NWA's Steenland likely to leave airline upon merger with Delta

Northwest Airlines CEO Doug Steenland is not expected to hold an executive post in the combined company if Northwest merges with Delta Air Lines, people familiar with the merger talks said Wednesday.

Steenland, 56, who led Northwest through a 21-month bankruptcy, could exit Northwest with about $19 million in total compensation, under his employment contract.

Steenland has been one of Minnesota's most visible business leaders as he steered the 82-year-old carrier through financial turmoil and watched his conflicts with labor play out in a public arena.

If he exits Northwest at the time of a merger, the compensation he'd receive would come from multiple sources. Steenland would be eligible for about $7.8 million in severance payments and benefits, according to Northwest.

In his 17 1/2 years of employment at Northwest, he also has accrued $4.1 million in pension benefits. In addition, Steenland would be holding restricted stock worth an estimated $7.2 million as of January, assuming a Delta-Northwest merger won approval from the Justice Department by then.

Selecting a management team for the merged airline has proved to be a difficult issue during several weeks of discussions.

Steenland was at the helm of Northwest at perhaps the most-tumultuous period in its history. In September 2005, just a month after a bitter mechanics strike began, Northwest filed for Chapter 11 on the same day as Delta. Both slashed operating costs and debt in bankruptcy court in New York.

Now, both carriers have been building their international business as their path to a more financially-healthy future.

If the federal government allows Delta and Northwest to merge, Delta CEO Richard Anderson, 52, will lead the combined carrier. Anderson was Northwest's top executive from 2001 to 2004. On Wednesday, Delta disclosed that Anderson has decided to waive about $15 million that he could receive at the time of a merger.

Anderson was awarded restricted stock, stock options and performance shares at Delta estimated to be worth $15 million when he left UnitedHealth Group in August to lead Delta. Those awards were set to vest over a period of years, but Anderson could have elected to redeem them at the time of a merger.

Instead, he informed his board of directors Feb. 7 that he was willing to waive receipt of that compensation when a merger occurs and his board accepted the offer.

Anderson's gesture might help him build support for a merger among employees and members of Congress, some of whom might otherwise see a merger deal as a means of personal enrichment.

"Richard's act reflects the culture of the airline, as well as his commitment to the people of Delta, acting in the best long-term interests of the company," said Delta spokesman Anthony Black.

Delta reported Anderson's decision about merger-related compensation in a regulatory filing Wednesday .

Tammy Lee, a Northwest spokeswoman, said Steenland was willing to take the same pledge in the event of a merger, though the offer likely is moot if he leaves the airline as a result of a merger.

"If Mr. Steenland remains with the merged airline in an executive capacity, he will waive any acceleration of compensation that would be triggered by the merger, including the acceleration of vesting dates for restricted stock and stock options," Lee said.

Several people who have been briefed on the merger talks agree that Steenland will not remain as an executive with the merged carrier.

Jerry Glass, an aviation consultant and former US Airways executive, said he understands why Steenland would be stepping aside in a Delta-led deal.

"Generally speaking, you really can only have one true CEO at a merged airline," Glass said. "Some companies have tried the concept of co-CEOs and it doesn't work." Former US Airways CEO Bruce Lakefield assumed the role of vice chairman of the board when his carrier merged with America West.

If a Delta-Northwest deal is announced this month, the two carriers would still be many months away from consummating a merger, because a deal would be subject to federal review.

"During that period of time as they remain separate, Doug will continue to run Northwest and Richard will continue to run Delta," Glass said.

The two have worked closely together from their early days in the legal department at Northwest, and in early 2001 when Anderson was named Northwest's CEO, Steenland was chosen as president.

Both also took pay cuts at Northwest when they were asking labor unions for concessions. Anderson's total compensation dropped from $2.8 million in 2002 to $2.4 million in 2003, and Steenland's compensation fell by $300,000. However, some Northwest employees ultimately took pay cuts of up to 40 percent, and the airline's executives have been roundly criticized by employees and union leaders who argued that the executives demanded deeper concessions than were needed to save the airline.

Anderson and Steenland asked Northwest's labor unions for concessions in 2003, but the airline ultimately cut labor costs by $1.4 billion on Steenland's watch and achieved that goal in 2006.

During his tenure, Steenland focused on building alliances with other carriers, and he was heavily involved in developing Northwest's successful joint venture with KLM Royal Dutch Airlines.

Air France-KLM may make a financial investment in a Delta-Northwest merger.

Also Wednesday, Gov. Tim Pawlenty, Attorney General Lori Swanson and the Minnesota House and Senate majority and minority leaders met to discuss the potential merger.

Pawlenty spokesman Brian McClung said the governor briefed the group on his discussions with Delta and Northwest executives and members of Congress. "They also discussed strategies to maintain the [Twin Cities] hub and the maximum number of airline jobs possible in the event of a merger," McClung said.

Delta's Anderson said in November that he would only enter into a merger that preserves the Delta name and retains the Atlanta headquarters.

Northwest employs about 12,000 people in Minnesota, with 1,050 in its Eagan headquarters.

Staff writer John Oslund contributed to this report. Liz Fedor • 612-673-7709