HONOLULU — A few top Hawaiian Airlines executives are out of a job now that Alaska Airlines has acquired Hawaii’s largest air carrier, but they are being well compensated with “golden parachute” benefits totaling close to $25 million.
The four highest officers at Hawaiian had special compensation agreements from 2016 that were conditioned upon any change in control of the airline and got triggered Wednesday by the completion of Alaska’s takeover.
Peter Ingram, 58, joined Hawaiian in 2005 and had been president and CEO since 2018. He is to receive the biggest payout, estimated at $13.2 million.
Shannon Okinaka and Aaron Alter also resigned from their positions at Hawaiian on Wednesday, according to the company.
Okinaka, 49, joined Hawaiian in 2005 and had been chief financial officer since 2015. Her departure compensation is estimated at $4.9 million, though she will be part of Alaska’s interim Honolulu leadership team as executive vice president of administration.
Alter, 67, joined Hawaiian as chief legal officer in 2016. His estimated departure compensation is $4.2 million.
One other top Hawaiian executive, Chief Operating Officer Jonathan Snook, also had a change-in-control agreement, also known as a golden parachute. His package was estimated at $5.4 million. However, a Hawaiian representative would not say whether Snook, who is 58 and joined Hawaiian in 2015 as COO, has left the company or will do so in the near future.
The change-in-control agreements at Hawaiian are triggered by departures due to the merger from three months before its effective date to 18 months afterward.
All the departure compensation estimates were disclosed in a Hawaiian proxy statement filed in April with the U.S. Securities and Exchange Commission. The payout figures are estimates based on the completion of the takeover happening Dec. 31, so the exact payouts could change a little.
Shareholders of Hawaiian approved the change-in-control package in 2016, and in February approved the acquisition by Alaska.
Local airline historian Peter Forman said the sums being paid to those who formerly were at the top of Hawaiian’s leadership may seem quite high, but he said the figures appear in line with industry norms.
“I’m not shocked,” he said. “That’s the way the airline business works. They (senior leaders) spent their whole career getting to one of the top spots, and this is their insurance program.”
Such golden parachutes linked to a change of control at companies with publicly owned stock are designed to reward top executives when the company they run gets acquired by another business whose executives often assume leadership positions at the combined entity.
In its proxy filing, Hawaiian said, “We believe that these compensation elements are reasonable, aligned with the market standard and are part of our executive remuneration program designed to incentivize executives to drive stockholder value creation and act in the best interest of stockholders, despite potential risk of a job loss.”
Forman said it’s not uncommon for the CEO of a major airline to never find a comparable job after being deposed in a merger or acquisition.
In one notable airline golden parachute arrangement not triggered by a merger or acquisition, the CEO of United Airlines in 2015 resigned amid a federal investigation of corruption allegations and received $29 million.
Currently, the CEO of Spirit AeroSystems, an airplane fuselage manufacturer, is slated to receive $28.5 million under a pending merger with Boeing.
Locally, one golden parachute payout was triggered by the 2004 acquisition of City Bank by Central Pacific Bank in which City Bank CEO Ronald Migita was to receive $10 million for being displaced in a hostile takeover opposed by City Bank leadership.
In 2015, the then-CEO of Hawaiian Electric Industries, Connie Lau, was slated to receive $11.7 million under a planned acquisition by Florida-based NextEra Energy Inc. But the state Public Utilities Commission rejected the deal. Lau retired in 2021.
The payouts for top Hawaiian executives are a mix of cash and stock.
The cash portion includes severance based on salary and bonus levels, plus a health insurance premium subsidy and an incentive payment. The executives covered by the payouts will not receive pensions, nonqualified deferred compensation or tax reimbursements in connection with the merger, according to the proxy filing.
For Ingram, the severance is 36 months of salary and 300% of a targeted annual bonus. For the other executives, the severance is 24 months of salary and 200% of their targeted annual bonus.
Based on Ingram’s $775,000 base salary, his salary severance is $2.33 million. Ingram’s bonus severance is $2.68 million. His insurance premium subsidy is $72,000 and his cash incentive is $2.25 million. The stock compensation is for prior stock awards that had not yet vested, and for Ingram totals $5.84 million.
