review,” the DOT stated in the order. “The parties opposing the Norwegian UK application have raised a number of significant issues, in many instances directly overlapping the types of issues before us in the still pending proceeding involving the permit application of Norwegian Air International Limited. The Department has already characterized those issues as novel and complex in the NAI context, and it reaches the same conclusion as to the present proceeding.”

Opponents allege that Norwegian Air Shuttle seeks to evade both Norwegian and international labor laws and pay pilots less by establishing “flag of convenience” subsidiary airlines. The Air Line Pilots Association described the DOT’s latest finding as “a significant milestone in the drive to ensure fair competition for U.S. airlines in the global marketplace. NUK is a UK airline, and its employment structure for its pilots and flight attendants is unclear, as are as its potential effects on U.S. jobs and the international airline industry.”

The Transportation Trades Department, AFL-CIO (TTD), a coalition of unions representing pilots, air traffic controllers, flight attendants and other transportation workers, also welcomed the “sound decision” by the DOT. “Now that Norwegian Air’s exemption application has been dismissed, the company’s business model—described by DOT as ‘novel and complex’—will face the careful scrutiny it deserves,” said Edward Wytkind, TTD president. “Norwegian Air should not be permitted to create shell subsidiaries designed to undermine labor standards and take advantage of lax employment and tax laws.” 

In its own statement reacting to the DOT finding, Norwegian Air said the permit application by NUK remains pending, and that it is confident the subsidiary “will receive its permanent authority” to operate to the U.S.

“Norwegian UK should be entitled to a foreign carrier permit under the terms of the Open Skies Agreement,” the group stated. Norwegian’s U.S. flights currently operate under the Norwegian Air Shuttle air operator certificate, which allows the airline to operate between the U.S. and Europe. With U.S. approval for Norwegian UK, the airline will be able to more effectively utilize its long-haul fleet and establish a seamless operation, including the use of the same aircraft on both U.S. and other long-haul routes… which currently all other European airlines can.”