Maybe we should start a campaign and focus our energy on getting these fellows into office, a DALAPA office! Things might change for the better.

TEN

Do you really believe this? Wow!

For those who want to think about risk and the inevitable reversal of the business cycle:

Mish's Global Economic Trend Analysis: Huge Miss on Jobs: Establishment +126K Jobs; Household +34K Employment, Labor Force -96K

Mike Shedlock does the best job of dissecting the non-farms payroll report, AKA the jobs report. I realize this is serious stuff, but understanding the risks of variable compensation is required due diligence.

Sparkler wants you to believe that it doesn't matter because your max pay rate increase will be unaffected by whether the company is on the hook for potential PS. IOW, there is no cost associated with potential PS. That is pure fantasy.

The real world works this way:

With profit sharing - X=max possible pay rate increase
Without PS - X+PV=max possible pay rate increase, where PV is projected value of PS.

Contrary to spackler's belief, the company can make a projection of probable value, certainly within a range of probable values. They do such things all the time, with fuel hedging for example. The point is they can project a number greater than zero if they see continued profitability. If they see a cliff coming (extreme case) they can elect to reject moves to monetize, knowing that they will likely not have to pay any PS.

Can they be proven wrong? I'll answer that with another question, have they ever been wrong on fuel hedging? Sure. The flip side, can we be wrong on the future value of PS? You bet. That is risk in a nutshell.

PS has value. We cannot say for certain what it is, only that its presently worth more than zero and will continue so as long as the company maintains profitability. We would like to say (bargaining position) that its worth 16% plus.

The company knows that it currently is worth that much, but also knows at some future date it will be less. Their risk is that they monetize the present value at par (or more), and then profitability declines. They will wish to mitigate that risk by receiving a discount.

We know that PS is currently 16% plus. We should know that somewhere down the line it will be worth less. Our risk is that if profitability wanes, we see smaller PS payouts. To mitigate that risk we wish to receive par or even a premium in the form of additional fixed pay rates.

If this becomes a bargaining position, the company will justify their value with an economic analysis by there team. DALPA has an economic team as well and will present the justification for their number. If an agreement can be made within both parties' parameters, we get a deal. If not, no deal. This is not rocket science.

Both will try to quantify risk and value PS accordingly.

My view is simple and I have passed it along via survey and direct input to the reps. The risk for a recession and reversion of the business cycle is rising and in my estimation the period of economic expansion is nearer the end than the beginning. In OTW, we are nearer to the peak of the cycle than the beginning. Or, we are closer to the maximum value of PS than not. If there is a time to capture max valuation from the company for a portion of our PS, it is now or within the period covered by our next contract. Additionally, the downside risk outweighs the upside risk where we leave some money on the table. Further, if we do miss some upside potential I consider it an acceptable time risk premium to play.

I ask all to read the bolded text above. This guy thinks I'm part of multi-faceted on my own contract. LOL!!! I'm just a guy that wants to bring home the most money I can.

Uh oh
 

Must be contract time again. Starting to see lots of posts by guys who aren't usually on here. Different names than C2012, so that's good. And, terms like "exposure to profit sharing." It's like exposure to bad press. Or exposure to Ebola. You know, the kind of stuff we want to stay as far away from as we can!

Give the fear mongering a rest Tool. You're like a hyena yelping around these boards trying to sell Fear, Uncertainty, Doubt. I understand this is standard protocol during contract negotiations to steer opinion. Not sure it's going to take this time like it did for C2012.

We don't know profit sharing will be less than 16%. In fact there is a very high chance it's going to keep going up if we don't screw with it. Did you watch Ed speak in the ATL crew lounge recently? By the end of this year our debt will be 5 Billion. Two years after that it will be ZERO. That's right, zero, with a HUGE reduction in associated interest payments.

Delta is on the verge of minting money like no airline has in the history of the world and your on here selling fear to get people to feel good about cashing in profit sharing pennies on the dollar. Take your crazy somewhere else....we're all full up here.

F U D. Fear Uncertainty Doubt


Nice try Tool. I'm not denying there are black swans and hazards to the economy and Delta out in the world.. There are. I'm just not going to subscribe to the argument you are posing to try and shape expectations.

It's not reasonable.

Let's look at this realistically.

The Great Recession. June 2007 to January 2010.

The subprime mortgage crisis led to the collapse of the United States housing bubble. Falling housing-related assets contributed to a global financial crisis, even as oil and food prices soared. The crisis led to the failure or collapse of many of the United States' largest financial institutions: Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, Citi Bank and AIG, as well as a crisis in the automobile industry.

The government responded with an unprecedented $700 billion bank bailout and $787 billion fiscal stimulus package. The National Bureau of Economic Research declared the end of this recession over a year after the end date. The Dow Jones Industrial Average (Dow) finally reached its lowest point on March 9, 2009.


Now, let's look at reality.

DELTA AIR LINES REPORTS 2007 FINANCIAL RESULTS
INTERNATIONAL EXPANSION HELPS DRIVE MORE THAN $1 BILLION IMPROVEMENT IN 2007 ANNUAL PRE-TAX INCOME
Atlanta, GA
NYS-DAL
Jan 23, 2008

ATLANTA, Jan. 23, 2008 – Delta Air Lines (NYSE-DAL) today reported results for the quarter and year ended Dec. 31, 2007. Key points include:

Delta’s 2007 pre-tax income was $1.8 billion. Excluding reorganization related and certain items, pre-tax income was $625 million, a $1.1 billion improvement compared to 2006.1,2, 3
Due to a 26% rise in fuel price, Delta reported a pre-tax loss for the fourth quarter of $105 million.
Delta ended the year with $3.8 billion in unrestricted liquidity, including $1 billion available under its revolving credit facility.
Delta employees will receive $158 million in profit sharing in recognition of their critical role in achieving significant financial improvements in 2007.

And in 2008, the height of the Global Recession.


Delta's 2008 net loss was $503 million, or $1.08 per diluted share, excluding (1) special items that primarily consist of an over $900 million non-cash charge related to employee equity awards that were issued or vested in connection with the merger and $7.3 billion in non-cash goodwill and other intangible asset impairment charges reported earlier this year, and (2) a $91 million loss on out-of-period fuel hedges.

"I want to thank my 85,000 Delta colleagues for their outstanding achievements in 2008 - a year where we not only faced the severe challenges brought on by over $2 billion in increased fuel costs and the onset of a global recession, but also closed our merger with Northwest and began a smooth integration process," said Richard Anderson, Delta's chief executive officer. "Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies. Delta people have a great track record for achieving their goals, and I am confident that 2009 will be another successful year." -


So, to make my point, in 2009 Delta had 6.14 billion dollars in gross income and a net income of 593 million dollars......

all before the end of the Great Recession.

Why?

The unbundling of fees.

We are in a new paradigm. Actually, we have been for a while.

You can put away the can of black paint and quit chasing the white swans in your attempt to paint something that's not all there.

Time to figure out how to work pay and compensation in the the new paradigm

Hint:

Cutting our profit sharing is not the answer

It really is unbecoming, isn't it? Sharpest, etc. only post then something needs a sell job. Sharpest, etc. Please does us a favor and wait to speak until the roadshow sell job. Your efforts and timing are suspicious.

Must mean a contract must be coming within a few months?

In May at the Delta BOD meeting next month they will announce yet another increase in their multi billion dollar stock buy backs and dividends.

The largest contributor by far to the record profits at Delta (the pilots) still work under a concessionary bankruptcy contract.

In 2016 Delta will easily make a profit exceeding $9 Billion. And the insiders fight day after day to assist management I reaching their goal of reducing our profit sharing. These dogs don't care one bit about our survey or line pilot desires.

With these profits Delta will have little to no debt.

Why would we even consider for one second giving up profit sharing?

Our execs compensation is up over 700% since chapter 11. Our turn.

Ten

I agree and it is happening. Baby steps.

MD is putting forward an amendment to the policy manual to let line pilots view all MOUs and LOAs for a period before our reps vote.

The negotiating committee is doing weekly updates.

The MEC has shifted away from Buzz and Randy. IMO they don't have the votes for another jam down.

If we attain the contract we deserve, we need to finish the job of reforming ALPA. Good changes at DALPA so far. National needs to be reformed big time. The way they spend money is disgusting.

Hoping for the best.

I guess. It just seems like the company could make the opposite argument that if profit sharing had no value our refusal to give it up would not harm the pilots unduly. I think we should come up with some other argument

[QUOTE=SharpestTool;1855570]Do you really believe this? Wow!



We know that PS is currently 16% plus. We should know that somewhere down the line it will be worth less. Our risk is that if profitability wanes, we see smaller PS payouts. To mitigate that risk we wish to receive par or even a premium in the form of additional fixed pay rates.

If this becomes a bargaining position, the company will justify their value with an economic analysis by there team. DALPA has an economic team as well and will present the justification for their number. If an agreement can be made within both parties' parameters, we get a deal. If not, no deal. This is not rocket science.

Both will try to quantify risk and value PS accordingly.

My view is simple and I have passed it along via survey and direct input to the reps. The risk for a recession and reversion of the business cycle is rising and in my estimation the period of economic expansion is nearer the end than the beginning. In OTW, we are nearer to the peak of the cycle than the beginning. Or, we are closer to the maximum value of PS than not. If there is a time to capture max valuation from the company for a portion of our PS, it is now or within the period covered by our next contract. Additionally, the downside risk outweighs the upside risk where we leave some money on the table. Further, if we do miss some upside potential I consider it an acceptable time risk premium to play.



ST,

Yes - Profit sharing will most likely go down some time in the future. But We are talking about a contract that covers 3-4 years - in which time PS will most likely continue to rise. Out biggest threats are all more than 4 years off. What "peak" are you referring to? We have been making record profits in a "down" economy and oil continues to decrease.

So why the rush to monetize it now when it is increasing yearly? If PS goes down for a year then we take a hit in PS - so what?

Are you saying that the industry will take a downward turn that will permanently affect profits negatively? :confused:

If the dreaded Black Swan does swoop in do you not think industry leading pay-rates would also be at risk? Don't kid yourself, there is no longer any stigma attached to BK and it could be used again. If we are hit with something big enough to permanently affect profits all bets are off.

I for one am more than willing to risk the upside of PS against a bad year or two. Besides, why would management want to monetize PS at a rate that would be more than projected future profit sharing? They know better than we do what the future may hold and I don't think they plan on giving us a premium.

Lets get a straight pay raise and not lose too much sleep over our increasing Profit sharing.

Scoop