pilotjockey

so in your world the company cant cost out the jeta for the next quarter or year because the future price is unknowable, get real.

dude stop. you have plenty of good points to make but you arent right on this one.

profit sharing is easy for the company to cost, its ten cents out of every dollar of profit upto 2.5b and 20 cents of every dollar above that

DALMD88FO

Not trying to start a fight but do you know how much we are going to make in 2015 and 2016?

TheManager

Ahhhhhh.

And here is the answer to your question.

bender, tool, basically all the"new but I was lurking and I only have 59 posts" members all tie back to this guy.


Which one of you sleuths can tell us:

A. His name

B. His title

C. How much he makes

D. His prior work and educational history.

Carl Spackler

It means this is what ST is unwittingly describing in his post below:

If you agree to the premise that management decides the size of the pie, you remove the need for collective bargaining and the entire Section 6 process. That's what non-union airlines do. Section 6 is about attempting to legally achieve a much larger pie than management was initially willing to define.

Carl

SharpestTool

So lets take a back of the envelope example. Lets say that I view industry best fixed pay rate plus 5% as the upper bound of responsible corporate governance. Further, lets say that in deriving this bound management has considered future exposure of half our current PS. Finally, lets embrace the flawed idea that PS can never go down and represent a loss in earning power. In doing so the value of future PS is defined and will be the same or higher than last year for the duration of the contract.

OK. Management using those parameters would be willing to pay as high as a 12% increase to current fixed rates. What would that look like? Lets say for simplicity that AA is the industry leader at our rate plus 7%. In reality we exceeded that pay rate last year by 9% or so due to PS. Nonetheless, we would need 7% to reach par, plus 5% in fixed pay rate increase, and then we add half of the current profit sharing or roughly 8% for a total of 20% premium over AA.

So our pay rates would like like 12,3,3 for a 3 year contract or 4,8,3,3 for a 3 year contract done 6 months early like last time. There you go, hourly compensation ends up at AA plus 5% plus PS = 13%

The math isn't difficult. What is difficult from our perspective is determining what is a reasonable upper bound that a board can sign off on. The negotiating process is designed to find the bound. Also, determining the value of profit sharing is not an intuitive process. It requires economic and risk analysis. Suffice to say a lot of math is involved. Of course there is also a purely speculative element as well. After all, a hedge is a bet.

The company will want to value PS at something less than par, rightfully IMO claiming that the risk is rising for them as we reach the peak of the economic cycle. We will take the opposite position and say we want a premium to par because past history shows accelerating profitability (a disingenuous position that ignores the business cycle, but necessary for the negotiation). We will find the value somewhere during the negotiation. That value is valid on that day, but inevitably will change when the future unfolds.

I suggest when we toss around pay rates we should start with what we believe is possible from the viewpoint of responsible corporate governance. We can all come up with numbers we like, but they are meaningless if they cannot be achieved in the real world. Then we work backwards to determine what annual pay raises would look like, with or without profit sharing.

Again, it may be instructive to talk with anyone who manages a publicly held business to determine what is possible when figuring out labor costs. Study the history of our business and the history of other labor intensive businesses. "It ain't my problem to find the money" isn't sufficient analysis to justify something that cannot happen.

Carl Spackler

Oh man...this is going to make a lot of people mad.

Carl

BenderRodriguez

Not exactly, but close. Management will define a pie. It is the union's job to maximize our portion of that pie. We wan't make the pie any bigger. Especially when thuggish tactics like the ones you utilized at your previous airline are enacted. BOB etc.

Our problem is the non union groups that make up the rest of the company and management's need to cater to them. I know it's not OUR problem on one hand, but on the other it very much is.


The real big problem that we now have is what is going on at Allegiant. If you think for one second that that doesn't affect us, you are completely out to lunch.

Carl Spackler

Again, insults don't change facts. You can know what your profit sharing percentage is, but without accurately guessing your future profit, you can't cost out future sharing. It's not my opinion, it's math.

See above...dude.

You're confusing estimation with costing.

Carl

SharpestTool

Carl,

Thanks for making my point about costing.

You are letting emotion to interfere with your higher order reasoning processes. Of course management ultimately determines the upper bound for their largest cost expenditure. That is why they are there. If we determined that for them we wouldn't be in business very long. I want to make $500 an hour! If I could get us all to agree with that figure, according to you we would establish that rate. This assuming the NMB would sign off on such a thing, which they wouldn't. They are cognizant of how business works.

We may move the upper bound to a point, that is what negotiations are for. Believe it or not, there is a limit where management cannot go past. They determine that limit and negotiate to stay as far under it as possible.

LivingTheDream

Right back atcha... and ShTool as well.