Air Canada and the Canadian Union of Public Employees have agreed to let the Canadian Industrial Relations Board act as an arbitrator to resolve a labour dispute.

The airline and the union representing its 6,800 flight attendants have two weeks to come to an agreement and negotiate a deal through the board.

Neither side can engage in any labour action during the binding process.

In a statement Thursday night, Air Canada said that under the terms of the agreement, Air Canada and CUPE must reach a deal by a Nov. 7 deadline.

"Air Canada is pleased to have a process in place whereby we can avoid any disruption of service and eliminate uncertainty for our customers," said Duncan Dee, executive vice-president and COO at Air Canada. "I wish to thank the Department of Labour, the CIRB, and their staff for their assistance in helping Air Canada and its flight attendant union find a process that will enable both parties to move forward together."

CUPE says arbitration 'best option'

Paul Moist, CUPE's national president, said Thursday the union was optimistic that arbitration would resolve outstanding issues.

"Our members deserve a fair collective agreement and I believe in the present circumstances arbitration is the best way to achieve that goal," Moist said in a statement. "These have been difficult negotiations in particular, because of threats of back-to-work legislation by the federal government and the minister of labour's referral to the CIRB, which blocked the legal right to strike of flight attendants."

The statement adds that arbitration "is the best option" in this context.

The flight attendants, who are dissatisfied with wages and working conditions, had been poised to strike this month, and had twice turned down a tentative agreement with Air Canada. They voted 87 per cent against ratifying the previous effort in August.

One of the biggest sticking points in the dispute has been Air Canada's proposal to launch a new, low-cost carrier to service "leisure routes" to sunny destinations. The proposal has flight attendants anxious that it could threaten their job security with the main carrier and drive down wages.

Sending the contract impasse to the CIRB for resolution means the Conservative government can avoid the controversial move of having to introduce back-to-work legislation.

Labour Minister Lisa Raitt said earlier this month that the federal government would send the labour dispute to the CIRB to prevent or stall a possible work stoppage.