Animal Farm at NWA

Categories: Business

The most interesting daily print journalism increasingly seems to take place in the business sections, and the Star Tribune is no exception.

Yesterday the Strib reported on the harsh words leveled at Northwest Airlines executives by Mark McClain, the local chairman of the pilot's union. On Monday, the pilots agreed to temporary pay cuts of 23.9 percents, a year after their wages were already slashed 15 percent. These are collectively larger than the cuts endured by NWA's management team. Next month, reports the Strib, top management will take 10 percent pay cuts on top of the 8 to 23 percent decreases in wages they experienced last year. McClain called the discrepancy "inherently unfair" and said it reflects "a lack of leadership on management's part."

NWA has utilized its bankruptcy filings as leverage to decrease the size as well as the total salaries and benefits of its workforce. Just today, a U.S. bankruptcy judge approved 19 percent wage cuts for 14,420 ground workers at the airline. But as the Strib notes, the airline execs told the bankruptcy court that management compensation is an issue in retaining key executives. Apparently, some NWA employees are more equal than others.

During the go-go stock market boom of the 1990s, CEOs rationalized their huge executive compensation packages by pointing to the profitability of their firms. So why isn't the reverse true when the airline is bleeding billions of dollars? NWA CEO Douglas Steenland earned $472,649 last year, according to the eComp Executive Compensation Database. By contrast, David Neeleman, the CEO of JetBlue, an airline that actually made a profit in 2004, pulled down $270,000, including his $70,000 bonus. And Gary Kelly, the CEO of Southwest, the other success story in the airline biz, had a base salary of $322,436, more than $100,000 less than Steenland's base, although bonuses for his performance elevated Kelly's total 2004 pay to $542,436.

The point is, slashing the salaries of NWA's executive team is hardly going to prompt a stampede for the exits--and if it does, given the airline's recent performance, it might not be such a bad thing.

Besides, a little more pruning at the top would again better reflect what is happening throughout the rest of the company. The Strib reports that NWA has slashed its in-house maintenance workforce from 4400 on August 19 to about 880 today. By contrast, its number of officer positions has decreased merely from 68 to 40.


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