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Bucking Bar 04-26-2010 02:51 PM


Originally Posted by makersmarc (Post 802151)
Not to drive you crazy, but exactly how are the profits of the W/O carriers dispersed?

That 10% margin has to go somewhere.

Riddle Eagle has got it.

Net of expenses, that revenue is profit. Same as any other revenue the Company generates. Budgets are nice, but in this business, it's hard to keep a budget.

I recall Continental's VP of Engineering was in trouble because their "unscheduled engine removal costs" were over budget. Of course, by definition, "unscheduled" is unscheduled. As a result they had a little bow wave of FOD'd out engines they were pushing forward into future fiscal years to make Gordon Bethune happy that their unscheduled emergency engine failures were budgeted to the penny. It just goes to show how silly a budget can be when a DC-10 is parked because it's fodded out engine isn't budgeted to break until next year.

As far as the money goes the division between our divisions is more in our mind than real. Comair's strike helped pull Delta into bankruptcy while Delta's bankruptcy pulled Comair in also.

RiddleEagle18 04-26-2010 03:40 PM

Bar, Maybe you can confirm,

Im pretty sure compass is unquie in the way delta deals with us.

I believe comair is still payed on a fee for departure basis and shows a profit or loss. They have a profit sharing program that varies quarter to quarter. Comair has outside revenue sources. They had a very productive ground handling service that was spun off into Regional Elite. They were contracted out to united express in many markets. The maint division also had outside work that brought money in. They preformed engine inspections and maint for Jazz and a few other operators.

Compass is very different. The airline is bare bones. In fact most of our HR functions are run by delta. Almost as though just another department of delta with a budget.

skywatch 04-27-2010 05:39 AM


Originally Posted by makersmarc (Post 802151)
Not to drive you crazy, but exactly how are the profits of the W/O carriers dispersed?

That 10% margin has to go somewhere.

Delta lost millions last quarter. Weird how all the wholly owned carriers made a profit when Delta lost millions, right? That is because all the deals (Compass too) are fee for departure deals. Period. Of course Delta gives all the W/O carriers a budget to work with - they control all the spending, and the lower expenses are, the lower the cost delta has to pay.

Assume Compass operates one leg for Delta that earns $1000 in ticket revenue. Assume Compass operates under cost plus 10%. Assume it costs Compass $1200 to operate the flight.

Compass gets $1320 for the flight - they made $120 (guaranteed 10%). On Compass books they show a profit of $120. There is your 10% Margin. Great, right?

Not so fast. On Delta's books for the Compass flight, they show $1000 of revenue for the flight on $1320 of expense. They lost $320 on the Delta books for a flight that Compass shows they made $120 for. Net loss to the overall Delta Corporatation - $200.

Simple enough?

skywatch 04-27-2010 05:43 AM


Originally Posted by RiddleEagle18 (Post 802161)
Not entirely true. Compass is given a budget at the beggining of the year and expected to operate at or under it. No fee for departure.

Compass does not show porfits or losses as a company. We only show up as a line on delta's finacial reports.

Riddle - Yes, Compass has a budget. All of the wholly owned are given a budget by Delta. But Compass operates under fee for departure, just like EVERY regional airline flying for a major does. Look at the financials. As long as the "peformance targets" are being hit (completion, A14, D0) then they will make a profit based on the fee for departure (cost plus)agreement. Don't take my word for it. Ask someone in finance how your carrier is compensated. We are all basically charter. Delta buys the airplane, and the ticket revenue goes to them.

Bucking Bar 04-27-2010 08:38 PM

These are all sort of true. The actual fee for departure agreements are closely guarded secrets. (redacted)

It was apparent based on the differences in these agreements that there was no standard boilerplate contract language employed, even amongst carriers working for the same major. Also, it was apparent these deals are hotly competitive.

What I saw would be years out of date now. Still, I doubt any one posting on a web board has any inkling of how these agreements actually work. The agreements I saw had all sorts of reimbursements, bonus money, pass through costs and allocations of liabilities. My impression is that ACMI contracts were probably where these F4D contracts probably originated in form.

skywatch 04-28-2010 08:45 AM


Originally Posted by Bucking Bar (Post 802754)
Still, I doubt any one posting on a web board has any inkling of how these agreements actually work. The agreements I saw had all sorts of reimbursements, bonus money, pass through costs and allocations of liabilities. My impression is that ACMI contracts were probably where these F4D contracts probably originated in form.

I cannot disagree with anything you have said, other than I take exception to the idea that I don't have at least an inkling...c'mon, I have at least an inkling:D.


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