Turbulence Over Executive Pay
Airline Workers Question Leaders' Bonuses After
Rank-and-File Pay Cuts
By Del Quentin Wilber, Staff Writer
Tuesday, May 22, 2007
FORT WORTH -- American Airlines executives should have been
celebrating last week during their annual stockholders' meeting,
the first in six years at which they could spotlight an annual
Instead, chief executive Gerard J. Arpey spent much of the
session fending off questions from irate employees. After
agreeing to accept massive pay cuts in recent years to keep
American flying, the employees said they were upset that the
carrier's top officers have been given stock-based bonuses worth
millions of dollars. One employee at the meeting called Arpey
and other executives "arrogant, greedy, selfish and heartless
The anger over airline leaders' pay is not unique to American.
Employees who have taken pay cuts at United and Northwest
airlines and US Airways are also battling their executives over
Labor groups say the unhappiness has led to at least two
showdowns with managers over contractual issues. Some say
demoralized workers could also hurt service.
"When you have a bitter and angry workforce, that translates
into a rough-and-tumble summer travel season," said Edward
Wytkind, president of the AFL-CIO's Transporation Trades
Department, an umbrella organization that lobbies on behalf of
The executives and their representatives all defended the deals,
saying the bonuses were granted for solid performance. The
companies say much of their executives' compensation is in the
form of stock grants, which could lose value if the airlines
perform badly or rise if they sustain their recoveries. They
also note that the companies' boards, not the executives
themselves, set the compensation levels.
During American's annual stockholder meeting, Arpey said that
the $160 million in stock awards given to top executives and
managers was a motivational tool that helped keep the carrier
out of bankruptcy.
Arpey, who made a little more than $6 million last month when he
sold his stock awards, noted that the carrier preserved its
workers' pensions and that employees also have benefited from
rising stock prices. They were given 38 million stock options
"This may be an issue on which we may have a hard time finding
common ground," Arpey told the shareholders and workers.
Other airline bosses are also reaping bonuses for helping turn
carriers around. Glenn F. Tilton, United's chief executive,
received 545,000 shares of United stock, worth about $20
million, last year that will vest over four years. He also was
granted more than 800,000 stock options, which could prove
lucrative if the carrier's stock price climbs.
Northwest, which was granted court approval last week to exit
bankruptcy protection, announced recently that its chief
executive, Douglas M. Steenland, received stock and options
worth more than $20 million that will vest over four years.
Meanwhile, W. Douglas Parker, chief executive of US Airways, was
given cash bonuses and stock grants worth about $4.8 million
last year, according to SEC filings.
Worried about employee reaction to the payout at a time of
slumping performance, Parker sent workers an e-mail last month
to address why "many of you are wondering how I could be paid so
much when our airline is doing so poorly right now."
The bonuses are already resulting in labor disputes.
Last month, United's pilots voted overwhelmingly to reject a
deal that would have allowed some pilots to fly extra hours each
month during the busy summer and fall travel seasons. A
spokesman for the union said the vote reflected anger over
American's pilots last year torpedoed the carrier's high-profile
bid to win a lucrative nonstop route to China by refusing to fly
longer hours. Union representatives have said in news reports
that pilots were upset in part about stock grants to the
Last week, at a rally held by transportation workers on the
Mall, airline workers said the bonuses sent a mixed message to
"Management continues to make terrible decisions," said Sara
Nelson, a United flight attendant and union representative.
"They aren't putting money back into the airline. They are
Analysts said that the executive compensation deals are not
outrageous compared with those given by other large companies
but that they come at a bad time for the airlines. Some
contracts are coming up for negotiation, and other labor groups
are pressing to reopen talks early.
"The whole idea of the last couple years was to create new
cultures at airlines that would keep costs down," said Darryl
Jenkins, an aviation consultant. "These very large executive
payouts are going to end up costing airlines an enormous amount
of money. The employees are going to want their fair share."
Jenkins noted that Delta's chief executive, Gerald Grinstein,
turned down pay packages when his carrier exited bankruptcy
protection a few weeks ago and that Continental's executives
last year turned down $23 million in stock incentives. Those
moves helped build goodwill with employees, Jenkins said.