Excessive Pay For Airline Ceos

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When United finally staggered out of bankruptcy, in February 2006, Tilton was the company’s largest individual shareholder and the fourth-largest overall, trailing only two investment firms and the Pension Benefit Guaranty Corporation. Tilton’s stock award—sanctioned by a compliant bankruptcy court judge and an equally tame creditors committee—so infuriated business wit Ben Stein that he compared Tilton to Orson Welles’ amoral, drug-dealing villain Harry Lime in The Third Man.

Doug Steenland, the president and chief executive officer of Northwest Airlines, hasn’t done quite as well as Tilton. In May, when Northwest came out of bankruptcy, Steenland received a package of restricted shares and options worth only $26.6 million. After several rounds of concessions made during bankruptcy, a Northwest flight attendant with 15 years on the job now earns about $36,000 annually. Steenland’s package is 739 times larger.

But Steenland is at least as clueless as Tilton about appearances. In June, Northwest’s first full month out of bankruptcy, management miscalculations about staffing and mechanical issues forced the airline to cancel thousands of flights. During the height of the crisis, in the last week of the month, Northwest was scrubbing as much as 15 percent of its schedule each day, and Steenland made no public appearances and issued no apologies to travelers. But according to a June 30 filing with the Securities and Exchange Commission, he did take possession of 159,000 more stock options.

Need more examples? Over at the nation’s largest carrier, American Airlines, chairman, president, and C.E.O. Gerard Arpey got his job when the previous boss was forced to resign after a secret executive-bonus plan was made public.

Arpey has shunned the secrecy but not the executive perks, which have skyrocketed even as service has declined. For many months this year, the once rock-solid airline was at or near the bottom of the Transportation Department’s ratings list for on-time performance, baggage-handling efficiency, and schedule reliability. Plagued by storms at its Dallas/Fort Worth International Airport hub, American had a dreadful June: Just 57.9 percent of its flights nationwide were on time, and its baggage-handling efficiency was far below the industry average.

Yet, in part for improving the airline’s share price, Arpey was given a stock bonus in April of $6.6 million. (Four other top executives snagged bonuses worth a combined $12 million, and all five dumped their shares within days of getting the grants.) Just two weeks ago, Arpey received another basket of gifts: 95,000 performance-based shares, 78,000 deferred shares, and 75,000 stock-appreciation rights.

Arpey faces difficult negotiations this year with several of the airline’s unions, all of whose members have made billions of dollars’ worth of salary, benefit, and work-rule concessions to keep American out of bankruptcy. When union representatives pressed Arpey about the executives’ pay, at American’s annual meeting in May, Arpey said management and labor might have to “agree to disagree” about the suite life.

“This is an issue on which we may have a hard time finding common ground,” he said.

The Fine Print
When Delta Air Lines emerged from bankruptcy earlier this year, C.E.O. Gerald Grinstein made news by declining to jump on the bonus bandwagon. But Delta’s story is more complicated. Grinstein, the former C.E.O. of Burlington Northern Railroad, made a fortune 20 years ago when he orchestrated the merger of his Western Airlines with Delta. And the septuagenarian Grinstein only returned to Delta management to repair the damage done by two previous chief executives. In 2004, he replaced Leo Mullin, whose greed in the months after 9/11 was exceeded only by his callousness. (On the first weekend after the attacks, with bodies still buried in the rubble of ground zero, he demanded a federally funded bailout, arguing that the “airline industry cannot be the first casualty of this war.”) Mullin had replaced Ron Allen, who resigned in 1997 but who continued to draw millions in Delta payouts until mid-2005.

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