Former US Airways President Scott Kirby left as President of American Airlines yesterday to become President of United.
American sent out their press release about elevating Chief Operating Officer Robert Isom to President and explained that Scott Kirby was leaving immediately. It didn’t mention anything about United, and it didn’t say anything about spending more time with his family.
Instead, it explained the decision that American couldn’t retain all of their executive talent so Kirby was out.
As part of that process, and subsequent conversations regarding career expectations and the marketability of its executives, the Company concluded it would not be able to retain its existing executive team in their current roles for an extended period. As a result, the Board chose to act proactively to establish a team and structure that will best serve American for the longer-term future.
American’s press release clearly states that they acted to make this decision.
Though Wall Street isn’t happy, Chairman and CEO Doug Parker isn’t going anywhere. After leading America West out of the wilderness to take over US Airways as it exited it second bankruptcy, and trying to merge it with United, then Delta, then United again he finally managed to take over American Airlines and gets to run the largest airline in the world (until Delta catches up, and it’s closer than you think).
Robert Isom has been COO since 2007. They decided to keep Isom and not Kirby.
Brian Sumers writes, “According to a source familiar with the matter, Kirby had been told he would need to leave American, and that Isom would replace him.”
Kirby walks away with about $13 million and keeps lifetime travel privileges, something he’ll obtain from United Airlines as well.
- $3.85 million representing 2 years’ base salary plus his short-term bonus target
- $9.37 million based on the current market value of 259,097 restricted stock units expected to vest in the future which have been accelerated.
(i) 157,456 restricted stock units held by Executive that otherwise would have vested based solely on continued service through April 2017 or April 2018, as the case may be, (ii) 52,775 restricted stock units held by Executive that would have vested in April 2018 based on Company performance achievement of 96%, which constitutes actual performance through June 30, 2016, and continued service through April 2018 and (iii) 48,866 restricted stock units held by Executive that would have vested in April 2019 based on Company performance achievement of 87%, which constitutes actual performance through June 30, 2016.
- He gets to keep lifetime travel privileges, but will be liable for taxes on the benefit.
Executive previously vested into lifetime travel privileges that include unlimited reserved travel in any class of service for Executive and Executive’s immediate family, including eligible dependent children, for personal purposes, access to Admirals Club travel lounges and 12 free round-trip passes, or 24 free one-way passes, each year for reserved travel for non-eligible family members and friends
If Kirby simply quit to take the (lateral) United job, he wouldn’t be getting two years’ severance and accelerated vesting at this level.
Now, maybe the need to look at the extent to which they could retain all of their management talent is American’s corporate-speak for Kirby asking for a timeframe in which he’d become CEO with Parker becoming non-executive Chairman, and the gambit ending poorly for him.
After more than 20 years with America West, US Airways and American, he’s out at American. He’s become a wealthy man in exchange for his efforts, walks away with more money (though not as much as it cost United to rid itself of Smisek), and he gets to take a similar position with United Airlines which he’ll be serving under a CEO without previous airline experience who has had major health issues since coming into the role. Scott Kirby winds up just fine.