Originally Posted by
UALinIAH
So you think our expenses are going down? Despite adding a net 1500 pilots per year and net growth a/c? I’m expecting a contract in 2023 so add in those billions to the expense line. I don’t have your sort of optimism that costs will be reigned in while we execute United Next. I think expenses go up over time as history has shown they do. Cost of everything has gone up with inflation. I don’t think looking back at expenses is realistic. If we don’t shrink costs only go up.
As you know I like to think I have a pretty healthy understanding of the mechanisms behind profit sharing, and I do agree with you that the percentage threshold in our language versus the fixed amount in the Delta language will definitely play more of a role going forward, but the purpose of this post is to make a minor side note relative to expenses. I have shown in the past that the single biggest factor affecting PS for us historically is the price of oil and not payroll.
This from a post I made in 2019:
Understanding and Predicting PS
So first 6.9% of $43 million = $2.967 billion and that is the amount of profit of which we get 10% then $3.8 - $2.967 = $833 million and that is the amount of profit of which we get 20%.
So $2.967 x .1 = $297 million / $7774 oayroll = 3.8%
and $833 x .2 = $166 million / $7774 payroll = 2.1%
Finally 3.8 +2.1 = 5.9%
If payroll goes up 5% the percentage falls to 5.6%.
If we save a $1 billion dollars in fuel the percentage goes up to 8.5% or said another way - every $100 million in fuel savings adds about 0.3% to PS.