Delta Air Lines’ banner year — propelled by lower fuel prices, higher travel demand and no sidelined Boeing 737 Max planes in its fleet — led the carrier to beat earnings estimates and notch its 10th consecutive profitable year.
But those results won’t just pay off for shareholders: The carrier said last week that employees are set to receive $1.6 billion in cash payouts, its largest employee profit-sharing pool on record and one that handily tops what many other companies offer their employees.
This year’s pool translates into a 16.6% cash payout for eligible employees — or about two months’ pay — which will be paid out on Valentine’s Day. The payout represents the sixth year in a row that the airline has paid more than $1 billion in profit-sharing.
“For years, I would get beaten up by Wall Street,” Chief Executive Ed Bastian said during a U.S. Chamber of Commerce event in Atlanta last week. “They thought the profits were theirs, and ‘why are you giving the profits away to the employees?’ Wall Street has actually come full circle, and they realize that Delta is the most awarded airline in the world because of its employees.”
Unlike individual incentive plans, profit-sharing plans are typically based on corporate profits rather than individual performance and payable to all employees in major work groups.
Brian Kropp, a group vice president at Gartner, the global-research firm, said only 12% of the companies its firms work with have profit-sharing plans. A 2018 survey by the National Opinion Research Center at the University of Chicago found that the median profit-sharing amount reported by employees surveyed was $2,000, or 5% of pay.
United Airlines last year paid out $334 million in profit-sharing, with payouts of 5 to 20% depending on the employees’ work group, the airline said in its annual report. It is expected to announce this year’s profit-sharing in its upcoming earnings report.
Southwest Airlines paid out $544 million, or 10.8% of eligible employees’ compensation last year.
American Airlines paid out $175 million in profit-sharing last year, or 1.5% of eligible earnings, spokeswoman Andrea Koos said in an e-mail. American will update its figures Thursday.
Cash profit-sharing plans tend to be more common in transportation industries such as airlines and automakers, said Ken Abosch, a compensation practice leader at Aon Hewitt.
That firm’s own surveys show that about 14% of employers still offer cash profit-sharing plans, while the figure 20 years ago was likely closer to 40%, Abosch said.
What defines them, he said, is a more all-inclusive approach to rewards that give payouts to all employees, or all hourly employees, as is the case with automakers such as Ford and General Motors. Increasingly, he said, companies have shifted to more incentive-driven cash awards that are based on company, department and individual performance but may not be available to all employees.
“Companies have worked very aggressively to try to increase the relevance of these plans by creating an individual performance component that creates more variability from person to person in what’s paid out,” Abosch said.
He pointed to the firm’s survey data that show average cash bonus programs tend to range between 4.7% and 12.9%, depending on union, hourly or salaried professional work groups.
Delta spokeswoman Savannah Huddleston said the carrier’s profit-sharing payout is available to all full-time, part-time or “ready reserve” employees other than officers and directors, who have a different compensation plan.
The carrier, she said, has additional incentive plans for front-line employees, such as a monthly incentive pay award for operational goals including on-time performance.
She noted that while the $1.6 billion payout is the largest in the company’s history, on a percentage basis it is among the biggest but not the highest ever.