Scope clauses

[Avicenna]

Help! I don't know what it is, my dictionary doesn't know it either ... and all my research in the web hasn't brought me clue ...

Is there someone out there who could give an idea what scope clauses are?

Thank you kindly in advance for your answers and explanations.

[AtRisk]

can you give the reference from which you found this phrase? Could you say how it was used?

[Avicenna]

It was in article on american regional aviation. Something to do with pilots unions ...
Couldn't understand the context, sorry.

Hope this helps.

[ironbutt57]

avoiding definitions, scope clauses deal with the amount of regional flying vs mainline flying..they came into this world with the advent of regional carriers code sharing and/or direct ownership of regionals by mainline carriers delta connection, american eagle etc...the clauses mainly specify the size /type of aircraft that can be operated by a major airlines' regional partner..it first came to light with the proposed introduction of the bae atp at american eagle...and became more evident with the introduction of regional jets..these clauses,which are incorporated into ALPA/APA collective bargaining agreements with their respective pilot groups/employers, limit or determine the ratio of regional jet fleet size to mainline narrowbody fleet size, and are designed to prevent mainline pilots' jobs being lost to regional jet pilots..as the fear was that many cities would be dropped by mainline airlines and would be operated by the regionals..thus causing the loss of jobs, or command opportunities for mainline pilots.The clause limits are usually in reference to seat capacity/powerplant type (jet vs turboprop) If the unions were to negotiate single seniority list agreements with their carriers blending the regional lists with the mainline lists..the need for these limiting contracts would be negated hope this sheds some light on the matter...

[This message has been edited by ironbutt57 (edited 30 September 2000).]

[This message has been edited by ironbutt57 (edited 30 September 2000).]

[AtRisk]

Does for me so thanks Iron.

[Gillegan]

Actually, the history goes back a little further. You might remember a little outfit called New York Air. A guy named Frank Lorenzo started them as a separate airline under the Texas Air umbrella. He started the company, transferred assets (read aircraft) from the existing airline and hired pilots (non union) at a fraction of what he was paying the Texas Air/Continental pilots (Correct me if I'm wrong, but I believe that Continental was part of Texas Air when New York Air was started). The upshot of this was that it was all legal and above board. The unions started to negotiate scope clauses to determine who could fly their company's airplanes, or aircraft with their company's livery. The next logical step was to apply this to regionals involved in code-sharing who ultimately became wholly owned by the parent companies. Before we even get into the inevitable argument about career expectations and such, let me say this, the pilots at the majors who have negotiated these clauses have no "God Given" right to limit the scope of the flying of their airline. They simply have the power to do so. Why does a dog lick his..... oh well you know. Anyway, if you want to get a taste of what happens without such clauses, take a look at BA and Cathay and see what they have done. BA has a bunch of airlines flying under their livery, arguably taking away potential flying from their mainline pilots and one only has to cruise over to the Cathay/Fragrant Harbour Forums to see how people feel about ASL. If you ask me, the pilots at the majors would be well advised to listen to ironbutts and get the regional guys/gals on board because an elimination of scope clauses has much larger ramifications if you look at the case of different airlines under the corporate umbrella and the transfer of assets. Imagine if American Airlines could transfer it’s entire fleet of MD-80’s (or even B777’s) to another airline that they own and fly them for half the cost. Without a scope clause, they could even keep the same paint job and no one other than the pilots would know the difference.

[Avicenna]

Ironbutt and Gillegan: thanks for your explanations. Both were helpful and interesting.

Seems as if Scope clauses are something typical American. Haven’t heard of something similar in Europe. Obviously these clauses are negotiated for each airline on a separate basis. Correct? Doesn’t this lead to distortions in competitiveness? Obviously airlines with rather liberal regulations would have better possibilities to expand and grow their business than those with tight limits, whose ability to provide satisfactory customer service might be in jeopardy. At the end of the day this could effect the overall economical performance of an cooperation.

Sure, the example of Texas Air/New York Air should be a warning what happens, if assets and business are transferred from one company to another. However the final success of this method depends on the possibility to find motivated pilots willing to work for less money. In a growing market with an increased demand they could certainly not attract employment applicants, who are willing to work for a low level wage. In the current economic environment everyone has the luxury of being more selective in choosing a job with good remuneration, benefits and career opportunities. Though this might change again … who knows.

Finally, I cannot see why mainline pilots should fear to lose their jobs to regional jet pilots. Decisions to drop a city and let it be operated by a regional carrier indicate IMHO that it was not cost efficient before. We are living in a profit orientated world and who could blame his employer to thrive for black figures rather than red ones. Even if it hurts the individual who is affected by such a change, it’s the customers’ demand which is originating these decision, not the bad will of a company.

Outlook: what do you think about the future of scope clauses?

[ironbutt57]

having once been the "victim" so to speak of a scope clause..i think they will be here to stay until either..1) the unions at the major airlines who are quite happy to take dues from regional pilots become happy to integrate seniority lists between the two pilot groups 2) the major airline managers become trustworthy people who have the best interests of their employees(and hence the company...because who builds a company) in mind....which do YOU think is likely to occur?

[Avicenna]

Ironbutt, I am sorry. I didn't mean to sound precocious. Just my logical mind trying to analyse the topic.

As I have no experience with american unions, I obviously don't know about suggestion #1 ... However, the way you formulate it, it sounds rather cynical and therefor hardly probable.
When it comes to #2 ... if we would be living in an ideal world ... let's dream on.

[Avicenna]

Ironbutt, in which way have you been affected? As these clauses have obviously been implemented to protect the pilots of major airline, you must have been with a regional carrier. Please let me know (shere curiosity)-- if you want to, e-mail me. Have a great weekend

[This message has been edited by Avicenna (edited 01 October 2000).]

[Gillegan]

Avicenna,
You are correct, scope clauses are negotiated on a separate basis and they do lead to “distortions” in competitiveness. In terms of market forces, the effect of a pilots union (in general) has been to reduce the effect of those market forces on pilots. In terms of management, a union always reduces a company’s flexibility (all changes in the status quo must be negotiated). I’ve never understood why some airlines (or other companies for that matter) virtually guarantee the formation of unions through the treatment of their employees. Sure they achieve some short-term gain, but in the long run their costs will be higher and their flexibility lessened. Better to have happy non-union employees and thus the ability to react quickly to changes in the market place/operating environment. I guess most modern corporations are mostly geared towards the short term anyway (“we’ll deal with any long term problems when they arise” ;). In many cases, the original scope clauses were negotiated while the management had no immediate plans to do anything like transfer flying/assets etc. Hence, the pilots traded something the company wanted for their scope clause (a freebie as far as management was concerned). It has only been very recently with the success of the regional jets that the scope clauses have begun to have importance to management.

In terms of asset/business transfers, as in the case of New York Air, it’s not just a case of pilot costs, but rather of overall labor costs since most unionized airlines have unions all across the board. I believe that at unionized airlines in the United States, labor costs make up between 30-45% of total operating costs. Imagine yourself the CEO of a unionized airline with high labor costs and historically low margins (compared with other industries, profit margins of airlines have always been low). Now consider the possibility of taking a sizable chunk out of those labor costs. The impact on the bottom line would be huge. Factor in the impediment to flexibility that union contracts represent and the fact that someone who aspires to run a multi-billion dollar corporation is most likely going to be an aggressive, hard charging individual who doesn’t like being told what he “can’t do” and it’s certainly going to be an attractive option. The trade off is going to be the obvious enmity of your unionized employees and the possible service disruptions that they may cause to your established airline. You are correct in stating that you have to be able to find motivated pilots willing to work for less money but historically, they have always been around. The possibility of flying “big jets” with relatively quick advancement has always been enough enticement. It has only been recently that the market for pilots (at least experienced pilots) has become tight with that scenario yet to fully play out.

Mainline pilots have feared losing jobs (or chances of advancement) to the regionals because at some airlines, that is exactly what has happened. The labor cost of operating a B737 versus a regional jet does impact the profitability of a route (how much I really don’t know and I do suspect a certain amount of rhetoric being employed by both sides) so the calculation is going to be which plane makes us the most money. In some cases, pilots from the mainline have been furloughed while routes were transferred to the regional airlines. The negative impact has been on the mainline pilots, they have the clout to negotiate these scope clauses and have done so. Obviously, the negative impact of the scope clauses has been on the growth of regional airlines and the advancement of their pilots as well as the flexibility of the airlines to deploy the aircraft that makes the most economic sense. While I’m sure that ironbutts (and many regional airline pilots) would disagree, this is not a morality issue. It’s a money issue, pure and simple. Historically pilots have not understood that the airline does not exist for them. It is a corporation that exists to make profits. When the tradeoff is such that the airlines are willing to pay the price (cost of a labor dispute vs. the potential savings) to eliminate scope clauses, they will do so. The first shot may have been fired by the airlines last year when they (through some shell organization of “smaller communities” but obviously with ATA backing) petitioned the U.S. Congress for the outlawing of these scope clauses because they were affecting the economic growth of these communities by denying them the service of regional jets. I think that the pilots have long understood the value of these scope clauses to them. I think that it has only been recently that the airlines themselves have begun to see the scope clauses as relatively expensive for them. As far as the future is concerned, they won’t be given up without a fight.

[ironbutt57]

yes, i was at a regional..gillegan had forgotten about or freind frank lorenzo and his new your air escapades..boy ole frank shure brought a lots of good thing to this business didn't he? amazing he lasted as long as he did...let's see if alpa (o) gets on with any move toward seniority list integration...