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Steenland's payout after NWA-Delta merger: $18.3 million

<= IMG title=3D""=20 height=3D297 alt=3D""=20 src=3D"http://stmedia.startribune.com/images/440*297/1nwa0214.jpg" = width=3D440=20 border=3D0>

Glen Stubbe, Star Tribune

Northwest Airlines CEO Doug Steenland =

If the Delta merger takes place this year and NWA = disappears=20 from the sky, Doug Steenland could land in style with a pay and = severance=20 package worth $18.3 million.

By DAVID PHELPS and PATRICK = KENNEDY,=20 Star Tribune

Last update: April 29, 2008 - 9:35 PM

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Douglas Steenland, who is likely to be the last CEO of Northwest = Airlines,=20 will receive an $18.3 million payout if the merger with Delta Air Lines = is=20 completed by the end of 2008, according to documents filed Tuesday with = the=20 Securities and Exchange Commission.

The severance package includes a $3.3 million cash payment if = Steenland loses=20 his job through the combination of executive ranks by Jan. 1, 2009; $6.2 = million=20 in pension benefits; $8.1 million in restricted stock; $340,000 in = medical and=20 dental coverage continuation; and $398,947 in airline travel benefits. = It's been=20 no secret that Steenland will leave the airline once the deal is = completed,=20 although he will become a member of Delta's board of directors.

Consummation of the merger, which still needs federal approval, will = end=20 Northwest's 82-year red tail legacy of commercial aviation in the Upper = Midwest.=20

The Northwest proxy statement also revealed that total compensation = for=20 Steenland in 2007 was $6.5 million, up from $2.6 million the previous = year,=20 based in part on the airline's performance against its peers and its = emergence=20 from bankruptcy. Steenland's 2007 compensation places him 17th on the = Star=20 Tribune's preliminary list of the state's 100 highest-paid CEOs.

The Star Tribune calculates total compensation as salary, bonus and = other=20 compensation, plus the value realized from the exercise of stock options = and the=20 vesting of stock awards. It does not include present value calculations = of stock=20 options and stock awards.

While Steenland's 2007 base salary only rose slightly to $531,919 = from=20 $516,384, he received $3.4 million from vested stock options and $2.2 = million in=20 incentive compensation.

"Northwest has its third-most-profitable year in the company's = history," said=20 Mike Becker, senior vice president for human resources and labor = relations,=20 noting that Northwest's employees received $125 million in = profit-sharing and=20 success-sharing payouts. Employees, however, took significant pay cuts = as the=20 airline restructured labor contracts.

Northwest's pretax profits last year were $764 million, up 154 = percent from=20 2006.

Package criticized

But the contrast between profitability in 2007 and the sudden urge to = merge=20 with Delta was confusing to some observers.

"There seems to be a disconnect here," said Alfred Marcus, professor = of=20 strategic management at the University of Minnesota's Carlson School of=20 Management. "On the one hand they're saying 'If we don't merge we're = dead,' and=20 on the other hand they're handing out performance incentives."

Marcus called the $18.3 million buyout "outrageous" and said it was a = disservice to other Northwest employees who are anxious about their = future=20 employment.

"It's like someone is flying in first class and others are being = treated like=20 luggage," Marcus said.

Airline spokeswoman Tammy Lee said one-third of the buyout package = represents=20 pension benefits that Steenland earned over 17 years at Northwest and = another=20 third is the acceleration of vesting for stock already awarded to = Steenland for=20 past service.

"When he is successful [in gaining regulatory approval for the = merger] it=20 will result in him working himself out of a job, with the double whammy = of a=20 one-year no-compete clause," Lee said.

But Rep. Joe Atkins, DFL-Inver Grove Heights, said Steenland's = severance=20 package doesn't jibe with the airline industry's economics. "They keep = talking=20 about how their fuel costs are out of control. Maybe he should help pick = up the=20 tab," Atkins said.

Atkins is chairman of the House Commerce and Labor Committee, which = has=20 conducted two hearings on the proposed merger and is prepared to hold a=20 third.

"I want to understand how they'll make the economics of this work," = Atkins=20 said. "It looks like it will either be higher ticket prices or cut costs = through=20 fewer and lower-paid employees. If that's all the merger stands for, I = ain't=20 buying."

Even if the merger is delayed until 2009, Steenland will get a hefty = package,=20 but the value could vary based on the price of Northwest stock at the = time. The=20 current plan is based on a stock price of $7.47 as of April 22.

Steenland's counterpart at Delta, Richard Anderson, took home total=20 compensation of $770,000 for the four months in 2007 he spent as the=20 Atlanta-based carrier's new CEO. Anderson has agreed to waive any = enhanced or=20 accelerated compensation he would get from the proposed merger, but he = would=20 will become CEO of the combined airline.

David Phelps =E2=80=A2 dphelps@startribune.com P. = Kennedy =E2=80=A2=20 pkennedy@startribune.com
=

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