The U.S. airline industry's experience under a regime of deregulation, as well as the potential forms of strategic interaction in a duopoly are examined in order to determine what strategies Canada's two major carriers should adopt in the deregulated Canadian airline industry. The following recommendations are made to Air Canada and to Canadian Airlines International regarding price, service, and network strategies. First, the carriers should strengthen their hub and spoke operations (i.e. by further consolidating feeder carriers, and offering a high quality of service network-wide). Second, the airlines should strive to control costs (i.e. by reducing labour and fuel costs, while capitalizing on the potential economies of scope attainable through international operations). Finally, the carriers should apply their marketing expertise (i.e. by continuing to develop their yield management systems and frequent flier programs, as well as adopting innovative, new pricing strategies). / Business, Sauder School of / Graduate

This dissertation deals with the changes which have intervened since the inception of deregulation in the US and Canadian airline industry, in the 'effort bargain'. / It deals first with the role of economic, institutional and legislative conditions, in each country, on labour, through a comparison of aggregate labour outcomes from 1960 to 1990. It subsequently assesses the impact of carriers' strategies to lower costs through an analysis of the collective agreements of pilots, flight attendants, mechanics and agents. This part of the research covers two airlines in each country. / Collected data indicate that deregulation decreased average earnings in both countries but the decline was greater in the US than in Canada. The US's greater decline was found to be linked to the economic context and competitive unionism, which had previously helped unions increase earnings above competitive levels. In the period of deregulation, this system caved in to pressures from the carriers and labour market conditions. / In Canada, the combined outcome of government monetary controls and labour negotiations, patterned after the conditions negotiated by the state-owned airline, kept earnings at more competitive levels. During deregulation, the decline was modest and approximately the same or slightly larger than in other industries. / The comparative analysis across carriers and crafts shows that competitive markets led to an elaborate pattern of contract changes which undermined the previous bargaining pattern as well as the system of labour relations. All airlines sought to cut costs through moderation of wage increases, two-tier wage structure, and work rule and fringe benefit changes. These concessions varied across carriers, work groups, labour market conditions, and the specificity of these jobs. Mechanics, with alternative fields of employment and with a centralized union structure, made the least concessions. / Although there were wage variations in the two countries, due to different pay scales, wages for senior workers have remained almost unchanged since deregulation. The small increases were exchanged for substantially lower wages for new employees and employment-productivity gains. In 1990, top wages were 10% to 20% higher, but those at the entry level were significantly lower in the US than in Canada. / These findings suggest that while competitive markets exert an important influence on labour relations, their influence is best understood historically and in the context of each country's specific circumstances.

No description available.