New USAir leaders get higher pay Compensation exceeds successors'

salaries may affect talks with unions

April 11, 1996|By BLOOMBERG BUSINESS NEWS

ARLINGTON, Va. -- USAir Group Inc.'s newly appointed management team, led by airline veteran Stephen Wolf, received higher salaries than its predecessors as well as 2.37 million stock options and shares of restricted stock.

Mr. Wolf, the former chairman and chief executive of United Airlines' parent UAL Corp., was named to those same posts at USAir on Jan. 16. Three weeks later, Mr. Wolf reassembled the management team he'd had at UAL, naming Rakesh Gangwal as president and chief operating officer and Lawrence Nagin as executive vice president of corporate affairs and general counsel.

To take the helm of the fifth-largest U.S. airline -- and the largest operating at Baltimore-Washington International Airport -- Mr. Wolf received 1.3 million stock options, of which 500,000 could be exercised at $12.1875 on the day he started, according to the company's annual proxy statement filed with the Securities and Exchange Commission. USAir stock closed at $12.625 on Jan. 16 and hasn't closed lower than $14.50. It closed at $18.625 yesterday.

He also got 325,000 shares of restricted stock that can be exercised each January for the next four years. His base salary is $500,000 a year, and he is eligible for an annual bonus that totals 50 percent of his salary if performance targets are met. If the targets are surpassed, his bonus can equal his salary.

Mr. Gangwal, who was lured away from Air France to replace Frank Salizzoni, got a $400,000 annual salary and an annuity that has an after-tax value of $1 million, the proxy said. He received 850,000 stock options that can be exercised $14.875, of which 170,000 are vested, and 250,000 restricted shares, of which 50,000 can be immediately exercised.

Mr. Nagin, whose annual salary is $340,000, received a $275,000 sign-on bonus, 225,000 options and 50,000 shares of restricted stock.

Twenty percent of the options, which can be exercised at $14.875, were vested immediately and the rest will become cashable over the next four years.

The SEC filing notes that while the stock options are subject to shareholder approval, the executives will receive equivalent sums if stockholders don't give their blessing. Relocation assistance also was provided.

"These packages are certainly very generous," said Smith Barney analyst Helane Becker. "It seems they are paying for reputation and the promise of results," she said, rather than actual performance.

Mr. Wolf's predecessor, Seth Schofield, worked for USAir for 38 years before stepping down last September. His salary in 1995 totaled $417,908 and his bonus was $212,500. He didn't receive any restricted stock and had 390,569 options at the end of 1995.

Mr. Schofield did get a six-month consulting agreement based on his salary as chairman and CEO and $1.72 million upon retirement from the company.

Both Mr. Gangwal and Mr. Nagin's bonuses are tied to performance goals and will be 50 percent and 35 percent, respectively, of their annual salaries if the goals are reached. If goals are exceeded, they would receive large bonuses.

"These salaries, if anything, are modest for this industry or any industry when you are looking at a $7 billion company," said Rick Weintraub, USAir's spokesman. "They have tied their well being to all shareholders and the well being of the company."

Mr. Gangwal and Mr. Nagin also received supplemental retirement agreements under which they receive pension benefits for more years than they actually work.

Mr. Gangwal will receive credit for five years for each year he actually works up through his fifth year of employment at USAir.

Every year Mr. Nagin works at USAir will bring him four years of pension benefits up to his fifth year at the carrier. After the fifth year, pension benefits will be based on actual time worked, with the maximum years of credited service being 30 years.

Smith Barney's Ms. Becker said the generous compensation packages may make U.S. Air's labor negotiations more difficult. The company plans to step up talks with its labor unions over the next two years to lower its highest-in-the-industry costs.

"This makes it very difficult to ask your unions to take a pay cut," she said.

Pub Date: 4/11/96

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