In an 8-K filed with the SEC, JetBlue (JBLU) announced that CEO David Barger "voluntarily amended" his employment agreement to "reduce his base salary by fifty percent, from $500,000 per year to $250,000 per year, in recognition of the challenges faced by the Company and its employees in the current industry environment. The amendment will be effective for the period of July 1, 2008 through December 31, 2008 only."

Whenever I hear about grand gestures like this, I’m immediately skeptical: halving the base salary sounds impressive but, at many companies, the CEO’s pay is so lopsided toward guaranteed bonuses and stock grants that it’s meaningless. Not so at JetBlue: in 2007, Barger earned a total of $514,642 — with no bonus — according to the latest proxy statement.

Executive pay at JetBlue appears to be very reasonable and, while the company has admittedly delivered extremely poor returns to shareholders, they have been in line with the industry. Over the past year, JetBlue has outperformed Delta Airlines by going down about 50% vs. more than 60% for Delta. Not exactly a track record to brag about, but certainly a data point that could justify continued increases in executive pay.

JetBlue’s strong corporate governance and the willingness of its top dog to take the hit along with the company’s rank and file employees should position the company well if the airline industry does eventually turn around.

But I wouldn’t count on that. Before you consider investing in an airline, consider these quotes from two billionaires:

"The fastest way to become a millionaire is to start off a billionaire and then buy an airline." -Richard Branson

"Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down." -Warren Buffett

Invest at your own risk.

Zac Bissonnette

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