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American Airlines announces departure details of Chief Commercial Officer Vasu Raja

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American Airlines announces departure details of Chief Commercial Officer Vasu Raja
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Gary Leff Chief Financial Officer | View from the Wing

On May 28, American Airlines announced that Chief Commercial Officer Vasu Raja would be exiting in June. His employment officially ended on June 30.

Vasu Raja was known for his bold positions. He strongly believed that the airline’s schedule was its product, rather than its service and experience. He was instrumental in architecting their Sun Belt focus and shifting away from managed travel. Additionally, he elevated the centrality of the carrier’s loyalty program as part of its core business strategy, not just as a financial instrument.

The primary reason for his dismissal was the declining business travel market share. Otherwise, it is possible that the airline’s CEO might have faced consequences. In a Friday evening news release through an SEC filing, American Airlines disclosed details about his severance package, which amounts to approximately $1.43 million.

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Raja will remain on payroll through January 31, 2025, collecting an additional $462,019. He will then receive a payout of $968,750 plus $261 towards COBRA continuation health coverage.

He retains officer travel privileges (confirmed travel in any class of service including for spouse or companion and dependent children; Executive Platinum status with Admirals Club access) through January 31. Subsequently, he will receive “‘the 65-point plan space available travel’ privileges for Executive and Executive’s eligible family members pursuant to the terms and conditions set forth in the Company’s travel policy for officers.” However, American Airlines will not gross up the tax liability for this travel, which is designated for personal purposes only.

Raja will also receive career transition services from Lee Hecht Harrison and is subject to non-compete and non-solicitation rules through January 31, 2025.

Most readers may view Raja's $1.4 million severance as extremely generous compared to typical expectations of two weeks' pay. However, his compensation package last year was worth $12.2 million.

Raja's earning potential remains strong; he could lead another airline, consult within the industry or work for suppliers. His severance appears modest when considering his future remuneration potential.

American Airlines does not seem to gain much from their $1.4 million expenditure on Raja's severance package. Some might argue that using his lump sum payout to partially fund a longer severance period during which he remained on payroll could have been more beneficial—essentially "gardening leave"—to allow time for his unique knowledge of American Airlines' plans and strategies to become outdated.

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