Southwest CEO’s compensation rose 15 percent to $4 million in 2012

The CEO of Southwest Airlines received $4 million in compensation for 2012, up 15 percent from the prior year, largely because of bigger stock awards.

The airline said in a regulatory filing on Friday that Gary Kelly, who is also the company’s chairman, was paid a salary of $675,000 and a $961,000 bonus last year, both 4 percent increases from 2011.

The bulk of Kelly’s compensation was in stock awards, which Southwest valued at $2.25 million on the day they were granted. He also received $129,802 in other compensation including contributions to retirement plans and security around his home.

Southwest said in the filing with the Securities and Exchange Commission that Kelly’s salary is below the median for leaders of similar companies. The board granted Kelly stock awards to reflect his “strong performance” and contributions to strategic moves including the integration of AirTran Airways, which Southwest bought in 2011, and modernizing the fleet, the company said.

However, the board also considered the lack of progress in boosting Southwest’s return on invested capital — it failed to hit a goal of a 15 percent increase.

In 2012, Southwest’s net income more than doubled to $421 million from $178 million in 2011. The results were helped by paper gains on fuel-hedging contracts. Revenue rose 9 percent to $16.09 billion on higher fares and more passengers, but operating costs climbed 10 percent because of increased spending for labor, fuel and maintenance.

Shares of Dallas-based Southwest, the nation’s fourth-biggest airline, climbed nearly 20 percent during 2012 and were up another 25 percent since the start of 2013, through Thursday’s close. Airline stocks have benefited from consolidation, as investors expect a series of mergers to increase the pricing power and profitability of the remaining carriers.

Kelly joined Southwest in 1986 and held a succession of finance jobs including chief financial officer. He was named CEO in 2004 and added the chairman’s title in 2008.

Copyright (2013) Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.