Southwest Airlines Hands Out More Stock Options

DALLAS (AP) -- Salaries for the top executives of Southwest Airlines Co. ranged from flat to a 25 percent increase last year and the officials received more-generous stock options, according to a proxy filed Wednesday with the Securities and Exchange Commission.

Southwest, the largest U.S. carrier to post a profit last year, said chief executive Gary C. Kelly got a 25 percent raise to $322,436 and a $220,000 bonus.

Kelly, 49, who was promoted from chief financial officer to CEO in July, also got options for 214,352 shares, up from 25,151 the year before.

Under a new contract, Kelly's annual base salary will rise to $424,065 by July 2007.

Chairman Herb Kelleher's salary remained $450,000 and he also got a $199,000 bonus and options for 208,570 shares, an increase from 8,570 in each of the previous two years.

Kelleher, 73, a founder and longtime CEO of the low-cost carrier, exercised options to acquire 1.4 million shares for a gain of $16 million, Southwest said in the proxy.

President Colleen C. Barrett, 60, got a raise of about 4 percent, to $339,835, plus a $316,000 bonus and options for 157,262 shares, up from 8,336 in 2003. She exercised about 304,000 options for a value of about $46,000, the company said.

The previous CEO, James F. Parker, who stepped down July 15, was paid $337,460, 2 percent more than in 2003. He also received a $225,000 bonus and options on 11,786 shares.

Kelly, Kelleher and Barrett all entered into new three-year contracts with the airline after Parker resigned. Southwest's compensation committee said the larger stock options were designed to offset salaries and bonuses that are perceived below-par for the airline industry.

The Dallas-based airline earned $313 million last year, as revenue rose to $6.53 billion from $5.94 billion.

The airline has largely insulated itself from rising jet fuel prices by purchasing about 85 percent of its fuel in advance at lower prices.

Shares of Southwest rose 18 cents, or 1.2 percent, to $14.82 in midday trading on the New York Stock Exchange. The stock has been trading at a 52-week range of $13.18 to $17.06.