KrustyF15

Extremely valid points on all accounts Albie. I’ll mention that FWIW, if you call hostile, I’ll call Fox Fox - and I think there are a lot of people whose trust you have rightfully earned and will do the same.
I didn’t mean to say you were or weren’t on board w VB; Rather, your usual on-point synopsis just didn’t address the possibility of moving the current retirement bar, as you have now done on that last post.
So without digging into it too much, I personally wouldn’t be bearish regarding our current or future negotiation leverage. If you want to call out the NC for not using that leverage or the membership for a missed opportunity, then that’s fair. However, across the collective airline industry, the pilot shortage is real, and I simply believe that some of those companies put a little extra oomph behind their hiring, potentially due to chicken little syndrome. The sky may be falling, but perhaps not at the exact rate that was predicted. Add to that the initial desire for companies (ours included) to get hooks into the highly qualified candidates, and you may see seats being better (or worse, depending on how you look at it) manned.
While my humble opinion is that a six year contract was about the worst parting shot to CBA 2015, it gives more time for the truth data to come out regarding what “right size” manning will be. Sure, the company might be fat on Schlitz this fall, but we still have time for their inherent, unable to help themselves, desire for efficiency. If they can at all help it, they won’t put extra bodies in seats. So ultimately, our ability as a group to get improvements to our overall retirement will reside with both the NC’s purported “red lines”, and of course the intestinal fortitude of our membership.
On a final note, if you are alluding to potential or even likely downturn in the economy a-la the 2007/8 trifecta of bad sh!t happening, then all bets may certainly be off. I still don’t think it will get as bad as it was ten years ago though; First, there’s not any more three place cockpits they can make two place. And second, it likely wouldn’t last as long... they aren’t talking of raising the age to 70 - only 67 for now...
Truly hope you and your family are well, and you’re getting your fill of the far East; I’m pretty sure you owe me 4-5-6 money, but I’m buying the first round when you get back to America-Jima.

Albief15

Didn't mean to convey gloom and doom, just that even in good times there are peaks and valleys. Make hay when the sun shines. I think things are good. Almost 1000 a year at Delta for three years was a once every two or three decade surge. We've hired what--25% in a few years here at FedEx? Awesome! Just don't look at that as "normal"... My point is I am just seeing the hiring at other places come off the accelerator a bit. That point was about guys deciding to upgrade or not--not about leverage, or the retirement issues.

pinseeker

Yeah, the union says that raising the A plan cap is too expensive, yet they have somehow avoided putting a price tag on the plan they've proposed.

In the Q&A section, it was asked how much our A plan would be worth if the company used the same money for the VB plan in funding the A plan. The answer, the company doesn't just fund the pilots A plan, it is a company wide plan. So what does that mean? How does that answer the question that was asked?

Fdxlag2

From Jetflyers:

- ALPA did adjustments with Cheiron to see how much it would cost the Company to change the current retirement caps: $260,000 and 25 years of service.
- ALPA has costed this out.
- $300,000 salary cap for A plan would be hundreds of millions of dollars on day of signing.

pinseeker

Even if that is true, though that isn't what I asked, didn't the company just contribute $1 Billion from tax savings to the retirement plan. Isn't that more than hundreds of millions? Why can't they show us that model but they can give us a VB modeler?

kronan

Albie15’s perspective always interesting.
Will say it’s nice to be working for a company where the odd 10k extra a year is a take it or leave it kind of mindset.
And, does Albie Really need to quantify what a change to the earnings Cap would produce ala retirement?
If it changes to 280, that’s the 10k extra a year.

And Dlax seems to be arguing both ways...that the ‘cost’ to a floating VB cap with a 2% floor is the same as the ‘cost’ to index our Traditional High 5 to the same cap.
But Dlax has pointed out the VB cap is Not the equivalent of our traditional Average cap. That one or two really good years in the 350-450 range have a big Impact on the Traditional Average while Attaining the VB 275 calculation would require every Single year of your career to be at that floating cap level.

The selling point of the VB is the reduced accounting/book expenses and the reduced PBGC expenses as compared to our traditional plan
Each and every new hire creates a book expense equivalent to the 260 Average * expected YOS the date they are hired.
Pension plans are Not a pay as you go plan

DLax85

Was the cost estimate mentioned above based on a “retroactive application” of increasing the current A fund salary cap for all on property who’s retroactive High 5 FAE was above $260K?

I’d imagine such a retroactive application would be quite expensive and I don’t believe the company would agree to it

I think any changes will be forward looking, and apply only to years going forward

Clearly the company can see that freezing the current A plan, and funding the new VB will be more expensive for them for any pilot who has maxed their High 5 and their 25 YOS

They will have to pay this cohort their “frozen” $130K benefit AND pay them additional VB benefits - at an additional 2% floor benefit for any additional YOS worked after the transition

They will be paying every pilot in this cohort a far greater amount then they’ve already accounted for under “retirement liabilities” on their balance sheet

Of course, this cohort would be the only group to ever enjoy such a benefit

Given, FedEx strives to keep the contract “cost neutral” where/how will these higher costs for this cohort be offset?

Why would FEDEX agree that higher costs for this cohort when we’re not in Section 6?

Would there be retirement savings elsewhere, amongst other cohorts?

Of course there would be. Anyone who hasn’t maxed their High 5 and hasn’t maxed their 25 YOS, would never be able to use the power/leverage of their currently accrued YOS.

Fdxlag2

I couldn’t tell you how the cost was computed. But one has to assume the liability listed against the fund goes immediately from 4500 pilots at 130k to 4500 pilots at 150k per year. Now someone is going to say but all 4500 pilots won’t get 25 years. Good point, the liability for every pilot still increases by about 15%, so immediately the fund goes from 85% funded to what 75%? Again this is why the IPA and UPS have a workaround. One, that according to our MEC, makes theirs the best retirement in the industry. But we want to go a new and different way.

DLax85

I don't think the cost of a our A fund with a High 5 FAE method, indexed to the same IRS limits, would be the same as our current A fund in any case, or the same as the VB fund in all cases.

I believe providing a higher benefit actually incurs greater cost. (We are talking about "negotiating" an increased benefit, right???)

I believe indexing our current A plan to the IRS limits would be a reasonable 5.7% increase, and then a 1.5-3.0% increase annually.

But, I'm not under any illusion that the company agreeing to guaranteed, 2% floor benefit, accrual each year, is any cheaper than what they provide now --- unless you replace how the "average earnings" are calculated.

The benefit & cost changes are highly dependent on YOS.

The easiest way to see this, and compare the plans clearly, is to assume the Investment Return = the Hurdle Rate, for every year.

15 YOS
Current A - 30% of High 5
VB - 30% of CAE. (Career Avg Earnings)

20 YOS -
Current A - 40% of High 5
VB - 40% of CAE

25 YOS
Current A - 50% of High 5
VB - 50% of CAE

30 YOS
Current A -50% of High 5
VB - 60% of CAE

35 YOS
Current A - 50% of High 5
VB - 70% of CAE

And for the rare, rainbow unicorn, 40 YOS pilot...
Current A - 50% of High 5
VB - 80% of CAE

Of course, even for the rainbow unicorn pilot, his CAE accrued benefit would be WELL BELOW any IRS Earnings Cap the year he retired, because the average is based on ALL of his W-2s from year 1.

After Year 5, the CAE method simply, and most definitly, accrues a smaller benefit, and accrues it at a slower rate.

So in the scenarios outlined above, the VB plan based on CAE can only be beneficial with YOS greater than 25...and then, it all highly depends on how the early portion, and middle portion, of that pilots career played out.

For military guys, it's like a 30 year Colonel, who's retirement is NOT based on his last/highest 36 months of pay....rather on his average, weighted-pay across his entire career -- as a 2LT, 1LT, Capt, Major, LT Col and Colonel.

(Hopefully, he was a "fast burner boy" getting promoted (upgrading) early! Hopefully, there weren't any periods of "downsizing" where promotions were slowed, and he didn't spend extra years as a junior or mid-grade officer)

Under an "enhanced A plan" with extra 1% YOS credits to 30 year, we could increase the max benefit to...55% of High 5

How would this compare to the VB plan accrued floor benefit of 60% of CAE?

Let's model it!

Show us the "assumed upgrade timeline" and we can start the spreadsheets!

If we gave increased 1% credits for those over 25, what percentage of our crew force would this cover now...and potentially cover based on current age?

Let's see our current pilot distribution based on YOS....based on age...and based on current High 5.

Given this information, we will gain clarity on who will benefit and who won't. Where the company will incur greater cost and where the company will save money.

I'm highly confident the company is studying each of these pilot cohorts very carefully, and working hard to keep any improvements "cost neutral", or "to a minimum", across the whole crew force.

pinseeker

Again, the PBGC expense is the same for the VB plan as it currently is for the A plan. The MEC has never stated that this will reduce the current PBGC expense. They have only stated that it reduces the volatility of funding the A plan and eliminated the potential for penalties, since the plan can't be underfunded.

Also, new hires aren't a book expense until they become vested in the plan.