Originally Posted by Flybywyr

More good information for the Block 1 rep


Part III
Leading Pay Rates, or Mis-Leading Pay Rates?
Let me begin by saying that this isn't a sport. Claims surrounding any TA are a damned serious business involving the lives of 4,200 pilots and their families. I take no joy from what I've written below, and it in fact saddens me. I'd rather not be in a position to have written what follows.

For reference, please click here to view a short clip from the first webcast on September 3rd.

Approximately $105 million of your dollars are missing from the DOS (Date of Signing) pay rate and signing bonus claims made in those statements. That's an average of $25,000 per pilot. In comparison, that's enough to pay back the company for both of the first two years of increased earnings under the 'Bridge' TA!

Did you catch the costly mistakes in the clip above? That's ok, almost no one caught the mistake made in calculating your pay rates, and you'd need access to pay or dues data to catch the signing bonus error. I can't say that you were deliberately misled by the statements made in that clip and elsewhere. Perhaps it was just a serious mathematical error. What I can say is that this TA's pay rates were not derived in consultation with your MEC, and that I expressed my concerns regarding the 3% slope claims/calculations to the negotiating committee chairman well before the above video was made.

The evaluation is a bit tedious, but please read below - multiple times if need be - to understand what happened. It is $105 million dollars of your money, after all. That should make it worth your while.



Does the DOS (date of signing) pay rate increase of 10% account for for 3% year over year increases since March of 2012, as described to you and your MEC?

No. Even though a 3% year over year slope is considered to be the bare minimum, it wasn't met. To substantiate the claims made in the video clip above, the DOS increase should have been just over 11.4% - not the 10% DOS increase contained in this TA, and certainly not 8% as mentioned in the video. In the 2010 'Bridge' TA you got 3% year over year raises while the economy was falling apart. Not meeting that minimum slope this time as claimed will cost you approximately $92 million. Again, that mistake coupled with the miscalculation of the signing bonus (another $13.3 million deficit) are more than enough to offset additional income from the Bridge TA during 2011 and 2012. See references (1)(2)(3) below.



The DOS pay rate mistake only affects the first year though, right?

No. The mistake in the DOS rates will cost the average Fedex pilot thousands per year over the next six years. Down stream pay rate increases stand on the shoulders of prior year rates. The effects of the DOS pay rate mistake compound each year, and this is a 6 year TA. See reference (1) below.



Does the signing bonus (retro) in this TA recapture lost 3% pay rate increases since March 2012, as described to you and your MEC?

No. The signing bonus should have been approximately $147.3 million vs $134 million. Those missing millions mean that your retro payment should have been approximately 10% higher (as much as $2000 to $3500 higher, depending upon your seat position). Less conservative but possibly more accurate calculations indicate a $13.7 rather than $13.3 million shortfall. Either figure is a deficit of approximately 10% compared to the claim of recapturing lost 3% raises. See reference (3) below.



Are this TA's pay rates "industry leading" - as described in the unscrupulously leaked TA hi-lights - surpassing those at American?

Not really, no. First, AA leap frogs this TA for 10 months of each year - meaning that these pay rates aren't the "industry leader" unless one snap shots only the best 2 months of the year and ignores the other 10. Next, the AA's rates top out at 12 years, while this TA's top rates require 15 years of seniority. In any event, one might conclude that the term "Industry Leading" in the context of airlines rebuilding from bankruptcy contracts is a rather dubious claim. See reference (4) below.

It's your call

Fixing this TA or living with it is your call, of course. The information presented here might be important to you, or might not, and no arm twisting of your vote is intended. I'm trying to do the job you elected me for, pointing out some things you've not been told in the videos and road shows. While my calculations have been verified repeatedly by others and I believe them to be accurate, I encourage you to grab a pencil and do them at your own kitchen table. If you find a material error or have questions please let me know.

If you conclude that items as simple as the pay rates and retro were miscalculated, then perhaps you will also conclude that there's cause for enhanced scrutiny in other, more complex sections.




(1) 3% year over year pay rate increase calculations:

The last rate increase was March 2012, when the top rate became $260.61

Because each 12 month period accrues an additional 3% per year increase, we missed 3% increases in March of 2013, 2014, and 2015 and would have missed an additional 3% increase in March 2016.

This TA would take effect before the next 3% raise would take effect in March of 2016 though (four months from now and only 8 months rather than 12 months since the last rate increase), so we have only accrued 2/3 of a yearly pay rate increase during the period between March 2015 through November 2015. This equates to 2/3 of an annual 3% increase, or 2%.

The simple math, then, is as follows:
2012 rate x 1.03 x 1.03 x 1.03 x 1.02 (partial year 2015) = an 11.5% increase (vs 10% TA)

In 03/2011 there was a 3% raise and the pay rate became $253.02
In 03/2012 there was a 3% raise and the pay rate became $260.61
To continue that 3% trend, then
In 03/2013 the rate should have become 260.61 x 1.03 = $268.42
In 03/2014 the rate should have become 268.42 x 1.03 = $276.47
In 03/2015 the rate should have become 276.42 x 1.03 = $284.77
In 11/2015 the rate should have become 284.77 x 1.02 (partial year increase) = $290.47



(2) Calculation of Lost Pay Over Six Years
Dues derived pay data indicates that the average total pilot pay during the two full twelve-month periods of the amendable period (Mar '13 through Feb '15) averaged $971m per year. That base figure was used as a constant in comparing total earnings going for each of the 6 years going forward under two scenarios.

Scenario 'A':
The DOS pay rate increase is 11.46%, which is the amount actually required to cover 3% year over year increases since March 2012, followed by 3%, 3%, 3%, 4%, and 3% increases in subsequent years.

Scenario 'B':
The DOS pay rate increase is 10% as in the TA, which is erroneously represented as covering 3% year over year increases since March 2012, followed by the same 3%, 3%, 3%, 4%, and 3% increases in subsequent years.

(Scenario 'A') - (Scenario 'B') = Approximately $92 million
$92 million pay deficit + $13.3 million signing bonus deficit = $105 million
$105 million / 4200 pilots = $25,000 per pilot



(3) Calculation of Signing Bonus (Retro) Deficit
The equation itself is straight forward. Note that the rate increases compound slightly year over up year: 3% x (March 2013 through Feb 2014 dues derived pay data) + 6.09% x (March 2014through Feb 2015 dues derived pay data) + 9.27% x (March 2015 through Oct 2013 dues derived pay data) = $147.3 million.
$147.3 million - $134 million (TA) = $13.3 million deficit



(4) TA rate comparison to AA's rates during 10 months of the year
12-yr AA rates vs. 15-yr FDX TA rates

Jan 2016 = $293.11 vs. $286.67
Jan 2017 = $301.90 vs. $295.27
Jan 2018 = $310.96 vs. $304.13
Jan 2019 = $320.29 vs. $313.25
Jan 2020 = TBD vs. $325.78
Jan 2021 = TBD vs. $335.56