Air France-KLM SA's (EPA:AF) CEO Compensation Is Looking A Bit Stretched At The Moment

Key Insights

• Air France-KLM's Annual General Meeting to take place on 5th of June
• Salary of €900.0k is part of CEO Ben Smith's total remuneration
• The overall pay is 55% above the industry average
• Over the past three years, Air France-KLM's EPS grew by 129% and over the past three years, the total loss to shareholders 59%

In the past three years, the share price of Air France-KLM SA (EPA:AF) has struggled to grow and now shareholders are sitting on a loss. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. These are some of the concerns that shareholders may want to bring up at the next AGM held on 5th of June. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for Air France-KLM

How Does Total Compensation For Ben Smith Compare With Other Companies In The Industry?

According to our data, Air France-KLM SA has a market capitalization of €2.7b, and paid its CEO total annual compensation worth €4.2m over the year to December 2023. That's mostly flat as compared to the prior year's compensation. We think total compensation is more important but our data shows that the CEO salary is lower, at €900k.

On comparing similar companies from the France Airlines industry with market caps ranging from €1.8b to €5.9b, we found that the median CEO total compensation was €2.7m. This suggests that Ben Smith is paid more than the median for the industry. What's more, Ben Smith holds €444k worth of shares in the company in their own name.

Component	2023	2022	Proportion (2023)
Salary	€900k	€900k	22%
Other	€3.3m	€3.3m	78%
Total Compensation	€4.2m	€4.2m	100%

Speaking on an industry level, nearly 55% of total compensation represents salary, while the remainder of 45% is other remuneration. Air France-KLM pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Air France-KLM SA's Growth Numbers

Air France-KLM SA's earnings per share (EPS) grew 129% per year over the last three years. Its revenue is up 7.3% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Air France-KLM SA Been A Good Investment?

Few Air France-KLM SA shareholders would feel satisfied with the return of -59% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Air France-KLM that you should be aware of before investing.

Important note: Air France-KLM is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.