RonRicco

The communication from DALPA on negotiations has reverted back to vagueness that was the hallmark of the Moak administration. With very little detail on our positions, (when you do provide details, it forces the company at some point to communicate their’s) it is hard to get worked up in either direction. Anyone remember the 777 negotiations? The Halloween surprise during C2K?

Considering that the committee members were in favor detailed communications in the past and were very vocal even during TA2 as details were released on AIPs, I have to wonder why they now apparently don’t think it is such a good idea? Which is fine, but at least communicate that philosophy as well.

sailingfun

Fortunately our other employees at Delta are very productive. Our flight attendants as a example are well above AA and UAL and very close to SW. If you wonder why Delta fights unionization so hard there’s your answer.

notEnuf

AAL context.

https://seekingalpha.com/article/430...share-buybacks

deltabound

That was great! And terrifying. Money quote:


"Whilst no one can predict with certainty when tough economic times will arrive, the fact of the matter is that they have chosen to focus on short-term shareholder returns instead of ensuring the long-term financial viability of their company. To make matters even worse, the majority of their shareholder returns have been share buybacks, which are effectively retained within the company, and thus, if things go south, their shareholders will still be left high and dry. A highly economically sensitive company that is operating in an industry known for bankruptcies that has been borrowing to fund share buybacks does not sound like a particularly desirable investment."


(Full disclosure: I hate hate hate stock buybacks, especially with borrowed money. It's insane)

Buck Rogers

Here is more perspective.....and I agree about stock buybacks with borrowed money as insane......there are some reputable, successful companies doing buybacks......numerous are listed in this article...

Why is Berkshire Hathaway(BRK/A) stock nearly 20 percentage points behind the S&P 500 index this year?

The company's recent unsuccessful attempt to buy Tech Data(TECD) , a distributor of technology products, offers a partial explanation, as it illustrates Berkshire's current challenges and CEO Warren Buffett's stubborn approach to capital allocation.

Buffett, who turned 89 in August, continues to search in vain for what he has called "an elephant-sized acquisition" that could total $50 billion or more. Berkshire recently lost a bidding war for a much smaller target, Tech Data(TECD), which agreed to be purchased for $145 a share, or $5.1 billion, by Apollo Global Management(APO) , the private- equity firm. That followed a Berkshire bid of $140 a share.

Berkshire is sitting on too much cash, has bought back only a modest amount of stock this year despite an attractive valuation on its own shares, has been subdued buyer of equities and can't find suitable acquisition targets because of Buffett's price sensitivity and unwillingness to participate in corporate auctions.

The latter appears to have come into play in the Tech Data(TECD) situation, as the company accepted a Berkshire offer only to turn it down when Apollo raised its bid.

Berkshire's class A shares (BRKA), which are up $505, to $331,000 Monday, have gained 8% this year, against a total return of 27% for the S&P 500. This is one of the worst years of relative performance for Berkshire since Buffett took the reins in 1965. Berkshire's class B shares are up 65 cents at $220.95 Monday.

There is some frustration among Berkshire holders that Buffett has allowed so much cash -- $128 billion at the end of the third quarter -- to build on Berkshire's balance sheet. Despite an expanded authority to buy back stock since the summer of 2018, Berkshire has repurchased relatively little. In the first three quarters of 2019, Berkshire bought $2.8 billion of stock. At that rate, Berkshire will buy back less than 1% of its stock this year -- its market value is about $540 billion.

Buffett loves to invest in companies like Apple (AAPL), Bank of America (BAC), and Wells Fargo (WFC) that repurchase lots of stock, but he has long been cool to buybacks at Berkshire. Some big banks are buying back 5% to 10% of their stock, while Apple has retired about 6% of its stock in the past year through the largest buyback program in the world.

Berkshire also has scaled back its equity purchases this year, buying $15 billion in the first three quarters, against $38.6 billion in the same period of 2018.

As one longtime Berkshire watcher tells Barron's, Buffett and Vice Chairman Charlie Munger are disadvantaged in the acquisition game. Buffett refuses to participate in corporate auctions, which makes it tough for boards of public companies like Tech Data(TECD), which have a fiduciary obligation to get the best price.

And it is debatable whether Tech Data(TECD), which operates in the slow-growth, low-margin distribution business, would be a better use of Berkshire's cash than its own stock. Apollo is paying 11.5 times projected earnings in Tech Data's(TECD) current fiscal year for the company.

Berkshire trades for 21 times estimated 2019 profits, but the company's effective price/earnings ratio is lower because Berkshire can reflect only the dividends of the companies in its $220 billion equity portfolio in its earnings. Berkshire is also sitting on an enormous amount of cash -- it is earning just 2% on that cash. And Berkshire owns a higher quality group of businesses than Tech Data(TECD).

Berkshire now trades for 1.35 times its Sept. 30 book value of about $244,000 per class A share -- near the low end of its range in recent years. And book will likely be up smartly in the current quarter thanks to the company's $25 billion of annual earnings power and gains in the stock market.

Berkshire's largest equity holding, Apple, has appreciated by about $10 billion since Sept. 30. Bank stocks, where Berkshire has broad holdings, are up about 10% on average since the third quarter ended. Berkshire's book could hit $ 254,000 per class A share at year-end, according to a client note from Barclays analyst Jay Gelb. That means the stock may be trading for just 1.3 times year-end book value, just above the old cap on Berkshire buybacks at 1.2 times book.

One longtime Berkshire holder says that Buffett should look for bigger acquisition targets, where the company has more of an edge because of the difficulty of private equity to do deals that are more than $50 billion. Potential targets include Walgreens Boots Alliance(WBA) , which already has had an approach from private equity, or a major airline like Delta Air Lines(DAL) or Southwest Airlines (LUV). Berkshire likes the airline sector and already owns about 10% of both Delta and Southwest.

A lagging Berkshire looks appealing with Gelb carrying an Overweight rating and a price target of $375,000 on the class A shares, about 14% above the current price.

Investors, however, may want to see a greater commitment from Buffett on stock buybacks or an attractive big acquisition before getting more excited about the shares.

Write to Andrew Bary at [email protected]

Gooner

That was an extremely basic breakdown of “productivity.” It says right on there that it divides total block by two pilots. International flights instantly change that dynamic. Fleet size and fleet complexity also skew those numbers.

That would be like the company saying pilot payroll last year was 4B and dividing it by 14,000 and saying every pilot made $250k.

You also have to compare on time metrics, common airspace metrics, and etc. statistics are more complex than this kind of basic breakdown for a reason. Such as the “productivity” changes at each company drastically change with mergers and or new fleets introduced.

While I actually applaud the data as a show of crediting your position, unfortunately as with all data it can be interpreted differently and the common denominator becomes the hardest part to prove.

I’d like to see this break down for a single fleet of each airline just to get a better look at a true comparison.

Han Solo

What is the upside to the company agreeing to any pilot gains? If we'd agree I'm sure the company would love to sign a contract where we work 100 hours hard block a month for free.

Not to mention, look at dispatch. Zero movement and they've been negotiating a year longer than us. The company has no incentive to negotiate right until they do. Reference what CBreezy said above and my reply. Delta's goal is to get Ed another 8 digit condo, another 5 cents on the dividend, and a $70 share price. Pilots earning what they think they deserve is not in the top 100,000,000 items on management's to-do list.

This is not a hit against ALPA or any other union, I firmly believe we are far better off with ALPA than without; however, they are powerless to negotiate until the company actually NEEDS something. The company needs productivity but pilots have made it clear we don't want to give productivity. The company needs JV relief and the pilots won't budge there either. I'm not suggesting we compromise when it comes to productivity or JVs but those are the bullets we have and if we don't fire them then exactly what are our negotiators supposed to use? It doesn't matter how profitable Delta is, they have no obligation to share the wealth with the employee group, in fact I'd argue they have a fiduciary obligation to do the opposite.

Until Delta can't fill new hire classes due to the perception that other airlines are better they have no incentive to make things better. Until Delta can't fill the schedule, they have no incentive to make things better. Until NPS goes down due to pilot actions (or lack thereof), Delta has no reason to negotiate. Until the pilot group stops flying unlimited green slips, taking actions to improve NPS, and covering every other department to make the operation run smoothly, management won't have a reason to negotiate with ALPA.

The deck is stacked against us. RLA won't let us strike. Judges on both sides of the aisle will side with big corporations and even the merest hint at a job action will be met with litigation from the company against individual pilots. I'm expecting a long wait, I'd be extremely surprised if we saw a contract worth ratifying before 2022.

CBreezy

You missed the point of what I was saying. Getting a 2-4% raise every year after the amendable date encourages us to drag our feet, especially during bad times. While I would love a clause like this, there is no incentive for the company to do this. And we certainly can't just "put it in there."

Hank Kingsley

I wouldn't settle quickly with us either. Couple of reasons. We towed the line this past summer with pleasure(and will do so again when asked/paid at double time), the economy can only get worse, FA's are being driven for a union vote and the omnipresent RLA. We're not the teamsters of yesteryear.

Fredturbo

I believe he/she is referring to the Bushwood Country Club celebration photo.