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Norwegian Air halts talks to buy Dreamliners, may quit Ireland

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[April 29, 2014]  By Joachim Dagenborg and Terje Solsvik

OSLO (Reuters)  Budget airline Norwegian Air <NWC.OL> has suspended talks on buying 20 Dreamliner planes from Boeing <BA.N> because of a delay in receiving U.S. backing for its long-haul plans, Chief Executive Bjoern Kjos said in a letter.

The airline may also reconsider plans to locate its long-haul operations in Ireland, giving up the advantage of having a European Union-based carrier, Kjos told Irish transport minister Leo Varadkar in a letter dated April 23.

Norwegian launched flights to the U.S. and Bangkok from its Nordic bases last year and obtained an Irish air operators' certificate, hoping to base the business in the EU, where it can operate under more favorable conditions and take advantage of the Open Skies trade between the U.S. and the EU.

Norwegian is operating its flights to the U.S. under a temporary permit issued by the government in Oslo.

Its application to the U.S. Department of Transportation for a permanent license, made via Norwegian's Irish affiliate, has been fiercely contested by its rivals and by unions.

They argue that Norwegian is simply trying to escape high Nordic labor costs and wants to employ cheap Thai crew, gaining an unfair advantage.

"Unfortunately, the delay in the DOT process has given us no other choice than to put our ongoing negotiations with Boeing to purchase 20 new 787-9 Dreamliner aircraft  due to be registered in Ireland  on hold until Norwegian Air International's future in the U.S. has been decided," Kjos said in the letter seen by Reuters on Monday.

"An additional delay  or in the worst case, a negative decision by the U.S. DOT  may regrettably force us to reverse our commitment to build an international long-haul airline in Ireland."

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Norwegian has been expanding at breakneck pace in recent years and has more than 200 aircraft on order. It is opening bases across Europe and plans to take on one of the most competitive markets this summer, launching long-haul flights between London and New York.

If it left Ireland, where its long-haul planes are registered, it would rebase them in Norway, where it has a permit to operate, Kjos said.

The firm already has commitments to buy or lease 14 Dreamliners but it has been looking for additional planes, because it consumes 20 percent less fuel than older jets, giving the firm a cost advantage. The 20 new Dreamliners have a combined list price of $5 billion.

Norwegian shares fell on news of Kjos's comments but later recovered some ground, trading 0.5 percent lower at 1421 GMT, lagging a 0.1 percent gain in the broader market <.OSEBX>.

(Editing by Balazs Koranyi, John Stonestreet)

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