Continental CEO defers pay/bonus until profitability restored

[ableone]

January 4, 2010

Dear Co-worker:

As I step into my new role as CEO, I'm proud and excited to be leading the greatest team in the airline industry. You have proven again and again that you can provide the best customer service and product in the business, despite the many challenges that have become the "new normal" for this industry. You just proved that yet again over the holidays, when you performed at the top of your game in one of the worst winter storms in decades on one of the busiest travel days of the year. No one does it better.

Now we need to focus on conquering our biggest challenge of all: making money on an on-going basis. Making money will make possible all the good things you want and deserve from Continental - job security, better pay, better benefits, career advancement and retirement security. Continuing year after year of losses will result in all the things you don't want - furloughs, pay and benefit reductions, career stagnation and worries about retirement. We've lost almost $1 billion since 9/11 as we've managed from one crisis to the next. It's our airline and it's time to take control of our destiny.

To demonstrate my belief in your ability to do just that, I am going to refuse to accept any salary or annual bonus until we make a full-year profit. I am willing to make this commitment because I have faith in you, and because the tone for any business is set at the top. I am not asking you or anyone else to reduce their pay. What I am asking is that you join me in making Continental profitable again. I'm asking that you do what you do best - provide our customers outstanding service while working more efficiently, bringing in new revenue and out-performing the competition.

While we face enormous challenges, we also have significant strengths. We have you - the most professional men and women in the industry. We belong to the world's best and most comprehensive airline alliance - Star Alliance. We fly the newest, most fuel-efficient fleet in the industry, and we have world class facilities. We continue to ensure that our product is competitive, adding amenities like DIRECTV, Video on Demand and flat-bed seats.

Our greatest strength is and always has been the Continental team and our Working Together culture. You are the key to our success and deserve all of the opportunities that will come from making money again. It's our airline. Let's get it back in the black so we can all enjoy the benefits that will flow from making money again.

I wish you all a healthy, happy - and prosperous - New Year.

Jeff

 

[Patriot328]

Awesome.. good for him.. Now FUPM....

 

[SuperFLUF]

How much $$ is he giving up? AND how much will he still make? (IF CAL doesn't turn a profit.)

It seems to me that this is more of an indication that they think 2010 will be profitable. CAL only needs to make a dollar (or a penny) for this to be nothing but a smokescreen to dristract and put pressure on the mechanics, pilots, flight attendants and most probably the ground service workers that are all re-negotiating this year.

 

[jonjuan]

Awesome.. good for him.. Now FUPM....

Not until full year profitability, didn't you read? Rings hollow for him to give up his salary and bonus. He's already made 10X what he needs to retire today and not change his lifestyle one bit.

 

[Homer Jay]

This is a very well thought out move in the court of public opinion. He's about to have all the unionized groups in contract negotiations as well as the possibility of Teamsters representing the ramp workers. I don't care what the public thinks, you owe us Jeff. FUPM

 

[100/hour/5y]

FUPM!

http://finance.yahoo.com/news/New-Co....html?x=0&.v=4

By David Koenig, AP Airlines Writer , On Monday January 4, 2010, 2:48 pm

DALLAS (AP) -- The new CEO of Continental Airlines Inc. says he will refuse to accept a salary or annual bonus until the company makes a full-year profit.

Jeffery A. Smisek, who became CEO on Friday after Lawrence Kellner stepped down to join a private-equity firm, told employees of his pledge Monday.

Continental, the nation's fourth-largest airline by traffic, lost $367 million in the first nine months of last year.

Smisek said if employees want better pay and benefits, they need to focus on making money. He said he was making his pledge because "the tone for any business is set at the top."

Smisek might not have to stick to his pledge for long. Analysts surveyed by Thomson Reuters expect the airline to close the books on 2009 by reporting a loss of more than $38 million in last year's fourth quarter. But for 2010, they predict a profit of about $190 million.

Continental reported large losses in the first and second quarters, and accompanied the second-quarter results with plans to cut 1,700 jobs.
In his previous job as president and chief operating officer, Smisek was paid a salary of $240,000 in 2008, the last year for which figures have been disclosed. He got no bonus that year -- nor in the previous two years -- but received incentive pay of $1.4 million and stock options valued at $1.9 million when they were issued.

The stock options are worth less today because Continental shares have fallen 40 percent since the options were issued in February 2008.

In his note to employees Monday, Smisek said the work force must focus on "conquering our biggest challenge of all: making money on an ongoing basis." He said profits would make possible all the things that employees want, while continuing losses will lead to furloughs and stagnant pay and benefits.

Smisek said he wasn't asking anyone else to cut their pay.

Continental shares rose 15 cents to $18.07 in afternoon trading.

 

[maxblast72]

Smisek might not have to stick to his pledge for long. Analysts surveyed by Thomson Reuters expect the airline to close the books on 2009 by reporting a loss of more than $38 million in last year's fourth quarter. But for 2010, they predict a profit of about $190 million.

Wow, a $190 million profit on revenues of around $13 billion. What is that a 2-3% operating margin?

 

[SuperFLUF]

Wow, a $190 million profit on revenues of around $13 billion. What is that a 2-3% operating margin?

Whaddaya expect, he's a lawyer with an underpaid workforce not a visionary or operations guy.
A talented airline CEO would probably be able to get 6-8% out of that.

 

[ultrarunner]

My wife qualifies for deferred-compensation as a very highly-compensated senior executive. It's a wonderful thing and has MANY advantages. So believe me when I tell you it is in NO WAY a sacrifice by ANY stretch of the imagination.


That press-release was a classic stroke-job to say the least, and anyone familiar with that type of program knows it and is just laughing!

Pretty incredible!

 

[V1rowt8]

Say what you want but Kellner never deferred his salary, or said he would.

 

[jonjuan]

Say what you want but Kellner never deferred his salary, or said he would.

Agree-only scum bag execs defer compensation....all except Ultras DB, that is......

 

[IAHERJ]

Wow, a $190 million profit on revenues of around $13 billion. What is that a 2-3% operating margin?

Yes, that is correct. I guess you should pat yourself on the back for the part you play in keeping the legacy carriers at such low yields.

 

[Secret Squirrel]

Yea, You guys are, and always have been, a beacon of light when it comes to compensation and WORK RULES.

 

[SuperFLUF]

Say what you want but Kellner never deferred his salary, or said he would.

Not that the accountant was any better of a CEO than the lawyer will be, but he DID actually do the same thing (defer salary & "bonuses") in 2005 (except it was not contingent on profit so he really gave up that pay). When took the reins from Gordon and asked all of the employees for a pay cut to avoid bankruptcy.

AND he still made quite a bit of money that year with his stock grants and ROBIC "non-bonus". In fact, I seem to recall that the executive ROBIC plan was created to help pay Larry after he "gave up" his salary.

Now the problem the analysts say we have is that we didn't go through bankruptcy so our costs are higher than the competition. Go figure. :smash:

 

[Hutchman]

Wow, a $190 million profit on revenues of around $13 billion. What is that a 2-3% operating margin?

More like 1.5%..........

1% of 13 Billion would be $130 million.

 

[Hutchman]

Not until full year profitability, didn't you read? Rings hollow for him to give up his salary and bonus. He's already made 10X what he needs to retire today and not change his lifestyle one bit.

And now the rest of the story......

"In a regulatory filing Monday, Continental said Smisek's annual salary is $730,000. In his previous job as president and chief operating officer, he was due a salary of $576,000 in 2008 but declined more than half and was paid $240,000. He got no bonus that year — nor in the previous two years — but was paid $1.4 million under an incentive program that rewards executives for the company's performance over the previous three years."

Where else can you tell your employees AND THE MEDIA that you will not take a salary or BONE-US and still pocket 1.4 million?

 

[SuperFLUF]

And now the rest of the story......

"In a regulatory filing Monday, Continental said Smisek's annual salary is $730,000. In his previous job as president and chief operating officer, he was due a salary of $576,000 in 2008 but declined more than half and was paid $240,000. He got no bonus that year — nor in the previous two years — but was paid $1.4 million under an incentive program that rewards executives for the company's performance over the previous three years."

Where else can you tell your employees AND THE MEDIA that you will not take a salary or BONE-US and still pocket 1.4 million?

And that's not even all of it.
A business reporter in Houston reported yesterday that he made 4.9 million in 2008 as the president. Certainly made more than that last year and with his pay raise as CEO, even if he does give up his salary...yada, yada....he will still make more this year than last.

 

[General Lee]

It is all deferred compensation. He will get the same amount eventually, but he is trying to make you look bad to the rest of the employees. Classic MBA tactics.


Bye Bye--General Lee

 

[Ben Franklin]

Classic MBA tactics.


Bye Bye--General Lee

I would think a "classic MBA tactic" would be to get paid as much as possible as soon as possible... and then on to the next one.

Seems to me that taking a "paycut" to serve the greater good of an institution is a communist tactic.

Sincerely,

B. Franklin

 

[jonjuan]

I would think a "classic MBA tactic" would be to get paid as much as possible as soon as possible... and then on to the next one.

Seems to me that taking a "paycut" to serve the greater good of an institution is a communist tactic.

Sincerely,

B. Franklin

he's taking a paycut to get the trojan horse in the back door of the MEC.

 

[SuperFLUF]

I would think a "classic MBA tactic" would be to get paid as much as possible as soon as possible... and then on to the next one.

Seems to me that taking a "paycut" to serve the greater good of an institution is a communist tactic.

Sincerely,

B. Franklin

If he were really taking a pay cut. He's only pretending to. Thus a classic lawyer tactic.
Not sure if he has an MBA, he does have masters in economics.

Unless, of course, he's in with the Illuminati and knows there will be another false flag op this year just like 9/11.
Or could it be that he knows a merger with United will happen and thus kill the analysts' forecast of 190 million profit?

A communist tactic would be to take a paycut to serve the greater good and then remove community contributions from all of the worker's pay in order to furninsh his lavish lifestyle.

Another note; as the #2 man, in 2008 he "forgave" 1/2 of his salary and ALL of his "bonus" and still eeeked out 4.9 million dollars.
Quite a bit more than the #1 guy at SWA, who actually turned a profit that year.

http://blogs.chron.com/lorensteffy/2010/01/continentals_ne.html

http://seekingalpha.com/article/174816-trying-to-understand-airline-executive-compensation

 

[EMBpilot]

1. Good way to start the CEO career! What a guy! Good PR all over the country, even some of the World. Who knows maybe Burger King will want him next?

2. Good way to boost the moral of employees so you can continue to rape them, maybe even ask for concessions and make them feel how hard it is out there, but if we sacrifice more and work more and not ask for anything we might be OK! Bottom line - if we make less then Delta people, doing the same business, we should be OK, right?
My airline pays me crap, but thats how it can buy yours!

3. Good way to demoralize the negotiation committee and almost every pilot on the property in light of the new contract.

4. Good way to bump the stock so Larry could cash out - most likely has been preplanned.

5. He'll get money somewhere esle and soon, just watch, but it will not make the news. Besides, still yound and yeah, maybe Burger King will want him?

 

[Jetjockey]

I cashed in on that bump in stock. Only a few hundred shares, but a nice bump indeed.

 

[flynryan15]

AHHHH! How nice a multi-millionaire giving up pocket change always brings a tear to my eye!! :bawling:

 

[jonjuan]

1.
5. He'll get money somewhere esle and soon, just watch, but it will not make the news. Besides, still yound and yeah, maybe Burger King will want him?

http://en.wikipedia.org/wiki/Greg_Brenneman

 

[ATRCA]

1. Good way to start the CEO career! What a guy! Good PR all over the country, even some of the World. Who knows maybe Burger King will want him next?

2. Good way to boost the moral of employees so you can continue to rape them, maybe even ask for concessions and make them feel how hard it is out there, but if we sacrifice more and work more and not ask for anything we might be OK! Bottom line - if we make less then Delta people, doing the same business, we should be OK, right?
My airline pays me crap, but thats how it can buy yours!

3. Good way to demoralize the negotiation committee and almost every pilot on the property in light of the new contract.

4. Good way to bump the stock so Larry could cash out - most likely has been preplanned.

5. He'll get money somewhere esle and soon, just watch, but it will not make the news. Besides, still yound and yeah, maybe Burger King will want him?

HHmmm... the most ironic thing about your post is that one of the best leaders in recent CAL history left CAL to become the CEO of......??????

You guessed it...Burger King!!

A great many knowledgeable people credit him for CAL's turnaround of the early 90's despite the credit often given to Gordon.