Effect of Phil Trenery Still Being Felt

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Pinnacle Airlines Corp. insists the price of averting bankruptcy would be shared from the CEO on down to hourly workers tossing bags into the bellies of airplanes.

But handsome salaries paid to former managers have come under fire as the airline asks its unions to take 5 percent cuts in pay rates that are among the industry’s lowest.

Pinnacle’s top five managers garnered a combined $4.4 million in total compensation in 2010, nearly 35 percent of $12.7 million in net income.

Former CEO Phil Trenary and former chief operating officer Douglas Shockey left last year with combined separation deals exceeding $2.3 million.

Experts on corporate governance and executive pay disagreed on whether Pinnacle executives were overpaid.

“I think it’s way out of line from two perspectives,” said Eleanor Bloxham, CEO of The Value Alliance and the Corporate Governance Alliance.

“It was way out of line to what the company was able to generate (in profits), and it’s way out of line because apparently that wasn’t an anomaly in terms of performance. The company was moving into trouble.”

“Why would you reward at that level when it doesn’t sound like they were turning the company around?” asked Bloxham.

But Florida International University law professor Jerry W. Markham, who has written extensively on executive compensation, said, “For a large company like that, that kind of compensation, I think it sounds on the low side. I know the company was going downhill, but typically your higher executives are expensive, and sometimes you get a bad deal: You pay them and they don’t perform.”

Pinnacle hasn’t given details about the sacrifices it’s seeking from workers as part of a comprehensive program to reduce costs and increase revenues.

The flight attendants’ union says it has been asked to take 5 percent wage cuts by Monday to help Pinnacle avert a Chapter 11 bankruptcy filing. The United Steelworkers union said on its website that company officials intend to spread the cuts among union and non-union employees alike.

Asked if cuts would fall on top executives or perhaps extend to severance packages of former executives, Pinnacle spokesman Joe Williams responded, “As we said in our news release (Dec. 8, 2011), Pinnacle is seeking to work with both union and non-union employees to reduce labor costs in addition to seeking modifications in agreements with partners, vendors, lessors and debt holders. Discussions with multiple groups are in progress and until things are finalized, we cannot comment on the status.”

Analyst Bob McAdoo of Avondale Partners LLC wouldn’t comment on executive compensation but said Pinnacle has a tough road getting union concessions.

“I think it’s going to be difficult to get those kinds of things done. Unions don’t usually move very well in those kinds of situations.”

He said Pinnacle’s new management team has a solid reputation for bringing Frontier Airlines out of bankruptcy and has taken steps to rein in Pinnacle’s cost structure.

“I understand there have been quite a number of middle management and just under the top group, positions that have been eliminated.”

The team hasn’t been in place long enough for Pinnacle to report total compensation numbers, typically contained in an SEC filing by the company each spring.

President and CEO Sean Menke has a base salary of $425,000 and a bonus program that would yield another 60-120 percent of his salary as he meets performance goals.

Other base pay numbers include Edward M. Christie III, chief financial officer, $290,000; and John G. Spanjers, chief operating officer, $275,000.

For previous team members, total compensation more than tripled base salaries.

Bloxham said Pinnacle leaders would be well served to consider shouldering deeper cuts than rank-and-file workers.

“If you want to generate the maximum engagement with employees you do more than go the distance,” she said. “You go the extra mile. In an instance like this, it’s the kind of situation where the management team should take a 5 percent cut to its salary but also eliminate extra bonuses until things can get back on track.”

Public tolerance for perceived corporate excesses is low coming out of the national financial crisis.

Markham said, “In the financial crisis there was a big hue and cry about the executives getting big payout packages and their companies then taking huge hits. Laying off employees and asking people to take cuts, the optics on it are not good.”
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pilotlight said:
It is to quiet, I believe something is going down within a week
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Well it sounds like the company is working with the big puzzle pieces right now, negotiations are running a little long. Deadlines are going to slip, just like every project, be patient.
 
jynxyjoe said:
Well it sounds like the company is working with the big puzzle pieces right now, negotiations are running a little long. Deadlines are going to slip, just like every project, be patient.
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I'm hearing the same stuff.

If the big parts of the puzzle don't fit, then there is no need to negotiate with any of the employees anymore.
 
ctab5060X said:
I'm hearing the same stuff.

If the big parts of the puzzle don't fit, then there is no need to negotiate with any of the employees anymore.
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Exactly... however I think the big puzzle pieces will come together.

Otherwise, see you at the bread lines!
 
Latest I heard from a buddy in transition class right now is that out-of-seniority furloughs are a real possibility (ie company may try it if they get to bankruptcy.)

Can you abrogate the "seniority" section of the contract in bankruptcy? I thought that was inviolable...
 
cencal83406 said:
Latest I heard from a buddy in transition class right now is that out-of-seniority furloughs are a real possibility (ie company may try it if they get to bankruptcy.)
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Guess I should hurry up and play the airline pilot card while I still have it.
 
cencal83406 said:
Latest I heard from a buddy in transition class right now is that out-of-seniority furloughs are a real possibility (ie company may try it if they get to bankruptcy.)

Can you abrogate the "seniority" section of the contract in bankruptcy? I thought that was inviolable...
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What exactly does an out of seniority furlough mean? Wouldn't any furlough be seniority based or is this referring to furloughs actually "out of" seniority order, which I figured would be next to illegal per the contract.
 
cencal83406 said:
Latest I heard from a buddy in transition class right now is that out-of-seniority furloughs are a real possibility (ie company may try it if they get to bankruptcy.)

Can you abrogate the "seniority" section of the contract in bankruptcy? I thought that was inviolable...
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I doubt they could find a judge that would be willing to abrogate seniority rights. The sanctity of seniority is pretty well established. But I'm sure the company will use that threat during negotiations to give them more leverage.
 
v1valarob said:
I'm assuming most can figure out how the fences will make a very messed up furlough list.
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From what I understand the fences wont make a difference when it comes time to furlough. They will furlough in reverse seniority with out respect to fences. That then reduces the "available" pilots that are talked about in the award. Lets say the park all the 200's and they need to furlough 1000 pilots. The bottom 1000 will be furloughed whether they are pinnacle, mesaba, or colgan. The furlough would be first. Then after that they take from the available pilots and fill the vacancies created according to blochs award. If there aren't enough pilots to fill the fences after everything is said and done then it just goes in seniority order for the pilots who are left.
 
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