sailingfun

Keep in mind that payroll is ⅓ of the companies expenses and the non contract raises are all ready absorbed in the first 3 quarters numbers. We are around 1/3 of that third. The fourth quarter is on track to be decent. We will know the third week in January.

Check Essential

Profit sharing might not be what we expect. All depends on what accounting method management decides to use this year.

I heard they made some pretty big bets on peanut futures and the Albanian currency has been fluctuating wildly the last few months.
PTIX could be zero.

sailingfun

We already know exactly the accounting method they used for the first three quarters and the PS pool from those quarters. Are you predicting a 5 billion dollar loss in the 4th quarter and a new accounting method?
You should really be shorting Delta stock. You will never have to work again!

Here however is why I would plan on this year being the highest dollar amount we see. I would plan on a significant drop for 17.

""For the December quarter, Delta is expecting a slight decline in margins year over year, as savings from lower fuel prices and productivity initiatives will be fully offset by declines in unit revenues that the company continues to address through its capacity actions and revenue management initiatives. The projections for the December quarter do not include any estimates for the company’s potential agreement with its pilots.""

The declines in unit revenue have been offset by the drop in fuel for the last 2 years. We won't have that gift in 2017. The continued revenue slide will become significant unless airline managements figure out more capacity constraints.

OldFlyGuy

Uhh, what he said. 2016 PS will be the peak. OFG

DALMD88FO

I think he was making a comment on how the company changed the way certain one time charges were changed to normal operating expenses in the profit sharing calculations.

notEnuf

2016 could be the peak for core delta profitability. This is exactly why they have pursued the "virtual merger" strategy. The investments in global network carriers will continue to bring revenue and profits as they expand the industrial model. Virgin Atlantic greatly improved profitability after the Delta team engineered their turn around. The same is happening at GOL now. Aeromexico has announced expansions since the initial Delta investment. Delta also bought 10% of the H shares of CEA.

The corporate profit margin may stay about the same but with this corporate expansion comes more profits. Management needs flexibility to assign flying to code share partners to drive the turn arounds at these partners.

Maintaining a 18-20% profit margin at Delta has been sustainable minus one time expenses like hedge losses and the potential lump sum retro payments. The PRASM adjustments are cyclical and will track market fuel prices and inflation. As fuel becomes more expensive ULC carriers are squeezed so capacity will be continuously adjusted to optimize revenue.

Profits will continue to grow but not from the usual sources. The 20% profit margin is impressive and likely near the limit. The corporate profit will grow from the increased size of the company. Delta operations are at or near maturity.