American Pilots Are Angry That Delta Employees Got Big Profit Sharing Bonuses

You’ve gotta give Delta credit for how well they take care of their employees. Yesterday Delta announced that they’re paying employees over one billion dollars in profit sharing this year. This profit sharing amounts to more than 10% of gross pay for most employees, with the average employee receiving about a $6,000 bonus. That’s a lot.

Here’s what Delta’s CEO, Ed Bastian, had to say about the profit sharing:

“This is the fourth year in a row that Delta’s profit sharing has topped $1 billion — a milestone no company in history has ever achieved. Delta people are the reason for our success and Valentine’s Day is our favorite day each year as we celebrate the incredible results our people have delivered.

Our industry-leading profit sharing and compensation philosophy reflects a decision we made a long time ago to share in the company’s success each year with our people who make it possible. Rather than make a one-off payment like other companies, Delta is invested in highly competitive base pay, an industry-leading annual profit sharing plan, and monthly bonuses each year when the airline performs well.”

I give Delta kudos for this, and it’s clear that on balance their employees are more invested in the company than at other airlines (though that’s not true across the board).

Perhaps the more interesting story that has emerged here is how pilots at other airlines feel about this profit sharing. Forbes has an article about how American pilots are saying “what about us?” following yesterday’s news. According to the story, here’s how profit sharing at the “big three” US airlines differs for pilots:

  • A Delta captain will get a payout of $29,000 to $59,000 (wow!)
  • A United captain will get a payout of $9,300 to $20,500
  • An American captain will get a payout of $3,600 to $7,500

Not surprisingly, American’s pilot union (the Allied Pilots Association) wants to discuss higher profit sharing following yesterday’s news. Here’s what a union representative had to say:

“The profit sharing pool at Delta is an Olympics size pool,” Tajer said. “American’s is a kiddie-size pool.

“Our pilots want to not only talk but also we insist on seeing our operations leadership recognized and properly aligned with the financial success of our company like Delta pilots have been for years,” he said.

Here’s what an American spokesperson had to say:

American spokeswoman Leslie Mayo said, “We are proud to be able to distribute $241 million in profit sharing to our team members for 2017, as well as a mid-contract pay increase of 8% for our pilots.

“Those raises and profit sharing were the right thing to do for our pilots,” Mayo said. “They earn it every day.”

For more context, here’s how the profit sharing arrangements at American, Delta, and United work (as you’ll see, not only does Delta have the biggest profits, but they also share the highest percent of them with employees):

Excluding special items and profit sharing, Delta earned $6.5 billion in pretax profits in 2017, while American earned $4.1 billion and United earned $3.5 billion, according to APA figures.  Delta is sharing $1.1 billion while United will share $349 million and American will share $241 million.

Delta shares 10% of pretax profits up to $2.5 billion and 20% above $2.5 billion, APA said. United shares 10% up to a 6.9% pre-tax margin and 20% above that margin. American shares 5% of its pretax profit.

Aside from profit sharing, pilot pay at the three carriers is roughly comparable, with senior captains all making $323-330 per hour. If you’re curious, here are the pilot pay rates for American, Delta, and United.

I’m a bit conflicted in regards to how to feel about the frustration from American pilots.

On one hand, airlines are greedy at the expense of passengers, so it’s not like I want them to keep more of their money and have bigger executives bonuses.

At the same time, it sure seems to me like airline pilot pay is once again getting unsustainably high. Pilots are now back to their pre-9/11 pay rates (inflation adjusted), with some captains making $400,000 per year in total compensation. If any of a variety of factors occurs, airlines won’t be able to sustain these pay rates, and they’ll be back to where they were before. American and the pilots negotiated contracts, and American even raised their pay by 8% last year, which wasn’t required by the contract. They’re getting more than they negotiated and are entitled to.

Furthermore, part of the reason that Delta has such generous profit sharing is because they generate higher profits. American pilots want higher profit sharing even though the airline doesn’t do as well, which to me largely misses the point. While I think management decisions are the driving force in airline performance, employees also do make a big difference, and I can’t say I notice that many employees at American going above and beyond.

Do you think American pilots have a valid complaint?

Comments

  1. How does everyone feel about the profit sharing being tied to wages (i.e. you receive say 10% of your wage as a bonus) vs the profit being shared equally between all employees regardless of their wages? It seems unfair that the lowest paid (who would likely need it the most), receive the lowest bonus while the highest paid who likely need it the least receive the most.

  2. Those who make more are deemed more important to the airline. A straight % works. Let’s face it, a pilot is more important(and much more highly trained) than a gate agent. Astronomic CEO pay is another story, however.
    As for AA pilots whining about Delta’s profit sharing $$ amount, perhaps AA should generate a larger profit before complaining? Though I’m sure a lot of the rhetoric from the union, is simply doing their job and making sure their voice is heard when things do improve.

  3. I don’t know where you heard that captains are making $400,000 a year. Only a small minority of senior captains earn $200,000+ at the height of their career and these jobs are very hard to come by. They are the exception, not the norm.

  4. @Geoff And I may be oversimplifying the issue, but surely if American pilots are so unhappy there’s nothing to stop them from jumping ship (so to speak) to Delta. Right?

  5. @ Amir Friedman — Not sure where you’re getting your info, but *all* American 737 captains and above make way over $200K per year. They’re guaranteed 73 hours per month and paid a minimum of $240 per hour, which is $210,000+. That’s based on minimum hours, doesn’t include profit sharing, doesn’t include per diems, and doesn’t include working holidays. Where did you hear that only “a small minority of senior captains” make $200,000+?

  6. @ Ben — Great business formula — steal miles from customers, give money to employees. Gee, you think devaluations will continue at the same torrid pace? You betcha!

  7. If an employee is unhappy, jump ship. Corporations should be upfront with compensation and benefits. Research the practices for other corporations before signing on the line. In our corporation, profit sharing only occurs being a certain salary level with targets between 10-50%. I have a bonus target of 40% atop my salary. Such information can be easily discussed with HR before signing. The bigger concern in the aviation industry is the dismal base salary for pilots, in general.

  8. AA pilots had generous profit sharing in their contract but gave this up several years ago for higher base pay. If they are upset with anyone it should be union leadership.

  9. They are getting what they negotiated for… they should stop complaining until are on par to delta with respect to performance and service.

    With that said, it would be great to see additional bonus being paid when an employee receives an AAplause… might encourage the front line workers to treat customers a little better.

  10. Man, the world has certainly evolved. Unions demanding profit sharing rather than pay increase (which would stay in case profits dip short term).

  11. Based on my industry research, the median wage for pilots of all levels and experience for heavy jets is around USD120000/annum. The 90th percentile median wage for all pilots within the US is USD193000/annum. In general, the salary for airline pilots are only good for the legacy carriers. Those for the regional carriers are significantly lower and starting salaries are absurdly low.

  12. Unions have turned the world into haves and have not. Legacy carriers pilots make loads while regional pilots make nothing. This could be an advertisement for having strong unions or weak unions. Either way!

    What is clear is that corporates sms their whores in Congress will not gladly share money unless they are forced to.

  13. American’s pilots are always pissed off. they HATED Horton and begged for a merger. They got what they wanted and now they are pissed off again.

    The attitude is terrible and partly stems down from management. American is a horrid organization. I am guessing if they would have stayed small, they would have fared better. They would have had a very competitive product. Horton was going for fleet consistency. All planes except maybe the first half of 737s would have had PTE and the experience he was going for was premium market. Doug Parker turned American into ValueJet within the US, maybe a little better for overseas travel. Either way you have a sub prime customer base compared to Delta and you copy versus create, of course you aren’t going to be as profitable. The profits American is making is simply due to lack of competition and current market demand.

    Also… the pilots thought “Give me now!” when they got the new contract and did not really look to the future. This is exactly how American’s management views decision making so atleast they are all aligned.

  14. @Kent, you are citing pilot salaries; Ben is citing captain salaries. There’s a big difference there. If you go to indeed.com you’ll see that the AVERAGE AA captain’s salary is 205k.

  15. American and former US Airways crew do not get along either. This has been an issue since the merger. You sometimes will see it manifest itself in flight. Lack of cooperation between cabin and cockpit crews.

  16. @Geoff, I agree that pilots are more important and much more highly trained than a gate agent and should be paid more, but they already are paid more in their base salary. It could be argued that pilots have very little to do with greater or lesser profitability and revenue managers, gate agents and flight attendants should get higher profit shares because they have a much greater effect on the profit levels of the airline.

  17. This is childish. And to talk about the average pay of pilots, or anything else similar, is a diversion from the point Ben is making. Let’s not hijack the post. We have a group of people upset because someone got something they did not.

    AA pilots should be very happy. Regardless of your profession, when “another” company in your industry raises the total payroll bar, you likely will eventually benefit.

    Consumers (frequent fliers and the companies that need air transportation) are the ultimate source of these new high profits that are being distributed. Just my opinion, but consumers are the only ones that have any possible stake at unfairness…

  18. @Ben – I’d be curious to see where Alaska Airlines and Jet Blue sit compared to the other three. Question… is it actually profit sharing for those three carriers, or are any of them using a performance based pay structure, like AS?

  19. I’m not really sure what the anger is over. If AA pilots are upset, then there are a couple of things to look at. First, change the AA culture. I usually badmouth United for the way they treat their customers, but lately I’ve noted an improvement. I do believe they’re trying. AA? Not quite so much. Treat people better, increase your bookings, and the profits will increase. While no airline is perfect, most industry surveys seem to indicate a preference for Delta. That may have something to do with the extra profits that Delta has to share with its employees.

    Second, are pilots really the ones deserving of these big bonuses and profit sharing? Probably not. I’d say that the gate agents, baggage personnel and maintenance folks (among others) are all as necessary to on time performance and profitability as the pilots, perhaps more so. I’d rather see the lowly gate agent who went above and beyond helping a stranded passenger receive more of the profit sharing largesse than a pilot. Perhaps that’s just me and it isn’t meant to belittle pilots. It’s just a recognition that an airline isn’t all about the folks sitting up front. An airline is about all of its employees.

  20. Delta has the highest profit and the highest profit sharing percentage? Wow, its almost like paying well and performing well are related…..

  21. I know it’s not always possible and the magnitude is going to be significantly different, but if you’re that worried that top management is getting too much, then you should negotiate to have your payment structured in a way that’s similar to top management. Obviously more of your relative pay is going to come in the form of salary, but if your C-suite executives have incentives tied to financial and stock performance then it’s probably not a bad idea to make sure you have that exposure as well.

    Are their downsides? Sure, but know what you’ve negotiated for yourself and if you don’t like it go and negotiate a deal that fits what you want.

  22. How is this even news? I’d be embarrassed to be an AA pilot right now. Just because an employee of a competing company has a better deal than me doesn’t mean I should complain about it. Union leadership brought a deal to the table that the pilots ratified, whose fault is that? And if I can’t stand it that someone else is getting a better deal then I’d better start looking for a new job. How is it DL’s employees’ fault that DL is earning so much money??? They clearly deserve a bonus check for their hard work and dedication to the company. I’ll bet that every DL employee working yesterday, today, and for weeks to come has a smile on his/her face, I sure would!

    As for negotiating for a bonus vs base pay, we also do that quite often. I’ve worked for a couple of tech startups in the past where I traded salary for stock options. At one I came out slightly ahead of where I’d have been for the drop in salary and at another I came out slightly behind. Both were good risks to take and, in the end, I’m not much worse off that I would have been. But I also didn’t hit the jackpot on the stock front.

    It’s all a crap shoot, AA pilots need to be happy with their 8% raise. What’s not to say that DL’s profits tank in the near future, then AA pilots are much better off with a guaranteed 8% in their pockets. Sheesh, what a bunch of petty whiners.

  23. American Airline Pilots are employed at a company that generates lower profits than its competitors.

    Sorry, ladies and gentlemen, but that means you receive less profit-sharing. End of story.

  24. I worked at American through the merger. The unions expressly voted for a small percentage raise rather than continuing profit sharing, effecting the whole company. I have 0 sympathy for them because eliminating it was THEIR choice.

  25. @Lucky I apologize, my mistake. I wasn’t paying attention to the fact that you were specifically mentioning American Airlines salaries, not the industry as a whole. Love your blog.

  26. Personally I like to shop and support those companies who treat their employees well. Yes, I might pay a bit more to live by that philosophy but in my experience companies that do right by their employees have employees who do right by their customers (generally speaking). So I shop at Costco vs Sam’s Club and so forth. Perhaps I should start booking more of my flights on Delta?

  27. @Aztec @Kent

    Actually there is no difference in the numbers both of you have presented – notice the values are very similar. I expect a small percentage of all pilots to be captains with significant experience supporting both your arguments. It’s just pathetic that their salaries are so low.

  28. I was on a flight from CDG to DFW
    The flight attendants were generally rude on AA
    One in particular scolded at me like a child because I raised the isle arm rest to side out of the seat
    Then my connecting flight to Miami the junior FAs were grouchy as well
    Not a happy group

  29. So AA pilots are angry again. Tell us something we don’t already know. I live in Dallas and am tired of hearing about how the poor pilots are treated. The pilots are king compared to everyone else (with the exception of the “C” suite) with the airline. Other than execs they are already the highest paid employees (and I understand why) but if anything it’s time for the pilots to decide either they want base pay or incentives and if they want a hybrid then they should participate in a profit sharing program for all employees so that a FA, a gate agent and a baggage claim rep can also participate. After all, those “other” front line employees actually interact with the flying public more than anyone else at the airline. If you gave those individuals more profit sharing then I bet you’d see a very different attitude in those employees. And in turn may influence passengers to your airline. Honestly, now all the airlines are about the same as far as price. I’d rather be on flights where I’m respected and treated as a guest, not a piece of cattle.

  30. Oh, and those 29″ pitch seats (yes, they are 29″ because my knees are touching and I’m 5’8″ is also a factor in why people are moving to other airlines. I know AA got into some trouble with the announcement and then turned around and said it wasn’t going to happen or at least it wasn’t going to happen “throughout” the fleet, but it’s happening all right.

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