Steenland's payout after NWA-Delta merger: $18.3 million

Douglas Steenland, who is likely to be the last CEO of Northwest Airlines, will receive an $18.3 million payout if the merger with Delta Air Lines is completed by the end of 2008, according to documents filed Tuesday with the Securities and Exchange Commission.

The severance package includes a $3.3 million cash payment if Steenland loses his job through the combination of executive ranks by Jan. 1, 2009; $6.2 million in pension benefits; $8.1 million in restricted stock; $340,000 in medical and dental coverage continuation; and $398,947 in airline travel benefits. It's been no secret that Steenland will leave the airline once the deal is completed, although he will become a member of Delta's board of directors.

Consummation of the merger, which still needs federal approval, will end Northwest's 82-year red tail legacy of commercial aviation in the Upper Midwest.

The Northwest proxy statement also revealed that total compensation for Steenland in 2007 was $6.5 million, up from $2.6 million the previous year, based in part on the airline's performance against its peers and its emergence from bankruptcy. Steenland's 2007 compensation places him 17th on the Star Tribune's preliminary list of the state's 100 highest-paid CEOs.

The Star Tribune calculates total compensation as salary, bonus and other compensation, plus the value realized from the exercise of stock options and the vesting of stock awards. It does not include present value calculations of stock options and stock awards.

While Steenland's 2007 base salary only rose slightly to $531,919 from $516,384, he received $3.4 million from vested stock options and $2.2 million in incentive compensation.

"Northwest has its third-most-profitable year in the company's history," said Mike Becker, senior vice president for human resources and labor relations, noting that Northwest's employees received $125 million in profit-sharing and success-sharing payouts. Employees, however, took significant pay cuts as the airline restructured labor contracts.

Package criticized

But the contrast between profitability in 2007 and the sudden urge to merge with Delta was confusing to some observers.

"There seems to be a disconnect here," said Alfred Marcus, professor of strategic management at the University of Minnesota's Carlson School of Management. "On the one hand they're saying 'If we don't merge we're dead,' and on the other hand they're handing out performance incentives."

Marcus called the $18.3 million buyout "outrageous" and said it was a disservice to other Northwest employees who are anxious about their future employment.

"It's like someone is flying in first class and others are being treated like luggage," Marcus said.

"When he is successful [in gaining regulatory approval for the merger] it will result in him working himself out of a job, with the double whammy of a one-year no-compete clause," Lee said.

But Rep. Joe Atkins, DFL-Inver Grove Heights, said Steenland's severance package doesn't jibe with the airline industry's economics. "They keep talking about how their fuel costs are out of control. Maybe he should help pick up the tab," Atkins said.

Atkins is chairman of the House Commerce and Labor Committee, which has conducted two hearings on the proposed merger and is prepared to hold a third.

"I want to understand how they'll make the economics of this work," Atkins said. "It looks like it will either be higher ticket prices or cut costs through fewer and lower-paid employees. If that's all the merger stands for, I ain't buying."

Even if the merger is delayed until 2009, Steenland will get a hefty package, but the value could vary based on the price of Northwest stock at the time. The current plan is based on a stock price of $7.47 as of April 22.