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May 26, 1999

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Gangwal, Wolf, Challenged By US Airways Trade Unions, Decide To Stay Out Of New Incentive Pay Plan

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Arthur J Pais

Rakesh Gangwal US Airways Group Inc Chairman Stephen Wolf said last week that he and Chief Executive Officer Rakesh Gangwal will not participate in an incentive pay plan that shareholders of the UScarrier approved on May 19.

The Association of Flight Attendants and other unions objected to the plan under which executives can receive cash payments for as much as five times their base salaries. More than 90 per cent of shareholders approved the proposal at the annual meeting in Charlotte, North Carolina.

Wolf said the company's philosophy is to offer salaries below those of competitors but then to offer incentives based upon performance

But he and Gangwal will "not accept any award under the plan." Wolf made $ 16.5 million last year including stock grants and Gangwal made $ 15.1 million, according to Bloomberg News. It is not clear how much more they would have made if they were to avail of the new incentive.

"The last thing I want to see is anything of a divisive nature impact the US Airways family after we have collectively achieved so much," Wolf said after the vote, referring to concerns raised by union representatives attending the meeting. He said he and Gangwal had discussed the issue, and while they felt it would be essential to the company's ability to attract top managers, they would not take payments under it.

The fifth largest passenger airline in the world, with almost 400 aircraft, US Airways operates more than 2,100 flights daily, carrying an average of more than 155,000 passengers. US Airways Shuttle, Inc, wholly owned by US Airways, flies 15 daily roundtrips between Boston and LaGuardia, and 17 daily roundtrips between LaGuardia and the Ronald Reagan Washington National Airport.

US Airways Express, the brand name for US Airways's regional aircraft operations, is made up of 9 regional air carriers that fly to smaller communities throughout the US Airways system. With more than 2,600 daily flights, US Airways Express is in itself one of the world's largest airline systems. The regional air crafts carry over 100,000 passengers daily.

About a decade ago, USAir as the company was known as was in deep financial trouble. Under the leadership of Wolf and Gangwal, who took over the operations about four years ago, the airline has become profitable. But complaints from the labor unions have also increased.

The complaints about executive pay came as US Airways is involved in negotiations with its flight attendants, whose contract expired more than two years ago. Wolf and Gangwal want to avoid a situation that could lead to a strike. Wolf said a strike would "not be in the company's best interest ... arguably, even worse, would be to end up with an uncompetitive cost structure.''

The new plan is intended to "assist our ability to hire and retain qualified officers,'' not to enrich himself or Gangwal, Wolf said after the meeting.

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