By JASON M. BRESLOW – MEDILL NEWS SERVICE
Despite its new “Happy Jetting” campaign, there has been little worth celebrating at JetBlue Airways Corp. [[JBLU]] recently.
In the last week alone, JetBlue announced a $7 million loss in the second quarter and saw its debt downgraded by Moody’s Investment Services. Amid such struggles, chief executive officer David Barger has, in a rare move for the corporate world, decided to take a 50 percent pay cut.
The reduction will put Barger’s salary at an annual rate of $250,000 through December 31. Last year, the 50-year-old Barger earned a base salary of $200,000.
In a filing with the Securities and Exchange Commission, JetBlue said Barger was taking the cut “in recognition of the challenges faced by the Company and its employees in the current industry environment.”
Chief among those challenges is the soaring cost of jet fuel, which has shot up approximately 70 percent over the past 12 months. At JetBlue, fuel costs increased 64 percent in the second quarter, to $370 million from $226 million. The fuel pressures have pushed the airline to announce plans to cut capacity by as much as 9 percent in the fourth quarter, and to eliminate a yet to be determined number of jobs. JetBlue is also deferring delivery of 10 new aircraft.
With the move, Barger becomes at least the third airline CEO to take a pay cut this year after Larry Kellner, chief executive officer of Continental Airlines Inc. [[CAL]], and Bob Fornaro, who heads AirTran Holdings Inc. [[AAI]].
While such measures may not necessarily go very far in helping a company reverse its losses, they carry strong symbolic value among employees.
Here in Chicago, Barger’s move raises the question of whether Glenn F. Tilton, chief executive officer of United Airlines parent UAL Corp.[[UAUA]], should be the next major airline boss to volunteer for a pay cut. United posted big losses in the first two quarters of this year, and announced plans to cut capacity and eliminate as many as 1,600 positions.
In 2007, Tilton had a salary of $850,000 but earned $10 million in total compensation. In 2006, Tilton’s salary was $687,000 but he earned nearly $24 million total.
“We are hoping Mr. Tilton takes a cue from these other airline CEOs who don’t treat their employees as disposable commodities and for once demonstrate leadership by sharing in the sacrifices that come with economic downturns in our industry,” said David Kelly, a spokesman for the United Chapter of the Airline Pilots Association.
Officials from United were not available for comment.
What do you think? Should CEO’s take pay cuts when their companies are struggling? Post your thoughts in our comments section below.