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More air execs give up pay
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September 28, 2001: 3:50 p.m. ET
Continental, US Air and Southwest execs latest to drop pay since attack
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Most of the top executives of the nation's largest airlines will go through the rest of the year without pay, as the financially troubled carriers grapple with the losses caused by the Sept. 11 terrorist attacks.
The moves come as most airlines in the heavily-unionized industry announce deep layoffs, sometimes without promised severance benefits, in the face of the sharp drop in demand for air travel in the wake of the attacks on U.S. targets.
The latest pay elimination came Friday from Gordon Bethune, the CEO of Continental Airlines (CAL: up $2.28 to $15.28, Research, Estimates); US Airways Group (U: up $0.46 to $4.56, Research, Estimates) where Chairman Stephen Wolfe and CEO Rakesh Gangwal will also go without pay, as well as Southwest Airlines (LUV: up $0.88 to $14.87, Research, Estimates), where Chairman Herb Kelleher, CEO Jim Parker and President Colleen Barrett, as well as the airline's board of directors, will forgo all compensation.
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 Continental Airlines CEO Gordon Bethune talks about industry layoffs and safety issues. |
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Bethune revealed his pay cut in an interview with CNNfn, while a Southwest spokeswoman told CNNfn.com of the pay cuts there. US Airways executives disclosed their pay decision in a recorded message for US Airways employees Friday. The message said their pay cut was effective Sept. 15, and that it was revealed to the airline's union leadership at a meeting Thursday.
The message from US Air executives also confirmed that Wolfe, Gangwal and General Counsel Lawrence Nagin would all remain with the company, passing up the chance to take buyouts worth between $8 million and $21 million, which they could have done between Oct. 12 and Nov. 11 under because of last year's shareholder approval to sell the company to United Airlines. That deal was eventually blocked by U.S. antitrust regulators.
Most execs have announced no-pay policies
Among the nation's largest carriers, only No. 4 Northwest Airlines (NWAC: up $0.87 to $11.55, Research, Estimates) and No. 8 America West Holdings (AWA: down $0.07 to $1.95, Research, Estimates) have not announced the elimination of pay for its top executives, though a spokeswoman for America West said such a move is being considered.
Southwest was the nation's most profitable airline before the crisis started and is the only major carrier not to announce deep staff cuts in the last two weeks.
American West CEO Douglas Parker, who assumed the airline's top job only 11 days before the attack, told Congress last week that without financial assistance his company might have to file for bankruptcy protection. But payment of $60 million of federal aid to the Phoenix-based carrier, the first half of expected federal assistance, eliminated the immediate risk of bankruptcy, an airline spokesman said Thursday afternoon.
Bethune, the head of Houston-based Continental, said he doesn't believe widespread pay cuts throughout the staffs of major airlines are the best way to deal with the financial crisis.
"I'd rather have 50 people at 100 percent of their pay than 100 people at 50 percent," Bethune told CNNfn's The Money Gang. "If you don't pay people what they're worth, they'll go to IBM or somewhere where they are paid what they're worth."
Bethune was the first airline chief to reduce staff when he announced Sept. 15 Continental would cut 12,000 positions, or about 20 percent of his staff.
Shares of most airline stocks gained ground in late afternoon trading Friday, although that still left their shares well below pre-attack levels.
Click here for a look at airlines stocks
Unlike some other carriers that are using emergency or extraordinary circumstances clauses in labor contracts to avoid paying full severance packages to the affected employees, Continental said it would honor all severance provisions, at an estimated cost of $60 million.
Continental, the nation's No. 5 airline, was one of two carriers – along with Southwest – that were profitable before terrorists used four hijacked jets in the Sept. 11 attacks. Since then, airline traffic has dropped to about a third of normal levels, sending loss estimates for the year as high as $10 billion.
AMR CEO started the cuts
Donald Carty, CEO of AMR Corp. (AMR: up $1.41 to $19.31, Research, Estimates), which owns both American Airlines and Trans World Airlines, started the series of executive pay eliminations when he revealed Monday he would not be paid for the rest of the year. He also set up a procedure for other AMR employees to take voluntary pay cuts as well.
The company said 20 percent of the pay the employees forfeit will go to a fund to help furloughed AMR employees as well as the educational expenses of the family members of those AMR employees killed Sept. 11. Two hijacked American Airline planes were used in the attacks.
On Thursday, AMR said senior executives and all other officers of American and American Eagle have accepted pay cuts of varying percentages.
Wednesday, Delta Air Lines (DAL: up $1.96 to $26.32, Research, Estimates) CEO Leo Mullin said he would forgo his salary for the remainder of the year as he announced 13,000 staff cuts.
Thursday evening, UAL Corp. (UAL: up $0.50 to $18.41, Research, Estimates), owner of United Airlines, said CEO James Goodwin and the employee-owned company's directors will give up compensation for the rest of the year.
The federal assistance package that will give airlines $5 billion in direct aid and up to $10 billion in loan guarantees includes some limits on executive compensation, though it doesn't require the executives take cuts of a certain magnitude.
Bethune told CNN he hopes the industry will be able to avoid further job cuts, which total nearly 100,000 since the attack. And he believes that eventually Americans will return to the airlines, although he expects recovery to be slow.
"Sooner or later you're just going to have to go to Seattle, and it's a long drive from Houston," he said. 
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Fed air payments of $2.5B arrive - Sept. 27, 2001
Continental jobs cuts will cost $60M - Sept. 26, 2001
Delta cutting 13,000 jobs - Sept. 26, 2001
Airline losses could ground U.S. economy - Sept. 21, 2001
American parent and United to cut 20,000 jobs - Sept. 19, 2001
Airline executives warn of bankruptcies - Sept. 19, 2001
Airline stocks see steep selloff - Sept. 17, 2001
Continental slashes staff, flights - Sept. 15, 2001
Airlines' cash will last only 30 days - Sept. 14, 2001
US Air execs can chose $45M severance - Aug. 20, 2001
Losses widen for airlines - July 18, 2001
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