Originally Posted by
Carl Spackler
Great question. Neither side in this Section 6 could place a dollar cost on future profit sharing without just wild guessing. Neither side would want to set the precedent in front of the NMB of proffering (or accepting) a complete wild a$$ guess on any item. Since the profit sharing calculation methodology is part of our current contract, management would have to make the demand that the formulation change. At that point, we could simply say no. If that ended up being the final straw in the Section 6 process, the NMB would step in and ask for the costing data of the company's demand. That costing data could not be provided for future contract years, thus the company could make no claim that our refusal to accept would unduly harm them financially...especially since by definition, profit sharing only applies during corporate success. If the company continued to press for an item that can't be future costed, they would run the strong risk of being found to be bargaining in bad faith by the NMB. Nobody wants that name tag.
This is why it's an untenable position for management. Their only hope is to get us to voluntarily give it up. This is why we're seeing the multi-faceted drive to denigrate profit sharing in the eyes of pilots.
Carl
Do you really believe this? Wow!
For those who want to think about risk and the inevitable reversal of the business cycle:
Mish's Global Economic Trend Analysis: Huge Miss on Jobs: Establishment +126K Jobs; Household +34K Employment, Labor Force -96K
Mike Shedlock does the best job of dissecting the non-farms payroll report, AKA the jobs report. I realize this is serious stuff, but understanding the risks of variable compensation is required due diligence.
Sparkler wants you to believe that it doesn't matter because your max pay rate increase will be unaffected by whether the company is on the hook for potential PS. IOW, there is no cost associated with potential PS. That is pure fantasy.
The real world works this way:
With profit sharing - X=max possible pay rate increase
Without PS - X+PV=max possible pay rate increase, where PV is projected value of PS.
Contrary to spackler's belief, the company can make a projection of probable value, certainly within a range of probable values. They do such things all the time, with fuel hedging for example. The point is they can project a number greater than zero if they see continued profitability. If they see a cliff coming (extreme case) they can elect to reject moves to monetize, knowing that they will likely not have to pay any PS.
Can they be proven wrong? I'll answer that with another question, have they ever been wrong on fuel hedging? Sure. The flip side, can we be wrong on the future value of PS? You bet. That is risk in a nutshell.
PS has value. We cannot say for certain what it is, only that its presently worth more than zero and will continue so as long as the company maintains profitability. We would like to say (bargaining position) that its worth 16% plus.
The company knows that it currently is worth that much, but also knows at some future date it will be less. Their risk is that they monetize the present value at par (or more), and then profitability declines. They will wish to mitigate that risk by receiving a discount.
We know that PS is currently 16% plus. We should know that somewhere down the line it will be worth less. Our risk is that if profitability wanes, we see smaller PS payouts. To mitigate that risk we wish to receive par or even a premium in the form of additional fixed pay rates.
If this becomes a bargaining position, the company will justify their value with an economic analysis by there team. DALPA has an economic team as well and will present the justification for their number. If an agreement can be made within both parties' parameters, we get a deal. If not, no deal. This is not rocket science.
Both will try to quantify risk and value PS accordingly.
My view is simple and I have passed it along via survey and direct input to the reps. The risk for a recession and reversion of the business cycle is rising and in my estimation the period of economic expansion is nearer the end than the beginning. In OTW, we are nearer to the peak of the cycle than the beginning. Or, we are closer to the maximum value of PS than not. If there is a time to capture max valuation from the company for a portion of our PS, it is now or within the period covered by our next contract. Additionally, the downside risk outweighs the upside risk where we leave some money on the table. Further, if we do miss some upside potential I consider it an acceptable time risk premium to play.
I ask all to read the bolded text above. This guy thinks I'm part of multi-faceted on my own contract. LOL!!! I'm just a guy that wants to bring home the most money I can.