Airline executive pay: giving up bonuses

Founder David Neeleman and the two other top executives at JetBlue Airways voluntarily gave up their bonuses of $75,000 each for 2005 – a record setting bad year for the six-year-old discount carrier, which posted its first quarterly loss, fall to the lower rungs of industry in terms of on-time performance, and said it did not expect a profit this year either.

The three – Neeleman, the airline chairman and chief executive; David Barger, its president and chief operating officer; and John Owen, executive vice-president and chief financial officer – disclosed in a Securities and Exchange Commission filing that they would forgo their annual bonuses, which are a guaranteed $75,000 a head. The three have a base salary of $200,000 each. In the SEC filing, JetBlue said the $75,000 bonuses are “subject to increase based on the achievement of performance-based milestones”.

The word performance may have been enough to shake the three, who remain in charge and in general well thought of. Here we will list other airline executives who have declined a bonus: Anyone? Step right up, gentlemen. Plenty of room…

Okay, maybe they’re shy, but there are some airline ceos who turned down bonuses, some while under a harsh spotlight, some more grandstanding than others. There’s Gerard Arpey, another young CEO, who took over American Airlines in 2003 in the midst of an employee revolt over management demands for pay cuts at the same time that then-CEO Don Carty had approved a major bonus to himself. This year, Arpey and other executives toned down a bonus plan put in place after the 2003 crisis, and neither he nor any other senior executive received a bonus for 2005. He did, however, get a 1.5% salary increase, to $526,620, plus restricted stock worth $328,000, awarded in place of a bonus. American is the only major network carrier not to have flirted with bankruptcy since 9/11. At Delta, one airline that has fallen in to bankruptcy, chief executive Gerry Grinstein has barred bonuses since he came in to office in 2004.

To editorialise, which is after all what bloggers do whether or not they admit it, we think a lot of the crowing about executive compensation at airlines is meaningless or resentment-driven. No one goes into the airlines these days to get rich (remember the old joke about how to make a small fortune in the airlines – start with a large fortune). And people who run airlines have a high-stress job, just as do people who work for them. We think that there is a real danger of good talent being forced away from airline management. Remember the instance of Richard Anderson a tough-talking former prosecuting attorney from Galveston, Texas. He became the head of Northwest Airlines but left to take (are you ready for this?) a less stressful position at a healthcare company, driven away, his friends said at the time, not just by the stress but by the fact that he had to take a pay cut every time he asked the unions to do the same.

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