Are Big Airlines' CEOs Overpaid Or Underpaid?

Forbes

6 days ago

Scott Kirby, United Airlines' CEO (Photo by Hyoung Chang/The Denver Post)
High and wildly fluctuating fuel prices. Enormously expensive assets that must be bought and maintained in near-perfect condition. Tens of thousands of (mostly) well-paid employees and their powerful, sometimes contentious unions. Extraordinarily powerful, often opinionated and sometimes down-right pushy shareholders and other financial backers. Uptight domestic and foreign regulators and a constantly changing cast of politicians whose motivations rarely support the idea of making big profits.
Given all that, one must ask whether it's worth it to even want to be the chief executive of a U.S. airline?
Well, at least it is for the CEOs of the nation's four largest carriers who, according to reports filed by the carriers with the Securities & Exchange Commission, earned more than $87.5 million, combined, for their troubles in 2024. That number includes the actual value and/or estimated current value of shares and options to buy shares, plus other forms of non-salary compensation, that they received last year.
So, are they paid too much?The answer to that question depends on one's ethical, moral, philosophical, political or maybe even theological views regarding the value of an individual's work - or on one's view of the relative fairness of a CEO's compensation vis-à-vis what their average employee earns. But in any practical evaluation there's no disputing that running a big airline, however tough a job that might be, is a sweet gig financially.
TOP PAID AIRLINE BOSSES
And the sweetest gig, at least in 2024, was Scott Kirby's at United Airlines. His total pay (including bonuses, the actual and/or estimated value of shares and options granted to him last year, and all other non-salary compensation) was just over $33.9 million. That was a big jump from 2023, when Kirby's total take was a mere $18.6 million.
As calculated by AirlineGeeks.com, an airlines-focused news website, that produced a CEO-to-worker ratio of 380-to-1. That means Kirby earned $380 for every $1 earned by the average United employee in 2024. Their average pay was $89,197.
Ed Bastian, Delta Airlines COE (Photo by: Nathan Congleton/NBC via Getty Images)
Ed Bastian at Delta last year took home just over $27.1 million, down from $34. 2 million in 2023. AirlineGeeks.com calculated the Delta's CEO-to-worker pay ratio to be 258-to-1 in 2024, based on Delta's average employee pay of $105,269.
American Airlines boss Robert Isom's pay in 2024 was considerably lower at $15.6 million. But in 2023 he took home more than $31.4 million. His 2024 pay ratio vs. the average American employee's pay ($81,744) was 191-to-1.
Bob Jordan, who became Southwest's CEO early 2022, received total compensation of $10.6 million in 2024, which resulted in a ratio of $115.5-to-1 vs. the average Southwest worker pay of $91,442. That, too, is per AirlineGeeks.com. In 2023, Jordan's first full year as CEO, his total compensation was $9.3 million.
However one looks at it, all four of those airline chiefs are well-compensated, as are pretty much all airline CEOs around the world.
DO SHAKY FINANCIAL TRACK RECORDS JUSTIFY BIG CEO PAY?
But according to FORBES and FORTUNE rankings of corporate leaders' compensation a strong argument can be made that the top bosses at the three biggest U.S. airlines – Delta, United and American – are being paid more than their companies' annual revenues warrant.
Of the 100 biggest publicly owned companies in America based on revenues, Delta's $54 billion in 2024 revenues ranks 70th, while United ($53.7 billion) ranks 83rd and American ($52.8 billion) comes in No. 86. Southwest's $27.5 billion does place it among the top 100 U.S. companies by revenue.
Yet the CEOs of the nation's three largest airlines all rank among the top 50 U.S. CEOs in compensation. Delta's Bastian's $34.2 million was the 31st highest CEO pay in America in 2023. That's according to Equilar, a corporate data tracking and analysis firm. Not all U.S. companies have filed their 2024 CEO compensation data yet, so 2023 is the latest year for which such data is complete.
Robert Isom, American Airlines CEO. (Photo by Nathan Posner/Anadolu via Getty Images)
Meanwhile, Isom's $31.4 million in compensation from American in 2023 was good enough to land him at No. 40 on that list. And though Kirby's 2023 compensation of $18.6 million from United wasn't enough to place his name on that same list, his $33.9 million earned in 2024 would have been enough to rank 32nd on the 2023 list. It also likely will put him at or near No. 32 on the 2024 list from Equilar once all companies have reported their 2024 CEO compensation data.
Furthermore, airlines today – as they have historically – generally represent a poor investment for those who invest in their stock because of their weak-to-non-existent returns on investment over time. Thus, the case can be aruged that these airline bosses shouldn't be quite so handsomely rewarded, especially considering their companies have failed over the last 65 years to fix their financially ramshackle houses.
Conversely, given the many complex financial, legal, regulatory, technical, labor, economic, macro-economic and political challenges they face just as compelling an argument can be made in the opposite direction: that the CEOs of America's biggest airlines are compensated appropriately - or maybe even that they're not paid enough. The gist of that argument is that without the great work of those CEOs and their management teams their respective airlines' would be in much worse shape, financially.
MIND THE PAY GAP
Regardless of what side one takes in that debate, analysis of the gap between what the big carriers' CEOs earn annually and what the average employees at their respective companies earn can be used to support both sides of the overpaid/underpaid argument.
Compared with the CEO-to-average employee ratios of the 100 highest-paid CEOs in the nation, Bastian's 258-to-1 ratio at Delta, and Isom's 191-to-1 ratio at American in 2024 are middle-of-the-pack numbers. Kirby's 380-to-1 ratio is slightly elevated over the Delta and American pay gaps, but certainly not extreme vis-à-vis most other large companies' pay gaps. (Jordan's 115.5-to-1 ratio at Southwest is way below the average among the top 100 paid CEOs in the U.S.)
The highest CEO-to-average worker compensation ratio in 2023, according to Equilar, involved Brian Niccol, CEO at Starbucks. That ratio (impacted heavily by the presence of a huge percentage of lower-paid part time baristas in the employee population) was an eye-popping 6,666-to-1. More than a dozen other CEOS on the Top 100 Pay Gap list had ratios above 500-to-1. Meanwhile, the lowest such ratio was just 74-to-1 at data storage giant Snowflake Inc., where the CEO, Frank Slootman, earned $21.2 million in total compensation. But the large majority of companies and CEOs on the list had boss-to-worker pay gap ratios in the 200- to 500-to-1 range.
On that basis, the case that airline CEOs are paid about right, or maybe not even enough is strengthened.
Still, just as lots of part time baristas on the payroll inflates Starbucks' CEO-to-worker pay ratio, airlines' CEO-to-average worker pay ratios are skewed in the opposite direction by the thousands of highly-paid pilots on their payrolls. U.S. News and World Report currently ranks piloting as the highest-paying non-medical profession in terms of total annual compensation.
Bob Jordan, Southwest Airlines CEO (Photo by Sam Hodde for The Washington Post via Getty Images)
Kit Darby, an airline labor analyst and consultant to piloting job-seekers at Kit Darby Aviation Consulting says that senior captains of the largest planes in each of the Big Four carriers' fleets 2024 earned on average about $364,500 at Delta, $372,850 at American, $384,000 at United and $386,700 at Southwest.
And Darby, himself a retired airline captain, notes that even the lowest-paid, newly hired aviators working as co-pilots on their major carriers' smallest planes earn way more than the average U.S. worker's pay (which is just over $62,000 a year). The most junior pilot at American earns about $115,600 a year; $117,800 at Delta; $123,800 at United; and $141,900 at Southwest.
Even at such relatively low, entry-level payrates, new pilots still help to narrow the CEO-to-average worker pay gap at the big airlines. And the much higher pay of senior captains – plus the handsome compensation earned by mid-career pilots – greatly narrows that pay gap. Indeed, pilot pay at the big airlines effectively smothers the impact that the carriers' tens of thousands of lower-paid workers like flight attendants, airport ground workers and office employees have on the CEO-to-worker pay gaps at their respective carriers.
In other words, if pilots weren't so numerous, and if they didn't earn such high wages, airline CEO-to-average worker pay gaps would be significantly larger. And that suggests, again, that maybe airlines' top executives are overpaid after all.