Delta Airlines – Question #84: Delta expects to receive a rebate based on percentages of all Delta purchases on annual basis. Please propose an annual rebate program that would impact higher volume purchase.

Rebate based on annual basis:

There are three ways how we can look at this:

  1. From a commercial side
  2. From a technical side
  3. Market circumstances

From a commercial perspective a rebate or discount should be able to be considered once annual volumes are higher than initially predicted. That concept is totally understandable.

The technical side is far more complicated. What do we consider a higher volume? 100 pieces? 1,000? 100,000? And what % or number is what we can agree on? Technically it does not make any difference if we produce 600,000 knives or 650,000 pieces. The numbers need to be considerably higher when any rebates can be considered.

Then there is the market circumstance. The problem with our products is that the market is not responding to our price and we do not control the volumes. If I would lower our price by 20% – you would still serve one meal per flight. You are not all of a sudden presenting a double service, because you got our product cheaper. Our pricing is not in relation to volumes that will be consumed.

Conclusion: Let’s put it like this: we are willing to discuss any rebate system we can agree on. But we are in the middle of a pandemic. Who knows what is going to happen between now and 12 months? Is Delta offering a price increase percentage in case the volumes are lower?

Plus, as of this moment, we do not have any idea which items, or groups, will be awarded to Sola. I can easily calculate the potential amount of turnover by simply putting everything on a big pile and summarize it. But is that realistic? I know that some items we are off target price, but many are within, so upfront – before we even have an idea on how and what we are going to do, I cannot promise anything.

The best thing to do here is first see what we are going to supply, estimate the volumes/turnover and agree on a % of total sales to be credited at the end of a certain period of time. And we can all agree on the exact terms in a very amicable way, where the conditions need to be clear for both parties. Same goes for the length of the contract. I mentioned over and over that we are in this for the long run, but most important thing now is to get out of this pandemic as soon as possible. The better Delta performs, the better we all do, and together we can accomplish a lot.