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Wednesday, September 29, 2004

Executives participate in wage cut


Airline's CEO will forgo salary for rest of the year

By James Pilcher
Enquirer staff writer

The corridor of executive offices at Delta Air Lines' Atlanta headquarters is nicknamed "mahogany row," after the lush wood-trimmed walls.

But those offices are much emptier in the last six months, as Delta chief executive Gerald Grinstein has flattened the executive structure and others have elected to leave the struggling airline, including one key departure last week.

On Tuesday, the remaining executives were included in an across-the-board 10 percent pay cut for all non-union workers at the Atlanta-based carrier - addressing a lingering issue among its workforce.

"These sacrifices are being shared mutually, across every region, in every department, and at every level of the company," Grinstein wrote in a memo to workers, saying he was foregoing his own $500,000 annual salary for the rest of the year. "In distressed times like these, when everyone must sacrifice, it is especially important that leadership participates, and they have."

Analysts applauded the executive cuts, especially the one taken by Grinstein.

"It goes a long way toward sending a message that they are serious about this," said Helane Becker, airline analyst with The Benchmark Group LLC.

Grinstein said in the memo that overall, the number of executives is down 20 percent since 2003, when it had more than 60 officials at the rank of vice president or above.

One top official, senior vice president Vicki Escarra, announced her retirement last week. She had served as chief marketing officer under the previous regime, and was still among the top officers at the airline.

As early as this month, Grinstein noted that he was having problems keeping executives but used Escarra as an example of one who was staying through the turmoil.

Other senior officials, including Delta's top vice presidents for maintenance and network management, have left in the past four months.

With the exception of Grinstein, Delta now has six top executives, whom company insiders had dubbed "the seven samurai" until Escarra's retirement.

Delta officials said they had not determined who would be included on the company's proxy statement beyond Grinstein and chairman John F. Smith Jr.

Executive compensation was down 41 percent just since the beginning of this year, company officials also said, and executives also had taken an 8 percent cut in March.

This has remained a sore spot with many workers, who remember the generous buyout packages of previous executives such as former CEO Ron Allen, who was pressured out in 1997, or the bonuses awarded to Allen's successor, former chairman and CEO Leo Mullin.

In 2002, Mullin was paid a bonus package worth more than $11 million, including $1.4 million in cash, but he returned about 40 percent of the bonus in April 2003. He also came under criticism for getting his bonuses on the same day that he announced pilot layoffs and began his quest for pilot concessions.

In addition, many top executives, including Mullin, had been given guaranteed pension funds - meaning they were protected even if the company went into bankruptcy. At the time, officials argued that such perks were the only way to retain top talent. Mullin got a pension worth about $16 million that credited him for 22 years of service.

But Delta executives eventually chose not to make the last of three payments into that fund, although retired executives such as Mullin and Escarra can still draw from it.

"Our compensation levels going forward must be limited by what the company can afford to pay," Grinstein wrote Tuesday.

E-mail jpilcher@enquirer.com




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