Profit Sharing at airlines has become the norm in the past ten years. Delta Airlines profit sharing results in a big bonus this year. These are the details
On Valentines Day, Delta Airline employees received news that they would be splitting 1.6 billion dollars in profit sharing. Since the airline employs 90,000 individuals, this comes out to the equivalent of an additional two months of pay for every employee.
What is Profit Sharing
The decade following 9/11 was a difficult one for the airlines. The number of flights was cut as the flying public was skittish about taking to the air. Hundreds of airline pilots, including several of my friends, were furloughed for multiple years. Add to this reality the change in the mandatory retirement age for pilots from age 60 to age 65 and the airlines had, effectively, no captain retirements for five years. Fuel prices tended to climb during the decade as well, eating into airline profits.
Meanwhile, the unionized airline employees (including pilots and maintenance workers) continued, as always, to push for higher wages and more job security. The unions and management reached a somewhat risky (for the unions) settlement. Wages would go up, if profits went up. In return for less of a guaranteed hourly wage increase, employees would get a percentage of the profits that the company made.
The Story at Delta
Delta began paying out the profit sharing in 2010. Since 2016, the profit sharing has exceeded one billion, with a b, dollars every year. The total of 1.6 billion for 2019 was paid out on Valentines Day 2020. Valentines Day has become the traditional payout date and has brought a new kind of “love” at Delta the past five years. This years’ total was the second highest (percentage wise) in history.
The 16.6% cash payout equated to around two months of pay for the average employee. For a pilot making $200,000 per year that comes to over $33,000. Those kinds of bonuses have pilots at the other major carriers, United and American, green with envy.
Two Closing Thoughts
During the hard times at the airlines, the carriers had to find ways to stay in the black. So, they added fees for items one would expect to travel with on a trip: suitcases. I am still galled by the fact that I must pay $25 (minimum) for a bag on Delta Airlines. Can you imagine catching a taxi or a bus and having to pay to bring your suitcase. Somehow customers acquiesced. Now that the hard times are over and profits are in the billions, Mr. Delta could you please fly my bag for no charge? If for no other reason that I have to stand in the aisle and watch a 70 year old lady and everyone else on the plane try to lift their carry on into the overhead bin.
Finally, as economist Jeff Haymond, and others, have repeatedly pointed out: Incentives matter. When workers are given incentives to perform in a way that helps the organization and they get rewarded accordingly, performance improves. That is the fatal flaw with socialism, which is being touted by so many politicians. Under socialism, all pilots would get paid the same, regardless of performance. So, what is the incentive to perform well in a socialistic system? There is none.
Delta Airlines has proved, beyond a shadow of a doubt that incentives matter. Question: Do you want a high performing pilot or a mediocre one? Incentives help all of us.
For a picture of how Delta celebrated with a A321 aircraft see the following story.