Originally Posted by SharpestTool

It's contract time! That means it's time for The Sharpest Tool!

Can't say I have missed this board while I've been absent. Been too busy making money and enjoying all things that did not include Poo Slinging. But, the times comes when work must be done to bring balance and sanity to a rather messy process of securing a meaningful and lucrative contract. Spent the last hour reading the thread and I can say I see some good thinking going on. I can also say I see some of the standard BS that I always see. Most of the latter from the usual suspects. Lots of new faces I'm happy to report. The donut crowd is far more subdued these days. LOL! Not many green bag tags these days. Too embarrassing I suppose.

Lets dive right in shall we.

Openers. We will never see the details of our opener, nor should we. The other side of the coin is our shareholders, who the board represents. Management works for the shareholders. Management does not forward the details of opening position to the shareholders, and for good reason. It would quite frankly **** them off. Hmm, the same reason DALPA doesn't tell us the details of management's opener. The opener sets boundaries within which we can work our way to an agreement. We can get wrapped around the axle all we want on this, but it is the way it is going to be and no responsible bargaining agent is going to bend on the issue. Suffice to say, if we achieved our opening position the pilots would be wildly enthusiastic and onboard. If management achieved their opener, our stockholders would be besides themselves with glee. Lets not waste time here.

Pay banding. Certainly an efficiency gain for the company and could be a negative for us. The other side of the equation is that pay banding could provide a windfall for a large percentage of the pilot group, depending on how the pay bands are constructed. It is a good way to disguise more money within the contract that isn't apparent by focusing on the headline pay increases. So as in all things contract, there is a balance between increased efficiency and the potential to increase the size of our pie. The Sharpest Tool is agnostic on the issue until further information presents itself.

Pension. Some silliness here. Defined benefit pensions have gone the way of the dinosaur. Thank god. Why anyone would want to return to an unsecured promise to deliver a future benefit is beyond me. The idea that someone would even mention it is ludicrous. Matching or exceeding industry best defined contribution (401K) is fine for those who think there is real value there long haul. Personally, I find more risk than value in that proposition. But, to be fair I see extreme risk in the future value of money and hate to see my stored productivity exposed to that risk. I can live with others that have the opposing position that says whatever tax breaks they can receive coupled with market performance can and will make a 401K lucrative. To each his own.

Profit sharing. Profit sharing is at risk compensation. Profit sharing always originates from a weak bargaining position and represents a hedge. Ours originated post-bankruptcy. As it was initially envisioned it was a bargain for management and a hedge for us against runaway profitability. Initially it was a liability to us in comparison to a fixed and known pay increase, and an asset to the company. Success has changed that equation around and currently it is a huge asset to us and a liability for the company. The key point here is that there is a cycle where profit sharing can work for us or against us. It isn't a linear process. The time to capture value (de-risk) from profit sharing is when it most hurts the company to maintain it. The time to capture value is at or nearing the peak of the business cycle. Too many see no risk in profit sharing at this point. History does not support that view. We are closer to the end of the business cycle than the beginning.

So, monetizing profit sharing is a smart hedge play. This time hedging against a drop off in profitability. What percentage and for how much? Again, I do not like risk. If it were just me, I would trade all of it for a 16% increase to our book pay rates. But, I realize others have a higher appetite for risk than I do. I would be open to monetize 50% and retain the other half as a further upside hedge. I think we have an excellent case to sell it back to the company at last year's going rate or our projected rate for this year, whichever is greater. So lets say for know 8% of our current pay rates.

Bottom line: profit sharing entails risk and anyone who doesn't account for that is selling sunshine.

That's enough for now. Lets see how much airborne Poo this generates. This is going to fun!