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Longtime Execs to Retain Salaries

July 21, 2007

By Trebor Banstetter, Fort Worth Star-Telegram, Texas

Jul. 21–Herb Kelleher and Colleen Barrett will continue to collect hefty salaries from Southwest Airlines after they relinquish their executive positions, the airline disclosed in a regulatory filing Friday.

Kelleher, who co-founded the Dallas-based airline in 1967 and is executive chairman, said this week that he plans to step down from his position next year. Barrett, who has also been with the airline since its inception and is the company’s president, will also give up her position.

But both will remain employees of the company, and will enjoy compensation on par with their current salaries. Kelleher will receive a $400,000 annual salary and will be eligible for a cash bonus every year for the next six years. He will also receive 60,000 stock options.

Last year, Kelleher earned a $450,000 salary and received a $332,000 bonus.

Barrett will be paid $368,752 through next July, after she steps down. Her salary will increase to $400,000 for the next five years.

She will also be eligible for cash bonuses and will get 75,000 stock options.

Spokeswoman Beth Harbin said the continued compensation “is fair recognition of the more than 40 years that they’ve solely focused on this company, and given it absolutely everything they’ve had.”

Barrett said Thursday that she intends to work five days a week after giving up her president’s post, focusing primarily on customer service and employee relations. Kelleher said that he would also continue a busy schedule and wants to work on lobbying and governmental affairs.

Gary Kelly, the airline’s chief executive, will receive a small raise in his base salary, according to the filing. He will be paid $424,065 annually through 2011 and be eligible for bonuses. He was also awarded 150,000 options, one third of which will vest this month and in July 2008 and 2009.

Shares of Southwest stock (ticker: LUV) finished Friday at $16.35 per share, down 5 cents.

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tbanstetter@star-telegram.com Trebor Banstetter, 817-390-7064

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