Part B

Is there a way to make this scale acceptable to management?

Management is accountable to the board but more importantly wall street. This group of managers has done an excellent job with the merger and the climb from bankruptcy. Credit is due here and their track record must be respected.

If this is going to happen they need to be able to frame it as an acceptable reward of our partnership or as at minimal cost or cost neutral.

We have some things that are in our control.

1) This deal and its timeline are about labor peace.

Labor peace is the foundation of the brand. They have a lot to lose if we were less motivated and moral was bad. Think about all the effort to get you out in front of the customer. Your hello my name is captain xxx cards. The HVC recognition efforts. The podium presentations when we are late. All of this goes away and that filters to other work groups. Gate agents upset because flight crews are late. Flight attendants who are not pleasant because they are boarding without pilots because we aren't willing to hustle to the next gate. That sets a negative tone when people are on airplanes waiting for crew. The operation is humming so well we have to be told to slow down occasionally.

Right now we command a 15% premium domestically. That disappears quickly if we go much beyond the amendable date.

2) They need to take back some profit sharing.

This is hugely unpopular, I know and agree we should keep it. Here's why. The goal is to be recognized as a high quality industrial company that is able to consistently return cash to shareholders. We are almost there. Our financials are inline, margins are good, debt load improving, credit improving. (very close to investment grade bond rating 6 years out of bankruptcy)
A major hurtle is compensation structure. High quality industrials don't pay profits to labor. The 2014 16.58% profit sharing is about as high as they can go with out breaking the mold. Normally pay based on company performance is for only the top tier not labor. If you pay a percentage the recipient has to be bringing revenue to the company. Sales is the obvious example. This is evident in the Q+A portion of the earnings transcript I posted earlier. If you heard the audio you know Mr. Anderson wanted nothing to do with this question but telegraphed a change.


The flip side is that you don't pay more than your peers for labor unless they are worth it. We are worth it. Our operational statistics are stellar. Again this would suffer if we are less happy.

How can they reward us and save face on cost?