Is Profit-Sharing = At-Risk Compensation?
 

I was thinking about the comment reported on the L&G, referencing Capt. Donatelli's twitter post: "We need a contract tied to the company... Profit sharing = At-risk compensation."

My immediate reaction is that this might be a trial balloon for the purpose of converting PS into a fixed pay increase. This is the traditional naysayer response: ALPA is trying to manage our expectations down. There must be something ominous going on.

On further reflection, let's think about what's actually happening. We'll be negotiating soon. If the Company is trying to go after the PS, they're not doing a great job, because RA talks up the worth of the PS plan, and the impact on employee performance every chance he gets. Strange behavior, for a guy trying to go after the PS, isn't it?

Now, what do executives traditionally want for contract employees? Traditionally, their wet-dream is a mechanism that reduces total compensation when times are down. The last thing they want is to have guaranteed wages high, when times are down. Granted, Wall Street gets jealous when times are up, and any period when PS is favorable to employees is like a dagger into their hearts, but the company is getting 80% of the profits above $2.5B, and they're NOT obligated to pay adequate payrates meanwhile. What's not to like?

Now, flip this around. Our union is negotiating on our behalf, and they want to retain the highest possible total compensation possible. Traditionally, we want the highest possible guaranteed compensation. We don't want to be hurt over mis-management. But then again, we don't want to cough up contractual gains.

For a change, we finally have in place a decent PS mechanism. Woe to the guy that tries to touch our PS. All that's missing is adequate payrates (in Section 3, anyway).

But in negotiating, the last thing we want is to emphasize the value of the PS, because we want... higher payrates (and other items). The first thing the company wants to do is to point to the PS, to fight against any such change.

So, when Donatelli says that the PS part is "at-risk", he's not only being accurate, but I think he's rationally trying not to talk up the value the value of something we have, to craft a better argument for getting things we need. It makes perfect sense.

Maybe our mistake is to think that every communication is directed at us.

There two salient facts about the PS plan are:
1) it's a contractual right that we own, and many value, and
2) it's most definitely subject to company profitability, and absolutely represents "at-risk" compensation, i.e. the future value is unknown.

Those two things are 100% true, but they don't work well together. If you're the union, do you want to make public noises before negotiations about how important it is to keep the PS, or how important it is get decent payrates? If you're the company, your game is to talk up total compensation, and especially the PS. Why would the union be doing the company's job?

Back to the two points above: we need to make sure that we communicate to our reps that they touch the PS at their peril (which we most likely did, via the survey), while at the same time, we need to recognize the "at-risk" nature of the PS plan.

It's much more subtle than going ballistic over the PS in public, but I think going ballistic in public over imagined PS monetizing hurts our negotiators. This may be a time to communicate more privately with our reps, and/or let the survey do the talking. I sure as hell was clear in the survey that we'd try to have their balls stuffed and mounted if they attempt to monetize the PS.

Weren't we all?

Profit sharing keeps IAM away. Chose your battles.

I actually think the company would be wise to just let profit sharing stay, if there is a downturn they instantly save money.

Now if ALPA is trying to monetize it on their own, well...

I agree with what you say, but what compensation is not at risk?

1000 + guys got furloughed with a no-furlough clause.

We had great contractual pay rates from C-2000 - did they survive?

Even after we took a voluntary 32% pay-cut to avoid BK we found our pay
"at-risk" to the tune of another 14%.

We get it. PS is at risk. If we foolishly decide to monetize PS thinking all compensation is not somehow at risk, lets keep it separate from section 6.

I for one am willing to accept a certain percentage of "at-risk" pay for a few reasons:

PS is tied to profits. Does anybody think if we are subject to a Black Swan event that would permanently affect our profitability that all compensation would not be at risk?

Do we really want to monetize PS because we may not be profitable every year?
The industry has drastically changed. We have been making record profits in a down economy. The company is much leaner and we are much more productive. I am not saying we will always be profitable but its not the 1980s or the 1990's anymore.

Scoop

Delta has proven time and time again, all compensation is "at risk."

Trial Balloon floated…

All pay is at risk

Thanks, Scoop.

I personally have been arguing for a large at-risk component for every year I was here, plus or minus a furlough. I like it, and under no circumstances do I want our PS reduced.

The reason I like a large PS component is I'd like guys to live within their means, and be less likely to trade out QOL to maintain a lifestyle they incorrectly assumed would never end. When things go south, these guys do just about anything for payrates. With a large PS, more guys see it correctly as at-risk, and many even pension the extra check. That's a healthier way.

Regardless of my interest in a large PS component, I'm arguing that maybe we're hurting ourselves with the public hystrionics. It needs to be crystal clear internally that the PS stays, but does that automatically mean we should infer from Donatelli's tweet that we're looking to monetize it, or is it a rational negotiating stance?

Profit sharing keeps IAM away. Chose your battles.

I actually think the company would be wise to just let profit sharing stay, if there is a downturn they instantly save money.

Now if ALPA is trying to monetize it on their own, well...

Where have you read that? Other then Jerry where have you heard that?

Your post is dead on. If American ratifies their agreement they will have rates 10% above ours on the amendable date. The company is going to try and use the profit sharing to justify rates lower then American.

Don't overthink this. The tweet means exactly what it means. PS is on the table and Donatelli is willing to give it up.

Also, what RA says is not cast in stone. He also said he was not here to merge us with Northwest.