Originally Posted by
makersmarc
Not to drive you crazy, but exactly how are the profits of the W/O carriers dispersed?
That 10% margin has to go somewhere.
Delta lost millions last quarter. Weird how all the wholly owned carriers made a profit when Delta lost millions, right? That is because all the deals (Compass too) are fee for departure deals. Period. Of course Delta gives all the W/O carriers a budget to work with - they control all the spending, and the lower expenses are, the lower the cost delta has to pay.
Assume Compass operates one leg for Delta that earns $1000 in ticket revenue. Assume Compass operates under cost plus 10%. Assume it costs Compass $1200 to operate the flight.
Compass gets $1320 for the flight - they made $120 (guaranteed 10%). On Compass books they show a profit of $120. There is your 10% Margin. Great, right?
Not so fast. On Delta's books for the Compass flight, they show $1000 of revenue for the flight on $1320 of expense. They lost $320 on the Delta books for a flight that Compass shows they made $120 for. Net loss to the overall Delta Corporatation - $200.
Simple enough?