PROCEEDINGS llventy-fifth Annual Meeting Theme: "Beyond Deregulation: Let Freedom Ring!" October 22-24, 1984 Parker House Boston, MA Volume XXV • Number 1 1984 T R F TRANSPORTATION RESEARCH FORUM in conjunction with CANADIAN TRANSPORTATION 4 RESEARCH FORUM 403 The Eastern Provincial Airways— Canadian Airline Pilots Association Industrial Dispute, 1982-84 by Robert A. Ellison* INTRODUCTION leading to significant efficiencies; considerable im- provements in labor productivity; and substantial On May 10, 1984, the Canadian Minister of stimulation of new demand.' In the past five years Transport, the Hon. Lloyd Axworthy, announced airlines operating in the deregulated U.S. environ- a"New Canadian Air Policy'! This new Canadian ment flew 20.907o more revenue passenger miles while air policy represents the first phase of a long term overall Canadian air traffic declined by 2.7070.9 One plan to liberalize economic regulation of the airline specific objective of the new policy is to counter the industry. The announcement came six years after seepage of passenger traffic via U.S. gateways just the Airline Deregulation Act of 19782 in the United across the border. States. During the past three years various agencies The central thrust of the new policy is to invigorate and groups, mainly governmental, had called for the industry and provide a stimulus to growth the deregulation of the Canadian airline industry through encouraging innovation and improving the Including the Economic Council of Canada,' the airline industry's efficiency and productivity. Airline Ministry of Consumer and Corporate Affairs,4 the managements, no longer hampered to the same ex- House of Commons Standing Committee on tent by regulatory constraints, would be freer to Transport,' and the Director of Investigation and manage. The same major elements outlined in this Research for the Combines Investigation Act.'The policy statement were the core elements in the re- reports and papers published from these agencies cent industrial dispute between Eastern Provincial were based upon the experience of the airline in- Airways Limited (EPA)and the Canadian Airline dustry in the United States following deregulation. Pilots Association(CALPA): innovation, efficiency The report unveiling the new Canadian air policy and productivity. stated there was evidence that regulation has: The objective of this paper is to examine the in- hindered innovation in services and pricing; reduc- dustrial dispute between EPA and CALPA during ed the flexibility of airline managements to pursue 1982-84, which from a negotiating environment new market opportunities and to adjust their opera- perspective can be regarded as a transition period tions to minimize costs; allowed airline employees from an era of regulated competition to an expected and suppliers to charge too much for their inputs, era of deregulation. A new air policy was expected because airline managements were freer under reg- but it was uncertain whether it would be as encom- ulation to pass along cost increases to their passing as the U. S. deregulation. EPA, owned by customers; and contributed to the unsatisfactory the holding company Newfoundland Capital Cor- earnings record of the industry as a whole.' In con- poration, is the designated regional carrier for the trast to these drawbacks of the present regulatory Atlantic Provinces of Canada. It also has flights to regime, the report stated it has become increasing- Montreal and Toronto in central Canada. Given the ly evident that airline deregulation in the U.S. has recessional economic environment and the an- delivered many important benefits, including the ticipated deregulatory environment in Canada in the emergence of new, low-cost airlines offering spec- early 1980's, EPA management wanted to establish tacular price cuts for no-frills services on certain a low cost, no-frills, propeller equipped subsidiary routes; a rationalizing of the airline route structure of the Newfoundland Capital Corporation(NCC), separate from EPA. Management was also deter- *Associate Professor, School of Business Ad- mined to achieve increased productivity through ministration, Dalhousie University, Halifax, Nova having pilots fly more hours per month and having Scotia a wage incentive plan. CALPA, a sister organiza- 404 TRANSPORTATION RESEARCH FORUM tion to Air Line Pilots of America in the USA,holds of EPA. If Air Maritime was successful in being bargaining rights for the pilots of most major licensed, it could hire its own pilots and not respect airlines in Canada. CALPA was certified by the the EPA pilots seniority system list. CALPA wanted Canada Labor Relations Board to represent the to modify the Scope clause in the collective agree- pilots of EPA on June 9, 1975. It had since entered ment (sections 4.01 and 4.02) so as to protect its into five collective agreements with EPA and was members against the consequences of this eventuali- attempting to come to terms over the sixth collec- ty becoming a reality!' The company was not pre- tive agreement in the dispute analyzed in this paper. pared to do this. The commissioner recommended Until recently, CALPA had been highly successful the issues be shelved to be dealt with at future in obtaining concessions for its members resulting negotiations when the reality of the issues were in enviable working conditions and benefits!' It was known. A month later both parties signed a letter concerned about the proposals and plans of EPA of Agreement accepting the conciliation commis- and also that any concessions in negotiations with sioner's report. There had already been a hearing EPA could spread to other Canadian airlines. There before the Air Transport Committee of the Cana- was also the influence of the deregulatory experience dian Transport Commission(CTC) to transfer cer- in the U. S. with wage concessions and the establish- tain commercial air services with fixed wing aircraft ment of new low cost carriers. from EPA to Air Maritime Limited, an application The industrial dispute between EPA and CALPA which CALPA opposed. lasted from the fall of 1982 until the spring of 1984. On October 8, 1982, a CTC decision (no. 6956) This dispute, which included a four month strike, issued a license to Air Maritime. As the collective decisions by two different panels of the Canada agreement had expired on September 30, 1982, the Labor Relations Board, two return to work agree- question of the Scope clause became a major issue ments and two decisions by the Federal Court of Ap- again. peal will be traced and analyzed. Three unusual The other major difference between the parties aspects of this dispute were(1) the potential to make was the desire of EPA to increase the maximum Canadian labor history by settling the status of hours of work for all of its pilots. EPA equated a replacement employees hired during a legal strike;" profitable organization with increased productivi- (2)the importation of American jurisprudence in- ty to be achieved by longer hours of work and also to the jurisprudence of Canadian labor relations by installing an incentive pay formula. CALPA boards;" and (3) a directive from the Transport showed interest in an incentive pay formula but Minister to EPA to separate its union from non- resisted it and the demands for longer hours. The union replacement cock-pit crews because the bit- CLRB panel reported that CALPA no doubt resisted ter feelings between the two groups had the poten- these demands because of the domino effect its tial to jeopardize passenger safety!' agreeing to them could have on their collective agreements with other airlines!' The commissioner Background to the Dispute proposed an alternative recommendation tying the issues of longer hours and incentive pay together The first Canada Labor Relations Board report which EPA reluctantly accepted but CALPA re- in 1983 stressed that(1) the labor relations climate fused. If the tying proposal was refused the com- between these two parties has already been vitiated missioner had proposed a 12070 wage increase retro- for many years, and (2) the issues which led to the active to October 1, 1981. A collective agreement was present confrontation already existed, and had lurk- signed but only for one year and to terminate on ed and surfaced many times in recent years!' The September 30, 1982. This was agreement no. 5 be- hostile union-management climate at EPA goes tween the two parties and it was signed almost back to a strike in 1980. The negotiations for the simultaneously with the statutory notice to bargain 1981-82 contract were protracted, requiring concilia- for its renewal. tion and finally the appointment of a conciliation The major issues affecting the renewal of contract commissioner in late 1981. Normally a conciliation no. 4 were not resolved; they were left outstanding commissioner has 14 days to report success or failure and became the central issues in the renewal of con- in assisting the parties and to make his findings and tract no. 5 in the fall of 1982: the Scope clause and recommendations known, if he failed. Extensions productivity, longer hours and an incentive wage were granted to the commissioner and he reported system. on April 26, 1982, that he could not get an agree- The chairman of the CLRB panel, Marc Lapointe, ment from the parties and, thus, he was forced to characterized CALPA as a labor organization which make recommendations. undoubtedly still benefits from the mystique of the One of the fundamental basic differences between "gods" who man the cockpits. However, it is also the parties was the Scope clause. A Scope clause is a union which has recently been confronted by the a statement of Company intent, embodied in the col- challenges of many airline owners, financially lective agreement, which outlines the entitlement squeezed by the recession which has severely stricken of the pilots on the system seniority list to all flying that industry, and had begun to have to yield, and conducted by the employer irrespective of aircraft has yielded some ground, a union which had final- types, new services developed and subsidiaries ly felt the bite of numerous layoffs and become sen- established.