Oil prices and profit sharing
 

A month ago oil was above 80 dollars a barrel and analysts were predicting above 100 by year end with some calling for 150 by summer. WTI crude is at 56 a barrel today and still falling. This will have a significant effect on profit sharing and certainly does not hurt as we get ready to exchange openers. It’s a dramatic drop!

I remember Andersen saying that each penny=$1million to the bottom line. I wonder if their math works the same going down as it does going up.

The math does not work when oil goes down because Delta has hedged the next 3 years at $80/barrel.

Just joking but that's what happened last time.

Or of course, maybe management just SAID that's what happened last time and the millions are hidden somewhere.

One month ago!

https://www.forbes.com/sites/judecle.../#9e17a0c5817e

The market believes that Congress will put a lid on Trump, which is why I called this a few months ago. However, all bets are off if we get forced into a war with Iran.

Before the merger with NWA a 1c increase in Jet Fuel cost Delta 20 million dollars a year. The runup in oil prices this year was projected to add 2 billion in additional costs. If and that’s a giant if oil stabilizes in the low fifties next year we will have a extremely good year since we passed on half the oil increase via increased ticket prices.
The bad news is the oil prices were killing are low cost competition. WOW and PrimeAir were already gone and others like Norwegian were teetering on the brink. This will probably save Norwegian.

War is a joke. Russia, Iran, etc are barking little dogs that yip all day long.

All we do is cut them from the global economy and they are nothing.

Russia 2% of global economy and Iran .7%.

War is not a joke. It only takes one well placed bullet or bomb to send our fragile economy into a tailspin. I can ASSURE you. We have far more to lose than them. The fact that you can't comprehend that shows how ignorant you are of a global political economy.

http://31.media.tumblr.com/653d6666b...kvkuo6_500.gif

Ukraine is not weak

I've left you teetering on the brink of complete annihilation!

In all seriousness, I don't see this affecting our profit sharing too much. It's happening very late in the year, so the impact will be minimal. I've heard rumblings (not from "top men"), but rumblings that we were looking at the 16-17% range. My guess is we'll see the higher end of that. Just my .02

That would be substantially higher than last year. This summer I was thinking 12.5%. Now hoping maybe 14.5%.

A little over a month ago a senior leader said we would see roughly same percentage as last year. Not sure if they saw oil dropping and factored that in, but I doubt it. I am cautiously optimistic we will be around 16% or slightly better. Only time will tell

With all that extra money they’re saving from low oil prices I’m sure they’re planning on buying a piece of yet another airline.

According to news outlets, Delts already has a bid in for Alitalia...

Denny

i'm thinking 15%, would love it to be around 17-18% though.

With just over 3 weeks left of the year, any changes to the guesses earlier for the profit sharing percentage?

My guess
16%

Profits are still projected lower than last year. I think we got 15.1% last year.

Analysts...what a word. If I listened to analysis over the years I’d have missed out on the biggest bull market Wall st has ever seen. These so called oil analysts? They’re idiots. They never get it right. A few years ago I was out skiing in Steamboat. My wife and another couple were in a big resort hot tub apres ski when a group of dudes showed up who were all in the fracking industry. In a nut shell.... they said they were going to be the shock absorber to the oil industry for a very long time. The frackers are flexible...they can ramp up quickly and shut down quickly... when oil spikes they ramp up... flood the market and bring the price down. Then shutter their wells and wait for the cycle all over again.... it’s the best advice I’ve ever gotten for the price of oil. That advice has been spot on over the past 4 years. These analysts are flunkies who could never make it anywhere else. So they dish on an industry they don’t understand or are able to make a living at... except to gin up fantasy stories of doom and gloom about a subject they’ve rarely ever gotten right. About the only profession that regularly does worse with zero negative feedback are the meteorologists. Don’t get me started on them!

they've been putting more into the profit sharing coffers though. As of Q3 results they had nearly 200M more in 2018 than 2017

Also what my guess is

That’s because they owe the non contract employees more.

Q4 will be at the high end of expectations.

Jet fuel was $2.25 in October. Now $1.73.

Each penny $50 million in additional annual profits.

That is $2.6 Billion. Hopefully the frackers keep at it to fill any cut by what’s left of OPEC and Russia.

13.25%

I’m hoping Q4 comes back above the guidance though. That could push it to 14%.

That’s not how it works.

Yes it is. Our amount isn't affected, but the total pot compared to last year (reported in Delta's earnings statements) is bigger because of the non-cons raise.

What changed is the percentage of their pot they get.

Right, but the entire pot (or both pots combined, I suppose) is now bigger. I think that's what sailing was saying. The way Delta reports it is just the total profit sharing pot. Which obviously is bigger this year because the non-cons are getting more.

I can tell you understand though. The main thing is that our profit sharing is unaffected by the non-cons raise.

I'm going with 15.2%

Here's the calculation I'd like to know... for every penny drop in the price of fuel, how much does my profit sharing check go up?

Pilots console themselves with profit sharing..."yeah, our JVs are flying WB flying I wish we had on our metal, but at least I capture some of that revenue via profit sharing." Does anyone know how MUCH profit sharing is actually attributable to such a thing? If any given concession/productivity give/job loss can be priced by negotiators at the table, we (DALPA) should also be able to estimate the amount of profit sharing such gives would be traded for.

My hunch is that we get a pretty small slice of the pie for significant QOL gives. Would you delay an upgrade by 3 months for $39 more profit sharing? Would you cave to a bad AM JV deal for an extra $146?

Total contract value doesn't mean much, even though it's a large number folks like to tout for various reasons. I think it would be more helpful to hear "for every $100k earned per year, pilots will reap $XYZ individually, per year, on average."

I would like to know this as well. Very good points.

Why is the profit sharing so hard for guys to grasp. The non cons amount of profit sharing was raised in the 4th quarter of last year. As a result if earning were exactly to the penny the same this year the company would need to put more money in the PS pot. Earnings are slightly less this year but the non contract increase will pay them more and require a larger pool of funds.

The formula for profit sharing is in the contract. Your question is basically impossible to answer because there are no absolutes. Fuel went up on a yearly rate about 2 billion dollars a year in 2018. We were able to raise fares and recoup 1 billion of that amount. Fuel is dropping back and that 2 billion cost is going away. What happens to airfares is a unknown however the trend now looks like it may be down as competitors launch sales. Non fuel costs will be up next year which will eat into the fuel bonus.
Analysts get big bucks to predict earnings and rarely get it right. Pilots don’t have a chance.
What most overlook is the new breed of low cost long haul carrier was dying at 80 dollars a barrel oil. They were going under and most would have been gone next winter. They just got a stay of execution and will continue to suppress international fares. It also gives all the domestic ULCC’s a much bigger boost than Delta. Fuel is a much bigger percentage of their overall expenses. They can now grow even faster suppressing our yields down the road.
The point is that as Delta pilots we were probably better off long term with oil in the eighties range. Our business plan was built to sustain profits at that rate.

These numbers are probably very close to the actual payout. Profits are still projected to be lower than last year where we got either 15.1 or 15.3. To lazy to look up exact number. If profits were exactly the same the percentage would be lower with raises and pilot hiring. The A350 Captains will probably knock the percentage down half a point all by themselves!

Check out the 10Q for the September quarter. The number you are looking for is Income before Income Taxes. Through 3 quarters $3.764B this year down from $4.457B last year. Fuel and compensation are up causing less profit. Also the increased income lowers the individual percentage for the same dollar amount. The profit is down 15% YTD. Q4 could be a boon because fuel and non fuel costs are tapering. Also pricing seems to be going up slightly for domestic, which is 2/3s of our revenue.

https://www.sec.gov/ix?doc=/Archives...930201810q.htm

I’m sticking with my 13.25% but hoping for 14%. I’ll lock in and take bets after Investor Day. :cool:

Why is the use of question marks so hard for guys to grasp?




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Not sure you understood my point. I'm not asking for a perfect guess at the future. I'm saying let's get our arms around how expenditures/gains/losses/efficiencies/QOL gives & takes affect our profit sharing checks. I think most of our check's value is "baked in" to the operation, and despite its impressive size, we as pilots don't really affect it all that much. Elements of our contract, negotiations and LOAs could affect it measurably, and we should estimate how much.

My realtor doesn't need to tell me what the final sales price of a house I'm interested in will be (they can't). However, they can guesstimate that a house will sell for between $10k and $20k and I'll already know I'm not interested. Sell for between $1.5M and $1.8M... still not interested. Sell for between $400k and $600k... that's worth a closer look and better understanding of the offering.

If pilots assume variable X could generate them $3,000 a year in additional PS... but it's really only going to generate $30 (or vice versa), that would be worth knowing. It's not hard math, but it's not math we hear discussed by ALPA (and I'd like it to be).

Every 1 billion change in profits increases or decreases the P.S. pool for pilots by 200 million. Using 14,500 pilots that 1 billion change in profits equals about 13,793.00 if that pilots income is exactly at the median. If you are above or below you would need to adjust for that. If profits fall below 2.5 billion the above would no longer be accurate.

Thanks, that's what I was thinking of.

So, the median pilot gets (loses) a buck every time the company generates (or loses) $72,500 in profit. High earners might see $2, and min-runners maybe 50 cents.

The 350 pilots are going to kill the curve.

Those bastages.