Originally Posted by
Rawhide51
Joe, I think you are missing two important points. As someone else already mentioned, Delta's contract focuses on the word "profit" and ours mirrors other work groups within the company and focuses on the word "margin."
You can type it in to google, or just click here:
https://smallbusiness.chron.com/prof...gin-10684.html
My viewpoint is similar in that margin focuses on "your company's long-term viability" while profit "is a short term indicator of how well your company is doing."
You are not being shown all the cards in this long term game, so you can't accurately predict, (there really is zero transparency) how we will fare in the profit sharing game at the end of the year.
Which leads to my second point. Take a look at the company's 1Q19 earnings report:
https://hub.united.com/united-airlin...634807011.html
Focus on bullet number 7. It says: "Repurchased $527 million of its common shares in the first quarter of 2019"
Now ask yourself, if we only made $292 million in income for 1Q19, how the hell could we possibly burn $527 million in stock buybacks? I use the word 'burn' because I see it as management refusing to use that money on something that would actually help the operation. Are they really telling us that there was no better use for half a billion dollars, than to bury it? Yes, it will raise the stock price because you are lowering the total number of shares out there, but is that really more important than the actual investment in the corporation? I get it, Wall Street wants to focus on reducing the cost per available seat mile, and this just happens to fall outside of CASM calculations, but still, Dulles airport couldn't use half a billion to kick start a new terminal? There is really no long term infrastructure program within the company that could use the investment now, while the economy is good and we can afford it?
How did we manage to spend $527m buying our own stock, when we only had an income of $292m? Yes, it's a cash flow business, but they are getting away with moving money around from one accounting category to another, without acting in the best interest of the corporation. They are simply acting in the best interest of the share price, and calling that the best interests of the share holders.
If I were king for a day, I would change our contract wording to reflect profit instead of margin. I would insist the board of directors eliminate the stock buy back program. And lastly, I would demand that the management of this company recognize that these are the good times. The economy is booming, so business is good. It won't always be this way. Now is the time to invest in the infrastructure for the long term. With the next recession, you won't be able to issue more stock to raise the money when you need it, because that will only lower the individual share price even further in an already down economy.
Winter is coming!
Forgive me for sounding condescending as I am keenly aware that it infuriates people on this forum that I often claim a higher intelligence, but I can tell you that your questioning how the company can buy back shares and still not show more profit represents a gross lack of understanding of basic accounting. Suffice to say that stock buybacks are not funded from nor accounted for in quarterly income, and have zero impact on earnings, nor can they have an impact on earnings based on GAAP rules. Now, do I agree stock buybacks are bad. Yes. Stock buybacks are terrible. As you intimated it implies management doesn't know how to invest the companies profits to grow the company so they resort to financial gimmickry to increase PE growth.
Next, you talk about how you would invest for the future while times are good. Well, don't mean to burst your bubble, but management has a very concise capital budget plan with precise metrics. They are putting capital to work in a highly disciplined manner which is why Wall St. has been rewarding our stock price above all other airlines.
Lastly, to your comment "you are not being shown all the cards". This applies to Mako's comment below as well. The simple fact is that airlines are one of the simplest businesses to understand. You have passengers, tickets, oil, and labor and pretty much that's it. You can't hide much. So no you actually can predict PS with a great deal of accuracy, and we can make a bet and see in February next year if I am close. I predict that we get between 5 to 7% this year.
We'll see
Originally Posted by
oldmako
I don't understand the fascination with something as ethereal as PS. People a whole lot smarter and more motivated than Joe (sorry) can manipulate those numbers and if they don't want the peons to get much of a PS check, the peons won't.
That being said, I am interested in getting a decent contract that offers us more than big hourly rates. And one that includes our current profit-sharing language or stronger. It took deregulation a long time for the skeptics to be proven right. I'm tired of waiting. It's time to make hay.
Mako,
First, I really wish you would do away with the anonymity thing, but whatever . . . in every single other post you have made on this forum I have always agreed and found your remarks to be poignant and insightful, but in this one case I must say it sounds more like "Chem Trails" and "Tin Foil Hats". Lorenzo stole from Eastern that is true, but he did it in a legal way that was accounted for in the books. Yes, corporations have lied egregiously, but United today is not one of those corporations. Profit Sharing is worth thousands of dollars per year and is not something that can be gamed. That is my entire point, and if you take the time to truly understand the math in my post you will see that what I am saying is true.