Skift Take

Does the average traveler care whether a U.S. airline CEO made $7 million or $13 million last year? It's highly doubtful. Passengers want to fly a well-run, on-time airline with friendly customer service. How much money the CEO makes is probably immaterial to most customers.

Delta Air Lines Chief Executive Ed Bastian earned slightly more total compensation in 2017 than any of his U.S. peers, as his carrier generally performed better on financial and operational metrics than its competitors.

Bastian, who became CEO in May, 2016, received roughly $13.2 million in compensation, mostly in stock, as he is paid a base salary of $800,000. That pay was 142 times greater than the median pay for Delta’s workers overall, a new metric companies are required by the Securities & Exchange Commission to report now.

Bastian’s pay was about 5 percent more than he was paid in 2016, when United CEO Oscar Munoz took the top spot.

“Delta carries itself today and it has for about five years the way American carried itself in the 1970s and 80s — as the undisputed industry leader,” said Robert Mann, an industry consultant. “If there is one guy who most deserves it, it would be Ed.”

After earning $18.7 million in 2016 total compensation, including a bonus tied to his hiring, United’s Munoz slipped last year to third among U.S. airline CEOs — by design.

He received $9.5 million after forgoing his annual bonus. Munoz said in a filing that he asked the board to withhold it, saying it is “important to send a message about the culture of accountability and integrity that we are building here as a United team.” Munoz referenced “setbacks,” in his note, a likely nod to an April 2017 incident in Chicago in which security officers dragged a passenger from a United Express aircraft. After the incident, the board modified his compensation slightly, tying a percentage of it to customer service marks.

American Airlines CEO Doug Parker moved up to the second slot with nearly $12.2 million in total compensation. Since May 2015, Parker has not taken a salary, arguing he should be paid in stock based on the company’s success. He does not take a cash bonus, unlike other top American executives.

Other U.S. airline CEOs make less money than the heads of the major network carriers. Among low-cost-airlines, Southwest Airlines’ Gary Kelly was the best paid, earning $7.5 million in 2017 total compensation, while Brad Tilden of Alaska made $5.7 million and Robin Hayes of JetBlue Airways made $3.3 million.

At ultra-low-cost-carriers, Bob Fornaro of Spirit Airlines earned roughly $2.2 million, and Maury Gallagher of Allegiant Air made $2.3 million, though as company founder, he owns hundreds of millions of dollars worth of stock. Frontier Airlines, a third discount U.S. airline, is not a public company.

Delta on Top

Delta had hiccups in 2017, including a computer system outage in January and a April storm in the Southeast United States that crippled the airline’s operation for days. But most outsiders consider Delta among the best-run airlines in the world, and it’s certainly among the most profitable.

In 2017, Delta reported full-year adjusted pre-tax income of $5.5 billion, and its revenue per available seat mile, a measure of per-flight revenue, is consistently far above the U.S. airline average. It estimates it earns a 10 percent revenue premium compared to its peers. 

“They have the best performing operation,” Mann said. “That counts for customers, and it counts for investors, and it really counts for employees. There is nothing quite like going to the office or the terminal or the ramp and not having to constantly apologize to people. Delta isn’t perfect but they are the closest to performing that way of any airline out there today, and they are not finished yet.”

According to Delta’s filings, roughly 94 percent of Bastian’s compensation is “at risk” — payable to the CEO only if he meets certain benchmarks. For compensation beyond base pay, he and other executives are measured on several factors, including net income, profit margin, net promoter score, on-time performance record and lost baggage rate. Much of his incentive pay comes in stock awards, rather than cash.

Median Employee Pay

CEO pay draws most of the attention, but there’s arguably something more interesting in the proxy filings — an estimate of the median employee’s salary.

It shows Delta pays its median employee more than $90,000 or roughly 2.6 times what Spirit pays its median worker. This is a major reason Spirit can offer such cheap prices. It’s also a reason Delta created a basic economy fare class to compete with Spirit. All of Delta’s costs, including employee pay, are significantly higher than Spirit’s.

Here is a full chart detailing pay for CEOs and the median worker.

Airline CEO Title Total Compensation 2017 Total Compensation 2016 Percent Change 2017 Median Compensation CEO Pay Ratio
Delta Air Lines Ed Bastian CEO $13,205,703 $12,557,231 5.16% $93,316 142 to 1
American Airlines Doug Parker Chairman & CEO $12,175,486 $11,140,763 9.29% $62,394 195 to 1
United Airlines Oscar Munoz President & CEO $9,561,134 $18,720,548 -48.93% $83,122 115 to 1
Southwest Airlines Gary Kelly Chairman & CEO $7,560,200 $6,181,660 22.30% $81,177 93.1 to 1
Alaska Airlines Brad Tilden CEO $5,718,166 $4,246,312 34.66% $49,664 115.5 to 1
JetBlue Airways Robin Hayes President & CEO $3,341,024 $3,160,901 5.70% $53,188 64.7 to 1
Allegiant Air Maury Gallagher CEO $2,320,613 $3,571,205 -35.02% $43,780 53 to 1
Spirit Airlines Robert Fornaro CEO $2,238,356 $7,172,512 -68.79% $36,149 62 to 1
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Tags: airline innovation, airlines, ceo pay, delta air lines

Photo credit: Delta Air Lines CEO Ed Bastian made more money in 2017 than any other U.S. airline CEO. 183656 / 183656

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