AER LINGUS’S new chief executive Christoph Mueller could net more than €4 million from pay and share options over the next five years if he successfully steers the airline back to profitability, according to a filing released to the stock market yesterday.
The chief executive, who took up his post at Aer Lingus on September 1st, has been heavily incentivised to stick with the loss-making Irish airline for at least five years and transform its fortunes and share price performance.
Mr Mueller will earn €475,000 in basic salary each year. This is in line with the pay of his predecessor Dermot Mannion. He will not be paid a bonus.
In addition, the German-born executive will receive 500,000 free shares in Aer Lingus on completing two years of service with the airline.
The free shares, which are currently worth about €295,000, have been awarded in lieu of bonus or incentive payments.
Mr Mueller has also been granted 1.5 million share options that can be exercised over the next five years and could net him €1.33 million if certain price targets are achieved.
The options will be awarded in equal tranches after three, four and five years. The first lot of 500,000 will be triggered if the stock hits €1 in 2012.
The second tranche is triggered a year later if the share price tops €1.60.
The share prices will have to hit at least €2.20 for Mr Mueller to be able to exercise his options over the final lot of shares in 2014.
Netting these share options will require a significant turnaround in Aer Lingus’s fortunes, given that the stock is currently trading at just 59 cent and the airline lost €93 million in the first six months of 2009.
Mr Mueller will be entitled to one year’s basic salary if his contract is terminated by the airline.
It is understood that Aer Lingus believes Mr Mueller’s remuneration is in line with that offered by similarly-sized Irish listed companies and suitably incentivises him to deliver the required changes at the airline.
Aer Lingus was advised on Mr Mueller’s remuneration by consultants Watson Wyatt.
However, details of Mr Mueller’s pay and share options are likely to anger staff at the airline at a time when Aer Lingus is formulating a plan to reduce its cost base by €130 million and cut about 500 jobs.
On Tuesday, Aer Lingus informed 63 temporary cabin crew in Dublin and Cork that their contracts were not being renewed.
Mr Mueller yesterday informed the stock market that he spent €27,750 on Tuesday buying 50,000 shares at 55.5 cent apiece. These are the first shares he has bought in the airline.
Seán Coyle, Aer Lingus’s finance chief, also declared that he spent €10,800 buying 18,000 shares in the airline yesterday at 60 cent each.
Mr Coyle, a former Ryanair executive, also holds 589,206 share options.
Separately, Aer Lingus yesterday appointed former Bank of Ireland executive Michael Grealy as director of human resources and organisational change. He will take up the post on September 28th, replacing Liz White, who is moving to insurer Hibernian Aviva.
