Source: Reuters Author: Karen Jacobs, Kyle Peterson 01/04/2010
Subject Concerned: Opinion Airlines Human Resource
Continental Airlines Inc said on Jan. 4 that its new Chief Executive Jeff Smisek has agreed to forgo his annual salary and bonus beginning with the 2010 calendar year unless the company turns a profit each year.
But the stipulation in the new CEO's employment agreement could prove a formality at least for 2010 as current Wall Street estimates call for Continental to return to profitability this year.
Smisek, who took over the chairman, president and chief executive posts on Jan. 1 following the previously announced resignation of Larry Kellner, will not receive his annual salary of US$730,000 and any yearly bonus if Continental does not deliver positive net income excluding unusual items, according to terms of the employment agreement detailed in a Securities and Exchange Commission filing.
In a letter to employees also included in the SEC filing, the former Continental chief operating officer said the tone for any business was set at the top and added that ending losses for Continental must be a priority.
"We've lost almost US$1 billion since 9/11 as we've managed from one crisis to the next," Smisek said in the letter. "It's our airline and it's time to take control of our destiny."
Analysts on average expect Continental to post a loss of US$2.66 a share for 2009, followed by a profit of US$1.36 a share for 2010 and per-share earnings of US$2.11 for 2011, according to Thomson Reuters I/B/E/S.
"I think he's trying to show goodwill for the airline and the whole industry," said Morningstar equities analyst Basili Alukos.
But Alukos added that CEO compensation can take other forms besides annual salaries and bonuses.
"Obviously they get other stuff," Alukos said. "There's a lot that goes into executive salaries."
Continental noted in the filing that Smisek's salary and annual bonus waiver would not affect his rights to participate in any company long-term incentive program and the calculation of benefits based on the salary or bonus level.