Raising the stakes at the new United Continental …

On Friday, the much ballyhooed merger of UAL Corp. and Continental Airlines was consummated, creating the clumsily named United Continental Holdings. We’ll let others start the pool on how quickly the company will shed routes and raise prices at airports where it dominates travel. We’re curious how long it will take to winnow the ranks of upper management.

Because let’s face it, having so many co-pilots gets expensive, fast. We won’t go through all the details — the 8-K filed late on Friday by UAL (as they’re calling the newly combined company) lays it all out in the course of more than 3,600 words. But it’s clear the airline isn’t the only thing that got bigger — executive salaries did as well.

Jeffrey Smisek, who had just been made Continental’s CEO on January 1, will be pulling in a salary of $975,000 — up by two thirds from the $590,400 he made last year at Continental, and still 33% more than Larence Kellner, his predecessor there, judging from the company’s most recent proxy. Zane Rowe, Continental’s former CFO and now CFO of UAL, is seeing a salary increase to $750,000 from $383,908 last year. James Compton, who now seems to be “chief revenue officer” after serving as Continental’s chief marketing officer, also saw his salary nearly double to $750,000. Peter McDonald, the combined airline’s chief operations officer and one of the few holdovers from the old UAL’s top echelons (he was chief administrative officer there), didn’t do quite so well: His salary is going up just 11%, but from a pretty high base, as this year’s proxy shows — he’ll be making $850,000.

Target bonuses for all of them top $1 million. By contrast, Rowe and Compton took home cash incentive pay of $863,793 apiece last year. (Isn’t it nice when several executives are paid the same salary and then somehow manage to earn exactly equal performance bonuses?) McDonald, like all of the old UAL’s execs, got no cash incentive pay in 2009.

Smisek, meantime, has an annual bonus target of $1.46 million — plus another $8.4 million long-term incentive award, and a $4 million ” one-time merger integration incentive” based on yet-to-be-determined integration goals.

Then there’s Glenn Tilton, UAL’s former chief executive. Apparently, he actually retired from that position in order to assume the chairmanship of UAL (as they’re calling the newly combined company). He gave up his $850,000-a-year salary in the process, but in return, he’s getting a $600,000 annual cash retainer, and $150,000 in restricted stock a year. Plus he gets office space and “administrative support” for a decade after his stint as chairman ends, whenever that should be.

All that said, if the new UAL’s board decides to try to thin the ranks any time soon, it won’t be cheap: Cash severance alone for Rowe and Compton would come to $4.8 million apiece if they’re let go without cause over the next two years, plus health-care for 33 months. Firing Smisek would cost $6.7 million cash on the barrelhead, and potentially health benefits until he’s eligible for Medicare. (After two years, the cash severance costs would fall — to about $3.5 million for Rowe and Compton, and $4.9 million for Smisek, plus benefits for two years.)

Still, the goal of this airline merger is a more efficient, more profitable airline, right? We’ll see how it goes. After all, its predecessors have been such resounding successes.


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