When the CEO of an airline is paid 176 times the average pay of his staff, it’s no surprise that it’s in the news for a few days. It’s good that there is nothing secret about how and how much major airlines reward their leaders, since all this is hidden from everyone.
In a report released yesterday, travel information company Skift detailed 2021 compensation packages for CEOs of 11 major U.S. airlines. While COVID and the US CARES Act have limited some payroll packages, only Allegiant’s Maurice Gallagher Jr. has gone home empty-handed. Delta Air Lines CEO Ed Bastian topped the list with a $12.4 million (€11.8 million) compensation package, most of which came from stocks and options. Although he earned $2.5 million more than his closest colleague Scott Kirby at United Airlines, Bastian has not escaped the impact of the pandemic on his salary. In 2020, his total package was $13.1 million, and in 2019 it was $17.3 million, according to Delta reporting.
Collectively, the CEOs of 11 publicly traded major U.S. airlines, excluding regional ones, received over $53 million in compensation in 2021. the four highest after Bastian and Kirby were: America’s Doug Parker with $7.24 million, Southwest’s Gary Kelly with $5.8 million, Spirit’s Ted Christie with $3.87 million, and Frontier’s Barry Biffle with $3.6 million dollars. At the bottom of the scale was Allegiant’s Maurice Gallagher, who got nothing by turning down compensation for 2020 and 2021.
Big money in stocks and incentives
In 2021, Delta Air Lines CEO Ed Bastian received a full $12.4 billion payout package despite Delta losing $3.4 billion. Photo: Delta Air Lines
It would seem a paradox that more than 90% of Bastian’s remuneration is based on performance goals, yet Delta posted an adjusted loss of $3.4 billion in 2021 and the remuneration was still coming in. In its fiduciary report to the Securities and Exchange Commission, Delta said it excluded certain performance measures,
“This will allow a better measure of the company’s performance once the airline returns to profitability and generates strong operating cash flows. The Nomination and Compensation Committee believed that the excellent record of retained performance indicators should ultimately provide sustainable long-term returns for shareholders.”
In other words, Delta moved the gate. It is also important to note that although these awards are in cash, they are actually paid in Delta stock. At Delta, the value of shares is pegged to their price on February 3, and most other airlines have a similar practice. Bastian’s actual base salary in 2021 was $950,000, so he has a lot of incentive to set Delta on a profitable path in the coming years. Similarly, United Airlines CEO Scott Kirby had a base salary of $1 million in 2021, but his total package reached $9.85 million, although United reported an adjusted net loss of $4.5 billion.
In Skift’s 2021 CEO Compensation report, Hawaiian Airlines has the lowest CEO-to-employee pay ratio. Photo: Hawaiian Airlines.
Average employee compensation varies by airline, but the report says it was $70,240 at Delta, $78,245 at United, $62,765 at American, and $69,381 at Hawaiian Airlines in 2021. For the executives of these four airlines, the pay gap was 176, 126, 115, and 44.6 times the average employee salary, respectively. A significant drag on the receipt of wages for all CEOs is the compensation restrictions enshrined in the US CARES Act and the Payroll Support Program, the federal government’s COVID relief package provided to the aviation industry. This provision reduced Kirby’s compensation by 28%, but Delta did not elaborate on its effect on Bastian.
Running a major airline successfully is no walk in the park, and an airline CEO’s salary compares to similarly sized businesses in other sectors. Commercial aviation is currently not delivering a pleasant experience to its customers, so are they being paid too much?
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