CLEVELAND, Ohio -- U.S. airline executives who have guided their companies through the last three giant mergers stand to collect tens of millions of dollars.
In the latest consolidation -- Southwest Airlines' pending acquisition of AirTran Airways -- AirTran Chief Executive Robert Fornaro will receive $5.7 million in benefits if the deal is finalized.
In the Continental-United marriage that preceded it, CEO Jeff Smisek is in line for a $4 million merger bonus if he reaches certain goals, yet to be established by a compensation committee. And when Delta and Northwest combined two years ago, Northwest CEO Douglas Steenland received an $18.3 million payout.
Compensation experts say market forces are driving the pay and that the executives are getting packages no more generous than their peers. They also say the mergers have left one CEO in each pair out of a job -- justifying the departing executives' golden parachutes.
AirTran Airways Chief Executive Bob Fornaro, left, receives a scale model of a Southwest Airlines passenger jet from Southwest CEO Gary Kelly on Sept. 27, the day they announced Southwest would buy AirTran.
But others say the performance incentives are out of touch with the economic arguments made in support of the deals -- that the carriers needed to combine to survive and prosper in the face of rising fuel costs and fierce competition.
Michelle Leder, author of footnoted.org, said there is a disconnect between combining to protect the health of companies and hefty bonuses.
"Of course the companies would argue otherwise -- that they're doing the best to protect as many jobs as they can and that the executives should be rewarded for this. Plus, they'd probably add that it's not all that easy to run an airline these days," Leder wrote in an e-mail.
Capt. Jay Pierce, head of the Continental unit of the Air Line Pilots Association, finds the pay of airline executives unfathomable given the industry's chronic woes. U.S. carriers made about $4 billion combined last year but are climbing out of a deep hole. Losses for the previous nine years totaled $58 billion, the Air Transport Association said.
"There is just something inherently wrong with the fact that people running airlines today, their children and grandchildren will never have to work," Pierce said. "Yet the companies they're running haven't proven to be viable companies, when you look at it with an economic microscope."
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