Human Capital & Careers

Airline Executives See Big Pay Cuts

Continental Airlines CEO and president get their pay slashed nearly in half as a result of a cap imposed by Congress. But the hard times for flight...
Stephen TaubFebruary 11, 2004

As the economy continues to perk up, chances are that executive pay will rise accordingly. The one temporary exception: airline-industry executives.

The reason for the dour outlook for those senior managers is that Congress capped their pay last April when it agreed to provide the industry with $2.9 billion in rebates of security fees paid by passengers from June 1 through September 30 as part of a $79 billion emergency-spending bill, according to USA Today.

The pact’s effect was underscored last week when Continental Airlines trotted out its proxy, the first of 66 airlines affected by the compensation rule to file the documents required before they hold their annual meeting, the newspaper reported.

Because of the congressional limit on executive pay at airlines that got federal security fees rebates last summer, Continental’s CEO, Gordon Bethune, and its president, Larry Kellner, saw their 2003 pay cut nearly in half, according to the company’s proxy. Bethune’s salary was slashed to $882,440 in 2003 from $1.06 million in 2002. In 2002 he also got a bonus of $651,563 and was eligible for 2.3 million shares of restricted stock and $3.5 million in long-term incentive pay; he received no such compensation in 2003.

Kellner was paid $651,563 in 2003, down from a base salary of $744,600 and a bonus of $456,250 in 2002. In 2002, he also was eligible to receive 1.4 million shares of restricted stock and $732,476 in long-term incentive payments. Kellner, too, got none of this long-term pay last year.

The hard times for airline chieftains aren’t likely to last, however. Limits on airline executive pay expire April 1, according to the USA Today story. Besides going back to their pre-2003 levels of pay, Bethune and Kellner will become eligible for $2.1 million and $732,476, respectively, in the long-term incentive payouts that they deferred in 2003 to stay under the congressional cap, according to the newspaper.

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