Follow me through this timeline here. Yesterday afternoon there was a bunch of noise about Scott Kirby, the President of American Airlines, apparently jumping ship to United Airlines.
That was pretty shocking news given that Scott has been by Doug Parker’s side for over 20 years in the airline industry. I wasn’t the only one talking about it. There were a bunch of other bloggers writing about it. I single out Wandering Aramean and View From The Wing’s posts because I had discussions with both of them while the whole thing was evolving yesterday.
As a side note, I was surprised how much traffic my post got yesterday. These sorts of things don’t generally get nearly as much traffic as posts about how to earn miles and points.
A commenter on my blog yesterday, rjb, was adamant that Kirby was fired. I was equally adamant that wasn’t the case. It’s pretty clear now that I was wrong.
The full text of Kirby’s severance agreement are posted on the SEC’s website. You don’t get $4MM in severance and $9MM in stock when you quit your job.
Why Kirby? Why Now?
By all accounts, Kirby has been a loyal company guy for quite some time. He consistently worked to make more money for whichever airline’s name was on the tail of the planes he was responsible for.
Was this a power play, where he went to Doug and the Board for long-term certainty, playing his hand too strongly? Did Bob Isom present an opportunity to the Board that was better than keeping Kirby?
Kirby appears to be a sharp, opinionated guy. He’s thoughtful on American Airlines quarterly earnings conference calls, but has strong opinions that he’s stuck with for quite some time. At times, those aren’t in concert with things the analysts find important. But, seldom have I heard him representing a position that’s different from Doug’s.
And yet, a large severance agreement paints the picture that he somehow “lost” a battle in the boardroom. This likely didn’t happen overnight. It probably took time to negotiate his role with United Airlines, and I don’t think him seeking a job at United lead to his termination. He almost certainly had a non-compete, making this type of jump unlikely in the first place. A non-compete (in some form) was likely part of the negotiation of a very large severance package. That seems to indicate that Kirby was negotiating from a position of strength, or that the split was very amicable. $13 million should do a lot to cushion the blow, along with the relative certainty that he’s next in line to run United when Oscar Munoz steps down.
But, the geeky awesome part is that Scott Kirby now (in theory) has lifetime travel privileges on two major airlines. Here’s the text of his American privileges:
Travel Privileges. 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 (collectively, “Travel Privileges”). The Travel Privileges shall commence from the first day of the seventh month following the Termination Date (the “Commencement Date”), provided, that, on, or as soon as administratively practicable after, the Commencement Date, Executive shall be reimbursed for any expenses incurred in accordance with Company policies from the Termination Date through the Commencement Date that would have otherwise constituted Travel Privileges. All Travel Privileges are subject to the Company’s non-revenue positive space travel policies of general application, including those outlined in the TripBook or applicable policy guide, that are now in effect and as they may be amended from time to time. A copy of the current policy covering Travel Privileges entitled American Airlines Group Positive Space Leisure Travel Program for Officers of American Airlines has been delivered to Executive herewith. For the avoidance of doubt and consistent with past practice, Executive’s right to Travel Privileges shall be subject to all applicable taxes, and the Company will not provide any tax gross-up payments to Executive for taxes payable on such travels. The amount of Travel Privileges Executive uses in one year will not affect the amount of travel privileges Executive is entitled to use in any other year. The right to Travel Privileges is not subject to liquidation, cash-out or exchange for any other taxable or nontaxable benefit.
He’s surely getting travel benefits from United, and it’s unlikely that he leaves without retaining those benefits in some form. That means Scott Kirby is likely to retire with free travel for him and his family on 2 of the biggest airlines in the world. And, those aren’t, ahem, “Basic Economy” benefits. Those seats are likely to be at the pointy end of the plane.
That doesn’t suck.
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