Southwest CEO 2010 Compensation More Than Doubled

DALLAS (AP) – Southwest Airlines Co. more than doubled the compensation for its CEO last year, to nearly $3.4 million, thanks mainly to a stock award worth $1.8 million.

Gary C. Kelly was rewarded for a big jump in Southwest’s income as passenger traffic rose sharply in a bounce-back year for the airline industry.

Southwest earned $459 million last year compared with $99 million in 2009, although the stock price did not appreciate as quickly — rising 14 percent in 2010. Kelly also engineered Southwest’s biggest acquisition ever, a $1.4 billion purchase of AirTran Airways that will increase Southwest’s size by one-fourth when it closes, which is expected in the next few weeks.

Southwest has been gaining passengers more quickly than other airlines, which Kelly attributes partly to Southwest’s policy of letting passengers check two bags for free.

In a Friday filing with the Securities and Exchange, Southwest said executive compensation for 2010 was supported by the company emerging “from the worst decade in U.S. aviation history without annual losses, without furloughs, and without degradation of its customer experience.”

Southwest, based in Dallas, started as a Texas puddle-jumper 40 years ago and now carries more U.S. passengers than any airline. It also faces challenges topped by rising fuel prices. Southwest’s on-time performance has suffered as Kelly has pushed into busy hub airports that the airline once shunned, and many longtime customers are angry over recent changes in the frequent-flier program.

Kelly’s 2010 salary rose only 5 percent but he got a bigger bonus of $930,000, up from $590,000 in 2009. The major difference in his compensation, however, was a stock award valued at $1.84 million when issued on May 19.

Other top executives also got stock awards that pushed their compensation sharply higher.

Unlike 2009, Kelly received no stock options in 2010. He got $112,668 in other compensation, including $49,433 in deferred income that the company said was earned for 2010 but paid this year. He got above-market earnings on deferred compensation of $7,902 in 2010.

The Associated Press formula calculates an executive’s total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.

The value that a company assigned to an executive’s stock and option awards for 2010 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company’s stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

Comments

One Comment

  1. Rutherford Lawrence says:

    Why is this newsworthy? Southwest’s profits increased almost five-fold from the preceding fiscal year. Is it wrong to properly compensate a CEO under whose leadership this was attained? My hat’s off to Mr. Kelly. Kudos, good sir! You deserve all compensation received.

  2. robert miers says:

    Southwest is the crown jewel in almost everything it does. I hate to see comparisons with other airlines because they are such a poor example. Southwest investors have not received much in past years. Methinks a stock rise should be more important than CEO compensation.
    In short, the job is not finished, Air Tran is great, but lets see a better return for those who invested and stuck with SW capital backing.
    Don’t party till the graduation, Other than that, a loyal SWA customer salutes the employees of the best airline

  3. Gary Franklin Sr. says:

    In these days of the BLUE COLLAR WORKERS WOES ABOUT THE ECONOMY AND THE SHAPE THIS COUNTRY IS IN, “” FINANCIALLY. Who wants to hear about ONE PERSON MAKING MILLIONS IN THE MIDDLE OF A RECCESSIONWHEN YOU FIGHT LIKE HELL JUST TO PUT BREAD AND BUTTER ONTHE TABLE< MUCH LES HAVING TO PAY FOR MEDICINE.

    1. lowtolerance says:

      Apparently he runs the company singlehandedly.

  4. LinD says:

    In case you were wondering why SouthWest’s airplanes keep falling apart it’s because they spend all of their revenue on expansion and management bonuses instead of on safety and maintenance!!!

  5. Rick McDaniel says:

    Compensation for CEO’s is totally out of control in Corporate America. No one is worth the money these people are being paid. No one!

  6. Dennis says:

    Because someone does their job , he shouldn’t be compensated! The people complaining need to work, instead of waiting for “Entitlements”

  7. SocialStrain says:

    On one hand, you have too many people in positions of power skewing value exchange in their favor far too much. While this should be obvious to most that too much of any imbalance leads to a collapse, the US is doing poorer and poorer at math and science, so that adds to the equation as well.

    On the other hand, baby boomers have a claim that we’ve passed a tipping point where extracting as much value out of a dying system, is justified – as long as that value stays with the most sustainable.

  8. Reeper says:

    Let’s see, they raised fees due to the cost of gas and yet this person still makes off with a bundle? How about giving him less and lowering the fees? The more that fly should be why you profit more, not charging more for those that still do.
    BTW I don’t fly, yet I believe in being fair. This is not. And if I did fly and used the same people it never has to do with the CEO’s being the cause, it’s because of the good people I come in contact with, thus they deserve the raises and not him. That would also pertain to all those who I don’t come in contract with yet their work of cleaning, maintenance, etc. made an impression on me. CEO’s do oversee all this gets done, thus they should get some yet they seem to take it all. Rewards for a job well done is nice, yet not needed like it’s getting done today.

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