By Julia Fioretti
BRUSSELS (Reuters) - The European Commission will launch an arbitration procedure to resolve a dispute between Norwegian Air Shuttle (OL:NWC) and U.S. regulators over the budget carrier's wish to fly to the United States from Ireland, two sources said.
The EU executive will take the unprecedented step as it considers the delay in granting flying rights to Norwegian's Irish subsidiary a breach of the EU-U.S. Open Skies agreement, one of the people said.
Norwegian's Irish subsidiary, Norwegian Air International, applied for permission to operate flights to the United States more than two years ago, but the typically routine request has languished amid opposition from labor unions and some U.S. airlines, which say Europe's third-biggest budget carrier would undermine wages and working standards.
EU Transport Commissioner Violeta Bulc sent a letter to U.S. Secretary of Transportation Anthony Foxx on Tuesday informing him the Commission had consulted EU member states and would invoke arbitration, the person said.
Norwegian Air welcomed the news. "We are very pleased that the EU Commision is seeking arbitration with U.S. authorities to solve this long overdue issue," a company spokesman said.
"Norwegian Air International is an approved and fully operational EU carrier that meets all requirements under the Open Skies Agreement between the EU and the U.S. A final approval will lead to more new jobs on both sides of the Atlantic, more new transatlantic routes and more affordable fares," he said.
A win for Norwegian could challenge the strong position of U.S. carriers such as Delta Air Lines (N:DAL) on the lucrative transAtlantic route, where partnerships with European rivals and immunity from U.S. antitrust law have helped them churn out steady profits.
The delay has hindered the airline's ambitions to expand its long-haul operations to the United States. The carrier already flies to New York and other U.S. cities with its Norwegian operating license.
However getting permission to fly to the United States with its Irish subsidiary would mean the airline could tap into aviation rights that the EU has secured, as Ireland is an EU member, unlike Norway.
Bulc also said the delay in allowing Norwegian's British unit to fly to the United States was another breach of the Open Skies agreement.
The arbitration procedure, involving a tribunal of three arbitrators (one designated by the EU, one by the United States and one jointly appointed by the EU and U.S. arbitrators), will formally kick off after the summer and could take several months.
The U.S. Transportation Department provisionally approved Norwegian's request in April, giving opponents three weeks to file objections, but there has been no final decision.
The EU has repeatedly called on the United States to approve Norwegian Air International's request, calling it a breach of the Open Skies agreement.
The Transportation Department said it found no legal basis for denying the Irish unit's request to fly to the United States.
Norwegian has relied on the fuel-efficient 787 jetliner from Boeing Co (N:BA) to keep its costs low and cut fares on transAtlantic routes.