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US Airways executive payouts scrutinized amid losses
By Thomas Olson
TRIBUNE-REVIEW
Sunday, April 13, 2003
US Airways sank into bankruptcy last August and recorded a massive $1.65 billion loss for the year.
So why, at the same time, did it pay out more than $36 million to four of its top executives? And why have its major competitors, which also are bleeding cash, paid out even more to their CEOs?
As US Airways regroups after emerging from bankruptcy on March 31, resentment over such compensation still runs deep among employees and others — especially after workers agreed to give up $1.02 billion in wages and benefits in each of the next seven years to help keep the airline aloft.
Practically all constituents of US Airways were battered by its bankruptcy. Most creditors received a mere 2 cents on the dollar. Passengers have fewer flights to choose from. Pittsburgh International Airport is quaking after the airline''s recent threat to drop it as a hub. And workers who didn''t lose their jobs lost pay.
Our members feel like veterans of a war, said Chris Fox, president of the Communications Workers of America Local 13302, Pittsburgh, which represents customer-service and ticketing agents here.
They are tired. And they expected that since we gave all these concessions, that the company would treat them better, she said. But we''re working twice as hard with fewer people.
There are about 12,500 fewer people, in fact, including roughly 3,900 fewer in the Pittsburgh area. Companywide employment peaked at about 45,500 in early 2001.
Altogether, the nation''s seven largest carriers have slashed about 108,000 jobs since the terrorist attacks of Sept. 11, 2001, and have posted a combined loss of $10.65 billion. Yet five of those airlines'' chief executives received compensation totaling $42.6 million last year, according to disclosures to date.
These airlines dare to give their CEOs all this money, and yet they make every single one of their workers take a pay cut, said Lois Deaton, 74, of White Oak. How do they get away with that?
A frequent traveler to Europe, Deaton is already steamed that she often has to backtrack all over the place to change planes on US Airways, even though it controls about three-quarters of the gates at Pittsburgh International. CEOs in the airline industry last year did embarrassingly well, said Robert Mann Jr., head of R.W. Mann & Co. Inc., an airline consultant on Long Island, N.Y. It looked pretty bad in the court of public opinion, which judges harshly, but fairly.
Leo Mullin lost $1.3 billion at Delta, and he made $13 million last year, Mann scoffed. I guess if he lost $1.5 billion, maybe he would have gotten more.
Mann was less critical of the $1.45 million pay package received last year by US Airways Chief Executive David Siegel, whose compensation was even probably a little low for a company of their size, the analyst said.
Siegel managed this airline through the bankruptcy process, and I guess that counts for something, Mann said. But now, it should depend on how it performs going forward.
US Airways workers were especially irked by the $35 million in golden parachutes the company paid to its top three former executives before filing for bankruptcy.
Stephen Wolf, who is no longer chairman, received $15 million after giving up executive duties in March 2002. Rakesh Gangwal got $15 million after quitting as CEO in November 2001. And Lawrence Nagin, who retired as executive vice president and general counsel in March 2002, received $5 million.
The outlays weren''t disclosed until February, while management was trying to strip pilots of their defined-benefit pensions and after all work groups had ratified contracts with more than $1 billion a year in concessions.
Against such criticism, US Airways said it was obligated to pay the severance to Wolf, Gangwal and Nagin because it was stipulated in their employment contracts.
We had contractual obligations, too, but we gave up concessions to avoid liquidation of the airline, said William Frieberger, general chairman of the International Association of Machinists District 141M, Pittsburgh, which represents aircraft mechanics.
Siegel and the new guard at US Airways had the ability to get that money back, and these guys did nothing, Frieberger said. It''s like a fraternity of thieves.
Billions of dollars in federal aid is pending for the airlines since the Sept. 11 attacks, noted Teddy Xidas, president of the Association of Flight Attendants'' Local Council 40, Pittsburgh. You can''t take taxpayers'' money and then reward yourself with millions, she said.
Layoffs crippled our union, Xidas said. The Association of Flight Attendants has lost roughly 10,000 members to industry layoffs since Sept. 11, including about 1,500 in Pittsburgh. The much larger Communications Workers of America in late March began drafting a merger with the flight attendants union, whose members will vote on it sometime this summer.
Congress also came down on airlines'' executive pay when it took up a $3.2 billion industry-aid bill a week ago. U.S. Rep. Melissa Hart, a Bradford Woods Republican, directed her criticism at Siegel for US Airways'' last-minute rejection of leases at Pittsburgh International after paying $35 million in executive severance last year.
On March 30, in the final hour of bankruptcy protection from creditors, US Airways tossed out leases at the airport and sought $50 million in annual cuts in new agreements. In addition, the carrier demanded that the Allegheny County Airport Authority provide $155 million for airport facility improvements or risk losing the airline''s hub operations to Charlotte, N.C.
Hart wrote Siegel a pointed letter on April 4 demanding an explanation of this decision''s impact upon your restructuring plans and the anticipated role Pittsburgh will play in a revamped US Airways. So far, that includes basing and maintaining a regional jet fleet here for the newly formed MidAtlantic Airways.
US Airways spokesman David Castelveter said the division would be headquartered here, provided we are able to negotiate a cost structure for regional jet operations.
Deaton, the transatlantic traveler, isn''t satisfied: I say let them move out and give us some competition.
She resents paying high fares on US Airways, especially when it has cut service 28 percent since Sept. 11 and suspended Pittsburgh-to-Europe service during next month.
You can almost always get a better fare overseas from New York anyway, she said. So it pays to go there to get it.
Thomas Olson can be reached at [email protected] or (412) 320-7854
By Thomas Olson
TRIBUNE-REVIEW
Sunday, April 13, 2003
US Airways sank into bankruptcy last August and recorded a massive $1.65 billion loss for the year.
So why, at the same time, did it pay out more than $36 million to four of its top executives? And why have its major competitors, which also are bleeding cash, paid out even more to their CEOs?
As US Airways regroups after emerging from bankruptcy on March 31, resentment over such compensation still runs deep among employees and others — especially after workers agreed to give up $1.02 billion in wages and benefits in each of the next seven years to help keep the airline aloft.
Practically all constituents of US Airways were battered by its bankruptcy. Most creditors received a mere 2 cents on the dollar. Passengers have fewer flights to choose from. Pittsburgh International Airport is quaking after the airline''s recent threat to drop it as a hub. And workers who didn''t lose their jobs lost pay.
Our members feel like veterans of a war, said Chris Fox, president of the Communications Workers of America Local 13302, Pittsburgh, which represents customer-service and ticketing agents here.
They are tired. And they expected that since we gave all these concessions, that the company would treat them better, she said. But we''re working twice as hard with fewer people.
There are about 12,500 fewer people, in fact, including roughly 3,900 fewer in the Pittsburgh area. Companywide employment peaked at about 45,500 in early 2001.
Altogether, the nation''s seven largest carriers have slashed about 108,000 jobs since the terrorist attacks of Sept. 11, 2001, and have posted a combined loss of $10.65 billion. Yet five of those airlines'' chief executives received compensation totaling $42.6 million last year, according to disclosures to date.
These airlines dare to give their CEOs all this money, and yet they make every single one of their workers take a pay cut, said Lois Deaton, 74, of White Oak. How do they get away with that?
A frequent traveler to Europe, Deaton is already steamed that she often has to backtrack all over the place to change planes on US Airways, even though it controls about three-quarters of the gates at Pittsburgh International. CEOs in the airline industry last year did embarrassingly well, said Robert Mann Jr., head of R.W. Mann & Co. Inc., an airline consultant on Long Island, N.Y. It looked pretty bad in the court of public opinion, which judges harshly, but fairly.
Leo Mullin lost $1.3 billion at Delta, and he made $13 million last year, Mann scoffed. I guess if he lost $1.5 billion, maybe he would have gotten more.
Mann was less critical of the $1.45 million pay package received last year by US Airways Chief Executive David Siegel, whose compensation was even probably a little low for a company of their size, the analyst said.
Siegel managed this airline through the bankruptcy process, and I guess that counts for something, Mann said. But now, it should depend on how it performs going forward.
US Airways workers were especially irked by the $35 million in golden parachutes the company paid to its top three former executives before filing for bankruptcy.
Stephen Wolf, who is no longer chairman, received $15 million after giving up executive duties in March 2002. Rakesh Gangwal got $15 million after quitting as CEO in November 2001. And Lawrence Nagin, who retired as executive vice president and general counsel in March 2002, received $5 million.
The outlays weren''t disclosed until February, while management was trying to strip pilots of their defined-benefit pensions and after all work groups had ratified contracts with more than $1 billion a year in concessions.
Against such criticism, US Airways said it was obligated to pay the severance to Wolf, Gangwal and Nagin because it was stipulated in their employment contracts.
We had contractual obligations, too, but we gave up concessions to avoid liquidation of the airline, said William Frieberger, general chairman of the International Association of Machinists District 141M, Pittsburgh, which represents aircraft mechanics.
Siegel and the new guard at US Airways had the ability to get that money back, and these guys did nothing, Frieberger said. It''s like a fraternity of thieves.
Billions of dollars in federal aid is pending for the airlines since the Sept. 11 attacks, noted Teddy Xidas, president of the Association of Flight Attendants'' Local Council 40, Pittsburgh. You can''t take taxpayers'' money and then reward yourself with millions, she said.
Layoffs crippled our union, Xidas said. The Association of Flight Attendants has lost roughly 10,000 members to industry layoffs since Sept. 11, including about 1,500 in Pittsburgh. The much larger Communications Workers of America in late March began drafting a merger with the flight attendants union, whose members will vote on it sometime this summer.
Congress also came down on airlines'' executive pay when it took up a $3.2 billion industry-aid bill a week ago. U.S. Rep. Melissa Hart, a Bradford Woods Republican, directed her criticism at Siegel for US Airways'' last-minute rejection of leases at Pittsburgh International after paying $35 million in executive severance last year.
On March 30, in the final hour of bankruptcy protection from creditors, US Airways tossed out leases at the airport and sought $50 million in annual cuts in new agreements. In addition, the carrier demanded that the Allegheny County Airport Authority provide $155 million for airport facility improvements or risk losing the airline''s hub operations to Charlotte, N.C.
Hart wrote Siegel a pointed letter on April 4 demanding an explanation of this decision''s impact upon your restructuring plans and the anticipated role Pittsburgh will play in a revamped US Airways. So far, that includes basing and maintaining a regional jet fleet here for the newly formed MidAtlantic Airways.
US Airways spokesman David Castelveter said the division would be headquartered here, provided we are able to negotiate a cost structure for regional jet operations.
Deaton, the transatlantic traveler, isn''t satisfied: I say let them move out and give us some competition.
She resents paying high fares on US Airways, especially when it has cut service 28 percent since Sept. 11 and suspended Pittsburgh-to-Europe service during next month.
You can almost always get a better fare overseas from New York anyway, she said. So it pays to go there to get it.
Thomas Olson can be reached at [email protected] or (412) 320-7854
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