Details on Delta TA
01-10-2015 | 04:17 PM
#3181
Doesn't Get Weekends Off
Joined: Jun 2007
Posts: 2,599
Likes: 2
No, that's why it makes sense to monetize the profit sharing if it's above and beyond the negotiated payrates. In my case it's probably better to stick with profit sharing with the few years I have left. If however i had 20 years to go I would want the money in the payrates.
"The industry is fundamentally changed. Double digit rate of returns are hear to stay!" That was the Mantra being touted by management and unions alike in 2000. By June of 2001 the airlines were facing some of the biggest losses ever. It turned in the blink of a eye. For the young guys we need to be very careful how much at risk based compensation we leave in our contracts. It would be beyond stupid to negotiate based on good times forever.
"The industry is fundamentally changed. Double digit rate of returns are hear to stay!" That was the Mantra being touted by management and unions alike in 2000. By June of 2001 the airlines were facing some of the biggest losses ever. It turned in the blink of a eye. For the young guys we need to be very careful how much at risk based compensation we leave in our contracts. It would be beyond stupid to negotiate based on good times forever.
I've got 28 years to go and would much rather have my PS monetized into payrates IF it is in additional to negotiated rates. Problem is, they will do what they did in C2012 and just move it from PS to payrates which did none of us any good.
01-10-2015 | 06:59 PM
#3182
Gets Weekends Off
Joined: Jul 2010
Posts: 12,831
Likes: 172
From: window seat
The refinery has lost money almost every quarter since we have owned it. It does no good to save 7 cents a gallon on jet fuel and lose 15 cents a gallon on the other products. There is a reason not a single other airline has followed our example. Between the purchase cost, upgrade costs and ongoing losses were down about a billion dollars.
That does not even get into potential long term environmental obligations.
That does not even get into potential long term environmental obligations.
We would have been hedged anyway, regardless of the refinery.
Yet we still saved that 7 cents and will continue to do so.
And the refinery should lose money. Always and forever. We didn't buy it to "make a profit". By definition any penny of "profit" that it could ever make would come out of the other pocket. Its "profit" or "loss" means absolutely nothing. The only thing that matters is the overall effect to the bottom line. You can't count hedges against it; that's ridiculous.
We have lower refining costs and more control of the supply of a bottlenecked high markup portion of the process. That's exactly what it was designed to do.
As for "long term environmental obligations" maybe you know something no one else does, but for now I'll assume they knew what they were getting into until proven otherwise.
01-10-2015 | 07:23 PM
#3183
:-)
Joined: Feb 2007
Posts: 7,339
Likes: 1
Isn't the refinery "crude neutral" though?
IOW it doesn't matter what crude is or what we gain or lose on hedges as that is separate from the refinery. Its purpose was to reduce the crack spread/refining costs, and nothing crude does effects that. To that end, isn't it still a success?
If lower oil prices result in lower fuel prices, won't that increase demand for fuel? Won't increased fuel demand result in more fuel needing to be refined? So flooding the market with cheap gas means you have to refine more gas. We now own and control that part of the bottleneck, and control it at a huge discount in our favor.
It was never designed to be an "oil hedge" or to "make a profit" it was done to lower risk and insure a reliable cheap supply. Hasn't it done that wonderfully?
IOW it doesn't matter what crude is or what we gain or lose on hedges as that is separate from the refinery. Its purpose was to reduce the crack spread/refining costs, and nothing crude does effects that. To that end, isn't it still a success?
If lower oil prices result in lower fuel prices, won't that increase demand for fuel? Won't increased fuel demand result in more fuel needing to be refined? So flooding the market with cheap gas means you have to refine more gas. We now own and control that part of the bottleneck, and control it at a huge discount in our favor.
It was never designed to be an "oil hedge" or to "make a profit" it was done to lower risk and insure a reliable cheap supply. Hasn't it done that wonderfully?
One interesting tidbit in the 2015 flight plan is Delta is limiting CapEx to $3 billion per year.
01-10-2015 | 09:03 PM
#3184
Gets Weekends Off
Joined: Feb 2008
Posts: 20,877
Likes: 194
Why did we lose 15 cents per gallon? Because of the hedges?
We would have been hedged anyway, regardless of the refinery.
Yet we still saved that 7 cents and will continue to do so.
And the refinery should lose money. Always and forever. We didn't buy it to "make a profit". By definition any penny of "profit" that it could ever make would come out of the other pocket. Its "profit" or "loss" means absolutely nothing. The only thing that matters is the overall effect to the bottom line. You can't count hedges against it; that's ridiculous.
We have lower refining costs and more control of the supply of a bottlenecked high markup portion of the process. That's exactly what it was designed to do.
As for "long term environmental obligations" maybe you know something no one else does, but for now I'll assume they knew what they were getting into until proven otherwise.
We would have been hedged anyway, regardless of the refinery.
Yet we still saved that 7 cents and will continue to do so.
And the refinery should lose money. Always and forever. We didn't buy it to "make a profit". By definition any penny of "profit" that it could ever make would come out of the other pocket. Its "profit" or "loss" means absolutely nothing. The only thing that matters is the overall effect to the bottom line. You can't count hedges against it; that's ridiculous.
We have lower refining costs and more control of the supply of a bottlenecked high markup portion of the process. That's exactly what it was designed to do.
As for "long term environmental obligations" maybe you know something no one else does, but for now I'll assume they knew what they were getting into until proven otherwise.
01-10-2015 | 09:06 PM
#3185
Gets Weekends Off
Joined: Feb 2008
Posts: 20,877
Likes: 194
Isn't the refinery "crude neutral" though?
IOW it doesn't matter what crude is or what we gain or lose on hedges as that is separate from the refinery. Its purpose was to reduce the crack spread/refining costs, and nothing crude does effects that. To that end, isn't it still a success?
If lower oil prices result in lower fuel prices, won't that increase demand for fuel? Won't increased fuel demand result in more fuel needing to be refined? So flooding the market with cheap gas means you have to refine more gas. We now own and control that part of the bottleneck, and control it at a huge discount in our favor.
It was never designed to be an "oil hedge" or to "make a profit" it was done to lower risk and insure a reliable cheap supply. Hasn't it done that wonderfully?
IOW it doesn't matter what crude is or what we gain or lose on hedges as that is separate from the refinery. Its purpose was to reduce the crack spread/refining costs, and nothing crude does effects that. To that end, isn't it still a success?
If lower oil prices result in lower fuel prices, won't that increase demand for fuel? Won't increased fuel demand result in more fuel needing to be refined? So flooding the market with cheap gas means you have to refine more gas. We now own and control that part of the bottleneck, and control it at a huge discount in our favor.
It was never designed to be an "oil hedge" or to "make a profit" it was done to lower risk and insure a reliable cheap supply. Hasn't it done that wonderfully?
01-11-2015 | 03:25 AM
#3186
Straight QOL, homie
Joined: Feb 2012
Posts: 4,202
Likes: 1
From: Record-Shattering Profit Facilitator
01-11-2015 | 04:18 AM
#3187
Gets Weekends Off
Joined: Apr 2008
Posts: 588
Likes: 0
From: 757/767
Other products does not mean hedges. Please review how much jet fuel you can get from a barrel of oil. The rest of that barral has to be sold. The refinery has so far done nothing but suck cash and the reduction in jet fuel prices in the NE has carried over to all airlines.
Delta's Traier refinery profit rising; airline stocks soar on falling oil prices
Delta said at an investor conference in New York that its Trainer refinery in Delaware County would produce a $75 million profit in the current quarter, helping to offset losses on the airline's fuel-hedge contracts.
Delta buys some of its fuel in advance, to hedge against higher costs. But when fuel prices dramatically decline, the airline is locked in and takes a hedge loss.
"Roughly half the hedge loss that we experienced this quarter is going to be offset by a profit at the Trainer refinery, as product cracks have held very strong, also attributable to the rapid decline in the crude input cost," chief executive officer Richard Anderson said.
"So we are looking at a hedge loss in the fourth quarter of $150 million, but we will generate a profit of about $75 million at the refinery," Anderson said.
Delta buys some of its fuel in advance, to hedge against higher costs. But when fuel prices dramatically decline, the airline is locked in and takes a hedge loss.
"Roughly half the hedge loss that we experienced this quarter is going to be offset by a profit at the Trainer refinery, as product cracks have held very strong, also attributable to the rapid decline in the crude input cost," chief executive officer Richard Anderson said.
"So we are looking at a hedge loss in the fourth quarter of $150 million, but we will generate a profit of about $75 million at the refinery," Anderson said.
The refinery, operated by Delta subsidiary Monroe Energy L.L.C., posted a $19 million third-quarter profit, a $13 million profit in the second quarter, and a $41 million loss in the first quarter this year.
How Delta Bought a Refinery and Wound Up Saving American and United a Ton of Cash
The profitability of refineries is measured by something called the “crack spread” — the difference between the cost of crude oil and the price of the refined product (in this case, jet fuel). For example, if a barrel of crude oil costs $US100 and the price of a barrel of jet fuel is $US150, the crack spread would be positive 50.
Since Delta bought the refinery in 2012, the crack spread for jet fuel in the U.S. has dropped roughly six points, yielding a savings of $US40 million dollars in fuel costs per point for the airline, Bhaskara told Business Insider. Based on his calculations, this change translates into annual savings upwards of $US240 to $US320 million for Delta alone.
Since Delta bought the refinery in 2012, the crack spread for jet fuel in the U.S. has dropped roughly six points, yielding a savings of $US40 million dollars in fuel costs per point for the airline, Bhaskara told Business Insider. Based on his calculations, this change translates into annual savings upwards of $US240 to $US320 million for Delta alone.
With a fleet of more than 700 aircraft, consisting mainly of older and less fuel-efficient planes, Delta benefits from the acquisition for obvious reasons. Delta’s big competitors, United Airlines and American Airlines, won’t reap the same savings.
But they will still save a lot. Bhaskara estimates that it could run into the hundreds of millions of dollars annually.
But they will still save a lot. Bhaskara estimates that it could run into the hundreds of millions of dollars annually.
Bottom line, Delta seems to be happy with Trainer. I don't see a scenario where Delta's fuel plan reduces profits to zero in 2016. That's not to say profits can't be zero in 2016 (though I wouldn't bet on it), only that it won't be the fuel strategy that does it.
01-11-2015 | 05:01 AM
#3188
Gets Weekends Off
Joined: Jun 2010
Posts: 852
Likes: 0
01-11-2015 | 06:29 PM
#3189
Gets Weekends Off
Joined: Jun 2009
Posts: 5,113
Likes: 0
Our wages are what it costs Delta to fly the leg on a current basis, and our profit-sharing represents deferred compensation for taking the airline through bankruptcy, and the merger. Just like the executives got stock options for being here, which are vested over some period of time.
Why would we be so stupid as to use deferred compensation to fund current wages?
"Monetizing" is what you do when the company is doing poorly, and you need to make a trade. Right now, it's (perversely) being used as an argument for self-funding a well-deserved wage increase.
This questionable argument was used with marginal effectiveness in C2012, but the bitter taste of buying our own increases lingers. I think it's a mistake to assume that people think of their PS as transient, or somehow "not real". Sleight-of-hands with the PS might be a gross miscalculation.
I've noticed a few guys floating trial balloons in the lounge. I deflated one as mercilessly as I could.
Why would we be so stupid as to use deferred compensation to fund current wages?
"Monetizing" is what you do when the company is doing poorly, and you need to make a trade. Right now, it's (perversely) being used as an argument for self-funding a well-deserved wage increase.
This questionable argument was used with marginal effectiveness in C2012, but the bitter taste of buying our own increases lingers. I think it's a mistake to assume that people think of their PS as transient, or somehow "not real". Sleight-of-hands with the PS might be a gross miscalculation.
I've noticed a few guys floating trial balloons in the lounge. I deflated one as mercilessly as I could.
Last edited by Sink r8; 01-11-2015 at 06:40 PM.
01-11-2015 | 06:51 PM
#3190
Thread Starter
Gets Weekends Off
Joined: Oct 2009
Posts: 3,108
Likes: 0
Our wages are what it costs Delta to fly the leg on a current basis, and our profit-sharing represents deferred compensation for taking the airline through bankruptcy, and the merger. Just like the executives got stock options for being here, which are vested over some period of time.
Why would we be so stupid as to use deferred compensation to fund current wages?
"Monetizing" is what you do when the company is doing poorly, and you need to make a trade. Right now, it's (perversely) being used as an argument for self-funding a well-deserved wage increase.
This questionable argument was used with marginal effectiveness in C2012, but the bitter taste of buying our own increases lingers. I think it's a mistake to assume that people think of their PS as transient, or somehow "not real". Sleight-of-hands with the PS might be a gross miscalculation.
I've noticed a few guys floating trial balloons in the lounge. I deflated one as mercilessly as I could.
Why would we be so stupid as to use deferred compensation to fund current wages?
"Monetizing" is what you do when the company is doing poorly, and you need to make a trade. Right now, it's (perversely) being used as an argument for self-funding a well-deserved wage increase.
This questionable argument was used with marginal effectiveness in C2012, but the bitter taste of buying our own increases lingers. I think it's a mistake to assume that people think of their PS as transient, or somehow "not real". Sleight-of-hands with the PS might be a gross miscalculation.
I've noticed a few guys floating trial balloons in the lounge. I deflated one as mercilessly as I could.
Well over 95% of our pilots want to keep our profit sharing or increase it.
The few pilots trying to sell reductions at Pub events and in the crew room are part of a coordinated effort by the new strategic planning chairman and his VC a long time cost neutral advocate.
We are in for a big fight. We can win but everyone needs to stay in contact with their reps and keep profit sharing off the table.
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