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Airlines

Does Doug Parker Get Paid Too Much?

Does Doug Parker Get Paid Too Much?
Jeff Edwards

American Airlines CEO Doug Parker earned nearly 200 times the median salary of the carrier’s workforce last year. Parker’s 2018 compensation of almost $12 million in stocks and bonuses dwarfed the average employee wage of less than $62,000 annually.

According to the Dallas Morning News, Parker has chosen to be paid in entirely company stock rather than cash since 2015. American Airlines Group’s hometown newspaper reports that executive compensation at the world’s largest airline actually fell slightly following the prior year’s record-breaking revenues.

According to recent shareholder filings, other top American Airlines executives earned big paydays last year as well. President Robert Isom took home $6.68 million. Company CFO Derek Kerr made $3.85 million and VP Steve Johnson earned $3.9 million.

While analysts, including Institutional Shareholder Services, gave American mostly high marks to the airline for executive compensation packages that are tied to performance and in line with salaries at other major North American carriers, labor leaders point to the wage disparity as a sign that management is out of touch with the state of modern air travel. Representatives of the Association of Professional Flight Attendants (APFA) suggested that that money could be better put to use by being reinvested in the company and perhaps spent on desperately needed upgrades and repairs.

“The fact American Airlines paid its CEO Doug Parker nearly $12 million is the latest sign of disrespect to the company’s hard-working, but beleaguered crew members and passengers who have had to put up with repeated safety concerns, broken luggage bins, missing baggage, flight cancellations, and a disinvestment that has led to one of the oldest fleets in the U.S aviation industry,” a union spokesperson told the Morning News’ Dom DiFurio.

According to a 2018 Skift report, shortly after choosing to be paid solely in company stock, Parker became the second highest paid airline CEO in both 2016 and 2017. Delta Air Lines CEO Ed Bastian was the highest paid airline executive in each of those years with compensation of roughly $13 million annually or about 142 times what the average Delta employee earned.

 

[Image Source: AP]

View Comments (14)

14 Comments

  1. iahphx

    May 4, 2019 at 2:42 pm

    This is a just your typical anti-management, pro-union argument, of course. It’s like arguing that professional athletes are overpaid. Or movie stars. I’d also note (and the story does not) that Parker has given his employees pay raises unprecedented in the airline industry or for that matter, any industry. There are employees at the company who are earning more than 2x what they earned before the merger 5 years ago. He’s given unionized workers raises without even asking them to negotiate for them (and therefore got nothing in return). So the idea that Parker is somehow “taking advantage” of his workers may play well to the usual crowd in the cheap seats, it is an absolute lie.

  2. akl_traveller

    May 4, 2019 at 10:27 pm

    Plenty of athletes/movie stars are overpaid; look up the MLB stuff looking at how much you pay for WAR
    I’m not an MLB expert, but I do actually analyse the impact of chief executive remuneration on performance in large public sector organisations (not private sector), and guess what? Correlation: zero.

  3. strickerj

    May 5, 2019 at 7:50 am

    I can’t help but notice none of these articles indicate what the spread should be, just imply that it’s too high. Terms like “pay gap” imply it should be zero, but surely we can all agree that every job shouldn’t be paid the same – otherwise there’d be no incentive to get an education or special skills, and the jobs that require them would go unfilled.

    So, I simply ask – what’s the ideal executive pay relative to frontline workers, and why?

  4. rthib

    May 5, 2019 at 1:44 pm

    Don’t like the pay – then become a CEO.

  5. mark_s

    May 5, 2019 at 4:25 pm

    What’s the median pay?

    Many corporations that I interact with as a customer leave me underwhelmed, and I am perplexed as to why the C-level execs running them continue to be employed. However, I don’t fly American Airlines very often, so I don’t know much about that. Regardless, unless the business is employee-owned, who cares what the play gap is between mean or median pay and the CEO’s pay? It’s irrelevant.

  6. chrisboote

    May 8, 2019 at 4:50 am

    Intriguing that 13m is 142x average wage at Delta, but ‘only’ 12m is 200x median at American

    Makes iahphx’s comments about incredible parses at American ring a little hollow

  7. alexmyboy

    May 8, 2019 at 4:54 am

    pro union, shut up. god forbid workers get paid a decent wage.

  8. Danwriter

    May 8, 2019 at 6:45 am

    I’m a capitalist, like (apparently) most of the respondents here. But I also acknowledge that the growing pay disparity between C-level and rank-and-file is symptomatic of much larger ills in the system. So singling out Parker may not be helpful.
    On the other hand, he must be doing a great job. After all, most companies wouldn’t hire, or tolerate, an employee wth multiple DUIs.

  9. John Aldeborgh

    May 8, 2019 at 7:01 am

    If I read the article correctly, American paid him nothing in cash. They simply gave him stock, although it’s unclear if this was ISO’s or RSU’s. Both of which carry a non-cash expense on the P&L. In either case this is very much a pay-for-performance compensation package.

    The other reality is that highly skilled CEO’s are not common and in constant demand. They earn what they earn because that’s what the market dictates. Just like professional athletes or movie stars. So I ask you, who is deserving of a higher salary a pro athlete (many of whom make this amount of money) or the CEO of a major airline providing a valuable service and creating tens of thousands of high paying jobs? In my mind this is ridiculously obvious, the CEO of course.

    You don’t help the poor by tearing down the rich. This is nothing but BS politics.

  10. POatParker

    May 8, 2019 at 7:17 am

    Idiot Parker should receive $0 income. In other words his ass NEEDS to be fired! He has crossed the line of human dignity! It’s no wonder passengers are lashing out. i.e. terrible seat rakes, skinner seats, removing TV’s in seat backs, more seats per unit area, really cramped bathrooms, nickel and diming everything, making it harder to hit status, less rewards (For more miles), etc. He is the most uncustomer centric CEO in the business! He deserves NOTHING, but his ass out the door!

  11. oldAGE

    May 8, 2019 at 7:25 am

    I like the comments here. But they ignore a common theme in the current US Business environment. In the heyday of business growth, union strength, and high corporate (and personal) tax burden, there was a certain “equality.” Don’t get too engrossed in that term. Some of us are Road Warriors. We have been around awhile.

    During this time of growth in the 60s and 70s, the rule of importance was in this order – Customer, Employee, Shareholder, and Management. What was “left-over” became the bonus structure. Employees treated Customers as vitally important. Today it’s Shareholder, Management/Customer, and then Employee. The line folks get sloppy seconds and the Customer is second or third fiddle. Management will screw the customer and employee to eek out more profit to satisfy the shareholder. I don’t care what Parker’s compensation is. I simply know what his attitude toward his customer base is.

    As a life-time AAdvantage Elite customer with two years of higher status than my Lifetime Status — I have seen what this product is like first hand. Long haul International to short hop regional service. I fly revenue in the front of the plane and all the way in the back of the plane. From 787-9s to every permutation of regional jet. I have seen the brand nose dive through four CEOs who all do the exact same thing. There is no innovation. It’s only dilution of the quality of the product and brand loyalty in order to placate the Shareholders at the cost of customer satisfaction. And Parker sees that as a Win.

    I have the luxury of being able to fly often irrespective of the general US and World Economic conditions. There were glimmers of hope for AA in 2007 – 2009 when customers disappeared. We were wooed with violins and roses. Yes, I don’t get raped at every turn for baggage or beverage or other revenue generating opportunities. But I now have a new theory of my purchasing power. And this theory is strictly based on how I can leverage the New Perception of Quality in US Domestic Aviation. I will simply buy the best cost ticket in the Class that will give me what I need for each trip on a carrier that is trustworthy — brand loyalty be-damned. I will be happy to spread my revenue around. If Domestic Main Cabin, then maybe AA to leverage my status. But if “J or F,” then possibly any other quality carrier will do.

    This New Perception is a direct result of the management decisions by American and other US Carriers. They are mostly indistinguishable. Most customers are treated as second class citizens. Honestly, some deserve it. But we road warriors know how to deal with everything. And we pay attention to the little things.

  12. Snuggs

    May 8, 2019 at 9:53 am

    “choosing to be paid solely in company stock” Wow, that’s pretty heady stuff. And it speaks to just where the airline will continue to go. This answers my nagging question as to whether it’s worth keeping AA status. No wonder Mr CEO related his incredulity at the lack of intelligence of anyone who would intentional acquire status: He knows just how bad he intends to make things.

  13. ckfred

    May 8, 2019 at 1:28 pm

    My father worked in labor relations for a Fortune 50 company in the 1970s. If the company did well, unions wanted “their fair share.” If the company had a bad year, the unions thought that only the suits in Chicago should get little or no compensation increase, because they made they made the stupid decisions, not the employees working in the plants.

    Once in a while, some union leader would complain that the senior executives were over paid. My father would do some computations and show that cutting the salaries of the top five executives by 50% would not pay for the wage increases demanded at one plant.

    I’ve always heard that it costs an airline about a million dollars to train a pilot from the time he or she is hired until the promotion from F/O to Captain. So Doug Parker’s compensation gets 12 pilots trained from hiring to promotion to Captain.

    Cutting the compensation of the top five executives won’t pay for a new 737MAX or A321, but it might pay for a C-check and cabin refreshment for one 777-200.

    Unions are fickle. I remember when several AA pilots I know despised Robert Crandall. Now, they say Crandall was the last CEO who knew what he was doing.

  14. Prof_Dr_G

    May 8, 2019 at 3:36 pm

    Who cares what he is paid if he is doing a good job in a competitive market. If he did not have monopoly power, he would not have a job. He can do whatever he wants because there is little competition and the Anti-Trust Division at the Justice Department no longer does its job.

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