U.S. greenlights Norwegian Air flights in blow to U.S. industry

By Jeffrey Dastin

(Reuters) - The U.S. Transportation Department said on Friday it granted flying rights to Norwegian Air Shuttle ASA's <NWC.OL> Irish unit, setting the stage for a new battle among airlines for leisure travelers across the Atlantic.

The order finalizes a tentative ruling made by the department in April and comes shortly after the European Commission formally filed for arbitration over Norwegian's request, which had languished for three years.

U.S. airlines and unions have said the subsidiary, Norwegian Air International, would undermine U.S. wages and working standards, claims Norwegian has dismissed.

The accusations have come as a fare war has escalated over the Atlantic, forcing large and established airlines to consider chopping prices, redesigning cabins and adding restrictions to win budget-conscious vacationers back from the likes of Norwegian.

"Regardless of our appreciation of the public policy arguments raised by opponents, we have been advised that the law and our bilateral obligations leave us no avenue to reject this application," the U.S. order said.

Norwegian and the Washington-based trade group representing U.S. airlines did not immediately respond to requests for comment.

(Reporting by Jeffrey Dastin in New York; Additional reporting by Alana Wise; Editing by James Dalgleish)