☒ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☐ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material under § 240.14a-12 |
March 30, 2023April , 2024
To Our Stockholders:
On behalf of the Board of Directors of American Airlines Group Inc., we invite you to attend the 20232024 Annual Meeting of Stockholders to be held on Wednesday, May 10, 2023,June 5, 2024, at 9:00 a.m., Central Time. As with our recent meetings, this year’s Annual Meeting will be a virtual meeting of stockholders, conducted via live audio webcast. The virtual format provides the opportunity for participation by a broader group of our stockholders and enables stockholders to participate fully, and equally, from any location around the world. You can attend the Annual Meeting via the Internet by registering at www.proxydocs.com/AAL using the control number which appears on your Notice Regarding theof Internet Availability of Proxy Materials, your proxy card (printed in the gray box), and the instructions that accompanied your proxy materials. You will have the ability to submit questions in advance of, and real-time during, the Annual Meeting via the meeting website.
The attached Notice of 20232024 Annual Meeting of Stockholders and Proxy Statement describes the formal business to be transacted and detailed procedures for attending, submitting questions, and voting at the virtual meeting. We have produced an interactive proxy
statement that will provide our stockholders with better capability to navigate through the document, making key information easier to find and evaluate. The interactive proxy statement is accessible at www.proxydocs.com/AAL prior to and during the Annual Meeting.
It is important that your shares be represented at the Annual Meeting and, regardless of whether you plan to attend, we request that you vote in advance on the matters to be presented at the Annual Meeting as described in these proxy materials.
Thank you for your continued support.
| Sincerely,
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The accompanying Proxy Statement is dated March 30, 2023,April , 2024, and is first being released to stockholders of American Airlines Group Inc. on or about March 30, 2023.April , 2024.
NOTICE OF 20232024 ANNUAL MEETING OF STOCKHOLDERS
DATE AND TIME: Wednesday, 9:00 a.m. Central Time
VIRTUAL MEETING ACCESS: Register at www.proxydocs.com/AAL
RECORD DATE:
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MEETING AGENDA
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A proposal to elect
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A proposal to ratify the appointment of KPMG LLP as our
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A proposal to approve, on a non-binding, advisory basis, executive
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A proposal to
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A proposal to
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Advisory vote on a stockholder proposal
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Such other business as properly may come before the
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For instructions on voting in advance of and during the virtual meeting, please see page (i)i of the Proxy Statement.Statement, which is incorporated by reference into this notice.
Important notice regarding theof internet availability of proxy materials for the Annual Meeting:
Our Proxy Statement and 20222023 Annual Report on Form 10-K are available at www.proxydocs.com/AAL prior to and during the Annual Meeting.
You can help us reduce costs and the impact on the environment by electing to receive and access future copies of our proxy statements, annual reports and other stockholder materials electronically by e-mail. If your shares are registered directly in your name with our stock registrar and transfer agent, American Stock Transfer &Equiniti Trust Company, LLC, you can make this election by going to its website (www.astfinancial.comequiniti.com/us) or by following the instructions provided when voting over the Internet. If you hold your shares in a brokerage account or otherwise through a third party in “street name,” please refer to the information provided by your broker, bank or other nominee for instructions on how to elect to receive and view future annual meeting materials electronically.
| By Order of the Board of Directors of American Airlines Group Inc., | ||
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Corporate Secretary
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PLEASE READ THE ACCOMPANYING PROXY STATEMENT CAREFULLY.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING, YOUR VOTE IS IMPORTANT AND WE
ENCOURAGE YOU TO VOTE PROMPTLY.
PROXY STATEMENT SUMMARY
This summary contains highlights about our company and the upcoming 20232024 Annual Meeting of Stockholders (the “Annual Meeting”). This summary does not contain all of the information that you should consider in advance of the meeting and we encourage you to read the entire Proxy Statement and the Annual Report on Form 10-K for the year ended December 31, 20222023 that accompanies this Proxy Statement before voting.
20232024 Annual Meeting of Stockholders
Date and Time: Wednesday,
9:00 a.m., Central Time
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Virtual Meeting Access: Register at www.proxydocs.com/AAL
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Record Date:
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Proxy Mail Date: On or about
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Vote in Advance of the Meeting
| Vote During the Meeting
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Over the Internet at www.proxydocs.com/AAL; or |
Over the Internet during the Annual Meeting. Please register at www.proxydocs.com/AAL to gain access to the meeting. | ||||||||
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By telephone at 1-866-570-3320; or
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See page 1 — “Virtual Stockholder Meeting” for details on how to access the live audio webcast and vote during the Annual Meeting. | |||||||
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By mail — sign, date and return the proxy card or voting instruction form mailed to you. | |||||||||
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i |
2024 Proxy Statement
| Submitting Questions at the Virtual Annual Meeting |
Stockholders may submit questions in writing during the Annual Meeting by registering to attend the virtual meeting at www.proxydocs.com/AAL. Stockholders will need their unique control number which appears on their Notice
As part of the Annual Meeting, and as time permits, we will hold a live Q&A session, during which we intend to answer questions submitted during the meeting in accordance with the Annual Meeting’s Rules of Conduct which are pertinent to American Airlines Group Inc. (the “Company”) and the meeting matters. Answers to any such questions that are not addressed during the meeting will be published following the meeting on the Company’s website at www.aa.com under the links “Investor Relations”—“Annual Shareholders Meeting”—“
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Stockholder Engagement and Governance Highlights
We welcome and value communication with our stockholders. We engage in proactive dialogue with our largest stockholders year-round to gain an understanding of their perspectives on a wide range of matters, which we regularly share with the Board of Directors of the Company (the “Board”). In 2023, we contacted stockholders representing approximately 40% of outstanding shares, and held discussions with investors representing nearly 20% of our outstanding shares. We also held engagements with the leading proxy advisor firms. We utilized these engagement sessions to focus on our recent board refreshment plan and other governance-related matters, our climate strategy, and executive compensation, particularly in the context of our recent CEO and senior management succession planning process and our emergence from the COVID-19 pandemic. We also discussed the Company’s long-term strategy and recent operating and financial performance.
Stockholders may communicate directly with our Board as set forth under “Communications with the Board and Non-Management Directors” on page 46.41 and can find information about our 2023 stockholder engagement feedback under “Stockholder Engagement” on pages 41 and 61. The following corporate governance and Board practices ensure accountability and enhance effectiveness in the boardroom:
Our Governance Best Practices
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✓ Independent Chairman and separate Chairman and CEO roles
✓ Annually elected directors
✓ Independent Board committees
✓ Regular Board and management succession planning
✓ Independent directors meet without management present
✓ Robust oversight of strategy and risk
✓ Regular Board and committee evaluations |
✓ Majority voting in director elections
✓ Stockholder right to call special meetings of stockholders
✓ Stockholder right to proxy access
✓ Stockholder engagement policy and outreach program
✓ Commitment to sustainability and social responsibility
✓ Stock ownership guidelines for directors and executive officers | |
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2024 Proxy Statement
| Board Refreshment and Board Leadership Structure |
The Board believes that thoughtful refreshment of the members of the Board is important to ensure that the Board continues to meet the changing needs of the Company and that new perspectives are regularly considered. The Board and the Corporate Governance and Public Responsibility
• The election of
•Successful CEO succession and the retirement of our former Chairman in 2023: Consistent with our long-term succession planning process for our CEO, Doug Parker, who had continued to serve as •The election of
In addition,
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Voting Matters and Board Recommendations
| Matter | Board Recommendation | Page | ||||
1. Election of directors |
FOR each
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2. Ratification of public accounting firm
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FOR
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3. A proposal to approve, on a non-binding, advisory basis, executive compensation
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FOR
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4. A proposal to
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5. A proposal to
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FOR
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6. Advisory vote on a stockholder proposal
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iii |
2024 Proxy Statement
20232024 Director Nominees (Proposal 1)
Our director nominees have demonstrated their commitment to diligently execute their fiduciary duties on behalf of our stockholders, and we recommend that our stockholders elect each of the nominees shown in the chart below at the Annual Meeting.
| Name | Age | Director Since | Principal Occupation | Independent | AC | CC | CGPRSC | FC | Age | Director Since | Principal Occupation | Independent | AC | CC | CGPRC | FC | SC | |||||||||||||||||
Jeffrey D. Benjamin | 61 | 2013 | Senior advisor to Cyrus Capital Partners | ✓ |
| M |
| M | ||||||||||||||||||||||||||
Adriane M. Brown | ||||||||||||||||||||||||||||||||||
Adriane M. Brown | 64 | 2021 | Managing Partner at Flying Fish Partners; former President and Chief Operating Officer at Intellectual Ventures Management; former President and Chief Executive Officer of Honeywell Transportation Systems | ✓ | M |
| M |
| 65 | 2021 | Managing Partner at Flying Fish Partners; former President and Chief Operating Officer at Intellectual Ventures Management; former President and Chief Executive Officer of Honeywell Transportation Systems | ✓ | M |
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John T. Cahill | 65 | 2013 | Vice Chairman of The Kraft Heinz Company; former Chairman and Chief Executive Officer of Kraft Foods Group and of The Pepsi Bottling Group | ✓ | M |
| M |
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John T. Cahill | 66 | 2013 | Vice Chairman of The Kraft Heinz Company; former Chairman and Chief Executive Officer of Kraft Foods Group and of The Pepsi Bottling Group | ✓ | M |
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Michael J. Embler | ||||||||||||||||||||||||||||||||||
Michael J. Embler | 58 | 2013 | Private investor; former Chief Investment Officer of Franklin Mutual Advisers | ✓ | M |
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| C | 60 | 2013 | Private investor; former Chief Investment Officer of Franklin Mutual Advisers | ✓ |
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Matthew J. Hart | 70 | 2013 | Former President and Chief Operating Officer of Hilton Hotels; former Chief Financial Officer of Hilton Hotels | ✓ | C |
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Matthew J. Hart | 72 | 2013 | Former President and Chief Operating Officer of Hilton Hotels; former Chief Financial Officer of Hilton Hotels | ✓ | C |
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Robert D. Isom | 59 | 2022 | Chief Executive Officer and President of American Airlines Group Inc. and American Airlines, Inc. | × |
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Robert D. Isom CEO | ||||||||||||||||||||||||||||||||||
Robert D. Isom CEO | 60 | 2022 | Chief Executive Officer and President of American Airlines Group Inc. and American Airlines, Inc. | ✖ |
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Susan D. Kronick | ||||||||||||||||||||||||||||||||||
Susan D. Kronick | 71 | 2015 | Former Operating Partner at Marvin Traub Associates; former Vice Chairman of Macy’s | ✓ |
| M | C |
| 72 | 2015 | Former Operating Partner at Marvin Traub Associates; former Vice Chairman of Macy’s | ✓ |
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| M |
| M | |||||||||||||||||
Martin H. Nesbitt | 60 | 2015 | Co-Chief Executive Officer of The Vistria Group; former President and Chief Executive Officer of PRG Parking Management | ✓ | M |
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Martin H. Nesbitt | 61 | 2015 | Co-Chief Executive Officer of The Vistria Group; former President and Chief Executive Officer of PRG Parking Management | ✓ | M |
| C |
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Denise M. O’Leary | ||||||||||||||||||||||||||||||||||
Denise M. O’Leary | 65 | 2013 | Private venture capital investor; former General Partner at Menlo Ventures | ✓ |
| C |
| M | 66 | 2013 | Private venture capital investor; former General Partner at Menlo Ventures | ✓ |
| C |
| M |
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Vicente Reynal | 48 | 2022 | Chairman, Chief Executive Officer and President of Ingersoll Rand | ✓ |
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Vicente Reynal | 49 | 2022 | Chairman, Chief Executive Officer and President of Ingersoll Rand | ✓ |
| M | M |
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Gregory D. Smith Incoming Chairman | 56 | 2022 | Former Executive Vice President and Chief Financial Officer of The Boeing Company; | ✓ | M |
| M |
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Gregory D. Smith Independent Chairman | ||||||||||||||||||||||||||||||||||
Gregory D. Smith Independent Chairman | 57 | 2022 | Former Executive Vice President and Chief Financial Officer of The Boeing Company | ✓ |
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Douglas M. Steenland | 71 | 2020 | Senior Advisor to The Blackstone Group; Former President and Chief Executive Officer of Northwest Airlines Corporation | ✓ |
| M |
| M | ||||||||||||||||||||||||||
Douglas M. Steenland | 72 | 2020 | Senior Advisor to The Blackstone Group; Former President and Chief Executive Officer of Northwest Airlines Corporation | ✓ |
| M |
| C |
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AC = Audit Committee | FC = Finance Committee | |
CC = Compensation Committee | M = Member | |
SC = Safety Committee | C = Committee Chair |
In light of the recent appointments and changes to our Board, the Board plans to assess its committee composition and membership following the Annual Meeting, including the appointment of our newest director, Mr. Reynal, to Board committees.
The Board unanimously recommends that the stockholders vote “FOR” each of the nominees shown in the chart above.
The Board unanimously recommends that the stockholders vote “FOR” each of the nominees shown in the chart above. | ||||
iv |
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2024 Proxy Statement
Ratification of Appointment of KPMG LLP (Proposal 2)
The Board has directed that KPMG’s appointment for the fiscal year ending December 31, 20232024 be submitted to our stockholders for ratification at the Annual Meeting. KPMG is well qualified to act as our independent registered public accounting firm and has a deep understanding of our operations and accounting practices. The Audit Committee considered the qualifications, performance, and independence of KPMG, the quality of its discussions with KPMG, and the fees charged by KPMG for the level and quality of services provided during 2022,2023, and determined that the reappointment of KPMG is in the best interest of the Company and its stockholders.
The Board unanimously recommends that the stockholders vote “FOR” the proposal to ratify the appointment of KPMG.
The Board unanimously recommends that the stockholders vote “FOR” the proposal to ratify the appointment of KPMG. | ||||
Approval of Executive Compensation (Proposal 3)
In making 2022Our executive compensation decisions,program is heavily performance-based and directly linked with our established goals of delivering record operational results, continuing to close our margin gap with our largest competitors, and reducing total debt by $15 billion by the Compensation Committee continued to consider concerns related to the need to retain and reward our management team throughout the COVID-19 pandemic and the backdropend of significant reductions in compensation. Despite these concerns, for 2022, the Compensation Committee re-established the performance-based components of our2025. Our 2023 long-term incentive program (“LTIP”) for our executive officers. Our 2022 LTIP for our executive officers returned to incorporatingincorporated both performance- and time-vesting components, with half of the target value consisting of the performance-vesting component. The performance-vesting component weighted 50% by target value andis tied to attainment of total debt reduction (60%(50% weighting) and relative pre-tax income margin improvement (40% weighting) versus our industry peers.peers (50% weighting). The performance-vesting component of the 20222023 LTIP will be earned, if at all, no earlier thanfollowing the third anniversarycompletion of the grant date. In addition, the Compensation Committee re-established oura three-year performance period. The 2023 performance-based short termshort-term incentive program (“STIP”). The STIP is was designed to align management with our goals to run a reliable operation and to return to profitability as we emerged from the COVID-19 pandemic while building on our momentum on diversity, equity and inclusion. As more fully described under the “Compensation Discussion and Analysis” section, in making 2023 compensation decisions, the Compensation Committee continued to consider concerns related to the need to retain and create appropriate incentives for our management team against the backdrop of significant reductions in compensation during the pandemic.
| v |
2024 Proxy Statement
We are committed to effective compensation governance, as demonstrated by the following compensation policies and practices:
What We Do
| What We Do NOT Do
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✓ 91% of CEO’s Annual Target Compensation ✓Link Pay ✓Performance-Based Long-term Equity Incentives with a Three-year Performance Period to promote long-term focus.
✓ Independent Compensation Consultant that is directly engaged by the Compensation Committee to advise on executive and director tion matters.
✓
✓ Annual Compensation Risk Assessment to identify any elements of our compensation program design or oversight processes that carry elevated levels of adverse risk.
✓ Minimum Vesting Requirements. Subject to limited exceptions, no awards granted under our equity plan may vest until the first anniversary of the date of grant. ✓Clawback Policy ✓ Extensive Stockholder Engagement to solicit investor feedback on our
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The Board unanimously recommends that the stockholders vote “FOR” the approval of executive compensation.
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Approval of the Frequency of the Vote to Approve Executive Compensation (Say-On-Pay✖ Frequency) (Proposal 4)
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 enables our stockholders to indicate how frequently they would like the Company to hold a non-binding, advisory vote on the compensation of our named executive officers. By voting on this proposal, stockholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two or three years. The Board has determined that holding a “say-on-pay” vote on executive compensation every year is the most appropriate alternative for the Company, and therefore recommends that you vote for a one-year interval for the advisory vote on executive compensation.
The Board unanimously recommends the approval of an advisory vote to approve executive compensation to be held every “ONE YEAR.”
Approval of the 2023 Incentive Award Plan (Proposal 5)
The Board has adopted, subject to stockholder approval, the American Airlines Group Inc. 2023 Incentive Award Plan (the “2023 Plan”). The 2023 Plan is intended to replace our 2013 Incentive Award Plan (the “2013 Plan”), which will expire in December 2023. Upon stockholder approval of the 2023 Plan, the 2023 Plan will become effective and will supersede and replace in its entirety the 2013 Plan, and no further awards will be granted under the 2013 Plan; however, the terms and conditions of the 2013 Plan will continue to govern any outstanding awards granted thereunder.
Subject to stockholder approval, the Board approved a share reserve under the 2023 Plan equal to 17,200,000 shares of our common stock, $0.01 par value per share (“Common Stock”). The 2023 Plan’s share reserve will be reduced by one share of our Common Stock for every one share granted under the 2013 Plan after March 22, 2023 (the date of Board approval of the 2023 Plan) and prior to the effective date of the 2023 Plan.
Key Features of the 2023 Plan:
| No |
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2024 Proxy Statement
Approval of an Amendment to Our Certificate of Incorporation Regarding Future Bylaw Amendments (Proposal 4)
At our 2023 annual meeting of stockholders, our stockholders passed a stockholder-sponsored proposal requesting that the Board take the steps necessary to eliminate each stockholder voting requirement in our Certificate of Incorporation that calls for a greater than simple majority vote.
In response to this request, and after carefully considering the advantages and disadvantages of maintaining the supermajority voting provisions in our Certificate of Incorporation, the Board has determined that it is in the best interests of the Company and its stockholders to amend our Certificate of Incorporation to eliminate the supermajority voting requirement for amendments to the Bylaws by our stockholders (the “Bylaw Voting Threshold Amendment”).
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Approval of an Amendment to Our Certificate of Incorporation Regarding Other Future Charter Amendments (Proposal 5)
In response to shareholder action at our 2023 annual meeting of stockholders, and after carefully considering the advantages and disadvantages of maintaining the supermajority voting provisions in our Certificate of Incorporation, the Board has determined that it is in the best interests of the Company and its stockholders to amend our Certificate of Incorporation to eliminate the supermajority voting provisions (the “Supermajority Elimination Amendment”).
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The Board unanimously recommends that the stockholders vote “FOR” the approval of the 2023 Incentive Award Plan.
Advisory Vote on a Stockholder Proposal (Proposal 6)
A stockholderThe Treasurer for the State of Illinois, as Trustee of the Bright Start College Savings Trust, has informed the Company that heit intends to present a proposal at our Annual Meeting. The address of the stockholder and the number of the Company’s securities that the stockholder owns will be provided to stockholders promptly upon request. If the stockholder (or their “qualified representative”) is present at the Annual Meeting requestingand properly submits the Board to take each step necessary so that each voting requirementproposal for a vote, then the stockholder proposal will be voted upon at the Annual Meeting. In accordance with federal securities laws, the stockholder proposal is presented under Proposal 6 as submitted by the stockholder and is quoted verbatim. The Company disclaims all responsibility for the content of the proposal and the supporting statement, including other sources referenced in the Company’s charter and bylaws (that is explicit or implicit due to default to state law) that calls for a greater than simple majority vote be replaced by a requirement for a majority of the votes cast for and against such proposals, or a simple majority in compliance with applicable laws to the fullest extent possible. The Board has considered this proposal and agrees that the removal of the supermajority provisions in our Bylaws and Certificate of Incorporation is in the best interests of the Company and our stockholders. Therefore, the Board recommends a vote FOR this proposal, but such recommendation is subject to several clarifications described in this Proxy Statement.supporting statement.
The Board unanimously urges that the stockholders vote “FOR” the stockholder proposal.
For the reasons stated in the Board’s Statement in Opposition, which follows the stockholder proposal under Proposal 6, the Board unanimously urges stockholders to vote “AGAINST” the stockholder proposal. | ||||
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2024 Proxy Statement
TABLE OF CONTENTS
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2024 Proxy Statement
THE MEETING
Purpose, Date and Time
We are furnishing this Proxy Statement to our stockholders in connection with the solicitation by the Board of proxies to be voted at the Annual Meeting and any adjournments or postponements of that meeting. When used in this Proxy Statement, the terms “we,” “us,” “our,” “the Company” or “American” refer to American Airlines Group Inc. (“AAG”) and its consolidated subsidiaries. “AMR” or “AMR Corporation” refers to the Company during the period of time prior to its emergence from Chapter 11 and its acquisition of US Airways Group, Inc. on December 9, 2013.
The Annual Meeting will be held in a virtual format via live audio webcast on Wednesday, May 10, 2023,June 5, 2024, at 9:00 a.m., Central Time, for the purposes described in the accompanying Notice of Annual Meeting. Stockholders can register to attend the meeting via the Internet at www.proxydocs.com/AAL by using the control number which appears on the Notice Regarding theof Internet Availability of Proxy Materials, the proxy card (printed in the gray box), and the instructions that accompanied your proxy materials.
The approximate date we are first sending the Notice of Annual Meeting and accompanying proxy materials to stockholders, or sending a Notice Regarding theof Internet Availability of Proxy Materials and posting the proxy materials at www.proxydocs.com/AAL, is March 30, 2023.April , 2024.
Record Date; Stockholders Entitled to Vote
Stockholders of record at the close of business on March 13, 2023April 9, 2024 (the “record date”“Record Date”) are entitled to receive notice of and to vote at the Annual Meeting. On the record date,Record Date, there were 652,816,491656,045,635 shares of our Common Stock outstanding and eligible to be voted at the Annual Meeting. Each share of Common Stock entitles its owner to one vote on each matter submitted to the stockholders. As of the record date, approximately 0.3 million of the issued and outstanding shares of Common Stock were held in the disputed claims reserve established in accordance with AMR Corporation’s fourth amended joint plan of reorganization. Pursuant to the plan, the shares held in the disputed claims reserve will be voted by the disbursing agent holding these shares in the same proportion as the other outstanding shares of Common Stock are voted.
A list of the names of stockholders entitled to vote at the Annual Meeting will be available to stockholders for ten days prior to the Annual Meeting for any purpose germane to the Annual Meeting. Please contact our Corporate Secretary at grant.mcgee@aa.comCorporate.Secretary@aa.com if you wish to examine the list prior to the Annual Meeting. The stockholder list will also be available during the virtual Annual Meeting for examination by any stockholder.
Your vote is very important. You are encouraged to vote as soon as possible.
Virtual Stockholder Meeting
The virtual meeting format enables stockholders to participate fully, and equally, from any location around the world, at little to no cost. We designed the format of our Annual Meeting to ensure that our stockholders who attend our Annual Meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting and to enhance stockholder access, participation and communication through online tools. Our directors will also attend the meeting.
Access to the Audio Webcast of the Annual MeetingMeeting.. The live audio webcast of the Annual Meeting will begin promptly at 9:00 a.m., Central Time. Online access to the audio webcast will open approximately thirty30 minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. We encourage our stockholders to access the meeting prior to the start time.
Log in Instructions. Stockholders can register to attend the virtual meeting at www.proxydocs.com/AAL. Stockholders will need their control number which appears on the Notice Regarding theof Internet Availability of Proxy Materials, the proxy card (printed in the gray box)., and the instructions that accompanied your proxy materials. In the event that you do not have a control number, please contact your broker, bank or other nominee as soon as possible and no later than Wednesday, May 3, 2023,29, 2024, so that you can be provided with a control number and gain access to the meeting. Once registered, stockholders will receive an e-mail with a unique link, and instructions on how to attend the meeting one hour prior to the start of the meeting.
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Submitting questions at the virtual Annual MeetingMeeting.. Our stockholders will be able to submit questions during the Annual Meeting by registering to attend the virtual meeting at www.proxydocs.com/AAL. Stockholders will need their unique control number which appears on their Notice Regarding theof Internet Availability of Proxy Materials, the proxy card (printed in the gray box), and the instructions that accompanied the proxy materials.
| 1 |
2024 Proxy Statement
As part of the Annual Meeting, and as time permits, we will hold a live Q&A session, during which we intend to answer questions submitted during the meeting in accordance with the Annual Meeting’s Rules of Conduct which are pertinent to the Company and the meeting matters. Answers to any such questions that are not addressed during the meeting will be published following the meeting on the Company’s website at www.aa.com under the links “Investor Relations”—“Annual Shareholders Meeting”—“20232024 Annual Meeting of Stockholders Q&A.” Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once. In order to promote fairness, efficient use of the Company’s resources and to ensure all stockholders are responded to, we will respond to up to three questions from a single stockholder.
The Annual Meeting’s Rules of Conduct will be posted on www.proxydocs.com/AAL approximately two weeks prior to the Annual Meeting.
| Access to the Live Webcast of the Annual Meeting
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The live audio webcast of the virtual Annual Meeting will be available to not only our stockholders, but also our team members and other constituents. In order to attend the virtual Annual Meeting, all stockholders and other guests will need to register at www.proxydocs.com/AAL.
A replay of the meeting will be made publicly available for two weeks after the meeting at the same website.
We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or the meeting, please call the technical support number that will be posted on the virtual meeting platform log-in page.
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Quorum
The presence, in person or by proxy, of the holders of a majority in voting power of the Common stock issued and outstanding sharesand entitled to vote at a meeting of Common Stock as of the record datestockholders, is necessary to constitute a quorum at the Annual Meeting. Shares are considered present “in person” if voted by the holder of those shares or by proxy during the Annual Meeting.
Vote Required to Approve Each Proposal
With respect to Proposal 1 (Election of Directors), each director must be elected by the affirmative vote of a majority of the votes cast with respect to such director by the shares present in person or represented by proxy and entitled to vote for the election of directors. A majority of the votes cast means that the number of votes cast “FOR” a nominee exceeds the number of votes cast “AGAINST” that nominee. BrokersWe presently believe that brokers do not have discretionary authority to vote on this proposal. Abstentions and broker non-votes (as defined below under “How to Vote Your Shares”) are not considered votes cast “FOR” or “AGAINST” a nominee’s election and will have no effect in determining whether a nominee has received a majority of the votes cast. In this election, an incumbent director nominee who does not receive the required number of votes for reelection is expected to tender his or her resignation to the Board in accordance with a policy adopted by the Board.our Corporate Governance Guidelines (the “Governance Guidelines”). Within approximately 90 days after certification of the election results of the stockholder vote, our CGPRSCGPR Committee (or such other committee as directed by the Board) will make a recommendation to our Board and the Board will make a determination as to whether to accept or reject the tendered resignation. Following such determination, we will publicly disclose the decision regarding any tendered resignation in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”).
Approval of Proposal 2 (Ratification of Appointment of Independent Registered Public Accounting Firm), Proposal 3 (Advisory Vote to Approve Executive Compensation), and Proposal 46 (Advisory Vote on the Frequency of the Advisory Vote to Approve Executive Compensation)a Stockholder Proposal), Proposal 5 (Vote to Approve 2023 Incentive Award Plan) and Proposal 6 (Stockholder Proposal) will require the affirmative vote of the holders of a majority of the shares represented, in person or by proxy, and entitled to vote on the matter at the Annual Meeting, provided a quorum is present. Abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and will have the same legal effect as voting against each proposal.
Approval of Proposal 4 (Amendment to our Certificate of Incorporation to Allow Our Bylaws to be Amended by our Stockholders by Simple Majority Vote) will require the affirmative vote of the holders of at least 80% of all shares outstanding and entitled to vote for the election of directors as of the Record Date. Abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and will have the same legal effect as voting against Proposal 4.
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2024 Proxy Statement
Approval of Proposal 5 (Amendment to our Certificate of Incorporation to Allow all Other Provisions of the Certificate of Incorporation to be Amended by Simple Majority Vote) will require the affirmative vote of the holders of at least two-thirds of all shares outstanding and entitled to vote for the election of directors as of the Record Date. Abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and will have the same legal effect as voting against Proposal 5.
Broker non-votes will have no effect on the outcome of Proposals 1, 3 and 6, and will have the same effect as a vote “AGAINST” Proposals 4 and 5. We presently believe that brokers will have discretionary authority to vote on Proposal 2 and, as such, broker non-votes are not expected on Proposal 2.
How to Vote Your Shares
If you are a stockholder of record, you may vote your shares:
| • | over the Internet at www.proxydocs.com/AAL prior to the day of the virtual Annual Meeting (and during the virtual Annual Meeting by registering at www.proxydocs.com/AAL); or |
| • | by telephone using the toll-free number 1-866-570-3320 prior to the day of the virtual Annual Meeting; or |
| • | by filling out, signing and dating your proxy card and mailing it in the prepaid envelope. |
You will need to follow the instructions when using any of these methods to make sure your shares will be voted at the Annual Meeting. We encourage you to vote in advance by telephone, over the Internet or by mail by completing your proxy card, even if you plan to attend the virtual Annual Meeting.
If your shares are held in “street name” through a broker, bank or other nominee, you may instruct your broker, bank or other nominee to vote your shares by following the instructions that the broker, bank or other nominee provides to you with the proxy materials. If you do not provide the broker, bank or other nominee with specific voting instructions, the broker, bank or other nominee that holds your shares generally may vote on “routine” proposals but cannot vote on “non-discretionary” (non-routine) proposals. We presently believe that Proposal 2 is routine and that Proposals 1, 3, 4, 5 and 6 are non-discretionary.
Most brokers offer the ability for stockholders to submit voting instructions over the Internet, by telephone or by mail by completing a voting instruction card after you have read these proxy materials. If you hold shares through a broker, bank or other nominee and wish to vote your shares at the Annual Meeting, you will need your unique control number which appears on the instructions that accompanied the proxy materials. In any case, voting in advance over the Internet, by telephone or by mail will not prevent you from voting at the virtual Annual Meeting.
If the broker, bank or other nominee that holds your shares in “street name” returns a proxy card without voting on a non-discretionary proposal because it did not receive voting instructions from you on that proposal, this is referred to as a “broker non-vote.” “Broker non-votes” are considered in determining whether a quorum exists at the Annual Meeting. BrokerAs noted in “Vote Required to Approve Each Proposal” above, broker non-votes will have no effect on the outcome of Proposals 1, 3 and 6, and will have the same effect as a vote “AGAINST” Proposals 4 5 and 6. Because5. We presently believe that brokers will have discretionary authority to vote on Proposal 2 and, as such, broker non-votes are not expected on Proposal 2.
Revoking or Changing Your Vote
Stockholders may revoke or change their votes at any time before exercise at the Annual Meeting by the following methods (your last instruction received by us will be counted):
| • | giving notice of revocation to our Corporate Secretary, at American Airlines Group Inc., MD8B503, 1 Skyview Drive, Fort Worth, Texas 76155 (by mail or overnight delivery); |
| • | executing and delivering to our Corporate Secretary, at the address noted above, a proxy card relating to the same shares bearing a later date; |
| • | voting over the Internet or by telephone prior to the time the voting facilities close; or |
| • | logging onto and voting at the virtual Annual Meeting. |
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If you decide to revoke or change your vote other than by voting at the Annual Meeting, we must receive the notice of revocation or new vote by 11:59 p.m., Eastern Time, on Tuesday, May 9, 2023, the day prior to the date of the Annual Meeting.2024 Proxy Statement
If your shares are held in “street name,” you must contact your broker, bank or other nominee to revoke or change your vote. The revocation or change must be made by the broker, bank or other nominee before the Annual Meeting.
Authority of Proxies
All proper votes received by us by 11:59 p.m., Eastern Time, on Tuesday, May 9, 2023,June 4, 2024, and not revoked will be voted at the Annual Meeting in accordance with the directions noted. In the absence of instructions, shares represented by a signed and dated proxy card will be voted “FOR” the election of all director nominees, “FOR” the ratification of the appointment of the independent registered public accounting firm, “FOR” the approval, on a non-binding, advisory basis,
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of executive compensation as disclosed in this Proxy Statement, “ONE YEAR” for the frequency of the advisory vote on executive compensation, “FOR” the approval of an amendment to our Certificate of Incorporation to allow our Bylaws to be amended by our stockholders by simple majority vote, “FOR” the 2023 Incentive Award Planapproval of an amendment to our Certificate of Incorporation to allow all other provisions of our Certificate of Incorporation to be amended by simple majority vote and “FOR”“AGAINST” the stockholder proposal.
If any other matters properly come before the Annual Meeting, the persons named as proxies on the proxy card will vote upon those matters according to their judgment. The Board knows of no other items of business that will be presented for consideration at the Annual Meeting other than those described in this Proxy Statement.
Solicitation of Votes
In addition to soliciting votes through the mail, we may solicit votes through our directors, officers and employees in person and by e-mail, telephone or facsimile. We may also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares held of record by them. We will pay all expenses incurred in connection with the solicitation of proxies. In addition, we have retained Innisfree M&A Incorporated to assist in the solicitation for an anticipated fee of $25,000, plus expenses.
Inspector of Election
All votes at the Annual Meeting will be counted by Mediant, Inc., our inspector of election. The inspector of election will separately tabulate affirmative and negative votes, abstentions and broker non-votes.
Important Notice Regarding theof Internet Availability of Proxy Materials for the Annual Meeting
The Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 20222023 are available at www.proxydocs.com/AAL prior to and during the Annual Meeting.
Electronic Delivery of Proxy Materials
In order to eliminate the mailing of a paper notice and to speed your ability to access the proxy materials (including our Annual Report on Form 10-K for the year ended December 31, 2022)2023), we encourage you to sign up for electronic delivery of the Notice Regarding theof Internet Availability of Proxy Materials using the instructions described below. Stockholders can help us reduce costs and the impact on the environment by electing to receive and access future copies of our proxy statements, annual reports and other stockholder materials electronically by e-mail. If your shares are registered directly in your name with our stock registrar and transfer agent, American Stock Transfer &Equiniti Trust Company, LLC, (“AST”), you can make this election by going to AST’s website (www.astfinancial.comequiniti.com/us/ast-access) and, (1) clicking Client Login, then Shareholders & Investors, then Manage My Accounts, then selecton “Login” under the type of Account—USheading “Individuals”, (2) clicking on Shareholder or Non US Shareholder, then Login to Transact; (2)Central, (3) entering the information required to gain access to your account;account and (3)(4) clicking Receive Company Mailing via E-Mail.e-Consent. You may also make this election by following the instructions provided when voting over the Internet. If you hold your shares in a brokerage account or otherwise through a third party in “street name,” please refer to the information provided by your broker, bank or other nominee for instructions on how to elect to receive and view future annual meeting materials electronically.
This year, we intend both to mail our proxy materials to certain stockholders and to use the “Notice and Access” method of providing proxy materials to certain stockholders. Under the Notice and Access method, if you have not opted to receive an e-mail notification, you will receive by mail a simple “Notice Regarding theof Internet Availability of Proxy Materials,” which will direct you to a website where you may access proxy materials online. You will also be told how to request proxy materials (at no charge) via mail or e-mail, as you prefer.
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2024 Proxy Statement
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports, or Notices Regarding theof Internet Availability of Proxy Materials, with respect to two or more stockholders sharing the same address by delivering a single proxy statement and annual report, or Notice Regarding theof Internet Availability of Proxy Materials, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies. In accordance with these rules, only one proxy statement and annual report, or Notice Regarding theof Internet Availability of Proxy Materials, will be delivered to multiple stockholders sharing an address unless we have received contrary instructions from one or more of the stockholders. Stockholders who currently receive multiple copies of the proxy statement and annual
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report, or Notice Regarding theof Internet Availability of Proxy Materials, at their address and would like to request “householding” of their communications should contact their broker if they are beneficial owners or direct their request to our Corporate Secretary at the address provided on page 3 of this Proxy Statement if they are registered holders.
If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, or Notice Regarding theof Internet Availability of Proxy Materials, please notify your broker, if you are a beneficial owner or, if you are a registered holder, direct your written request to Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717 or call Broadridge at 1-866-540-7095.
If requested, we will also promptly deliver, upon oral or written request, a separate copy of the proxy statement and annual report, or Notice Regarding theof Internet Availability of Proxy Materials to any stockholder residing at an address to which only one copy was mailed.
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2024 Proxy Statement
PROPOSAL 1—ELECTION OF DIRECTORS
Election of Directors
Upon the recommendation of the CGPRSCGPR Committee, the Board has nominated the 1211 director candidates listed below under the section “Director Nominees.” Each nominee is currently a director of the Company, one of whom was appointed since our 2022 annual meeting of stockholders.Company.
The authorized number of directors is currently set at 1512 and the Board currently consists of 1512 members. Mr. Parker will retire from the Board on April 30, 2023, and Messrs. Albaugh and RobinsonBenjamin will not stand for re-election at the Annual Meeting. The Board has approved reducing the authorized number of directors to 1211 effective as of the Annual Meeting. If elected as a director at the Annual Meeting, each of the nominees will serve a one-year term expiring at the 20242025 annual meeting of stockholders and until his or her successor has been duly elected and qualified.
Each of the nominees has consented to serve as a director, if elected.
The Board unanimously recommends that the stockholders vote “FOR” the proposal to elect each director of the Company listed below under the section “Director Nominees” for a one-year term expiring at the 2024 annual meeting of stockholders and until his or her successor has been duly elected and qualified.
The Board unanimously recommends that the stockholders vote “FOR” the proposal to elect each director of the Company listed below under the section “Director Nominees” for a one-year term expiring at the 2025 annual meeting of stockholders and until his or her successor has been duly elected and qualified. | ||||
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2024 Proxy Statement
Director Nominees
Information regarding our director nominees, including their qualifications and principal occupations, as well as the key experience and qualifications that led the Board to conclude each nominee should serve as a director, is provided below. The categories of key skills are:
There are no family relationships among the directors and our executive officers.
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Independent
Director Since: 2021
Committees:
Key Skills and Experience:
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Adriane Brown
Select Business Experience: • Managing Partner of Flying Fish Partners, a technology-based venture capital firm (2018-Present) • President and Chief Operating Officer of Intellectual Ventures Management, LLC, a private equity firm (2010-2017) • Various roles, including President and Chief Executive Officer of Honeywell Transportation Systems, at Honeywell International Inc., a manufacturing company (1999-2010) • Various roles, most recently Vice President and General Manager of Environmental Products, at Corning Incorporated, a materials manufacturing company (1980-1999)
Current Public Company Directorships: • KKR & Co. Inc., a global investment company (2021-Present) • Axon Enterprise, Inc., a law-enforcement technology company (2020-Present) • eBay Inc., an e-commerce marketplace company (2017-Present)
Past Public Company Directorships: • Allergan plc (2017-2020) • Raytheon Company (2018-2020) • Harman International (2013-2017)
Other Leadership Experience and Service: Member of the board of directors of the International Women’s Forum; former member of the board of directors of the Washington Research Foundation/WRF Capital.
Key Experience/Director Qualifications: Financial expertise, risk management experience, extensive experience as a senior operating executive for segments of large global public companies, including industrial and manufacturing companies, investment experience in technologies and service as a public company director.
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2024 Proxy Statement
Independent
Director Since: 2013
Committees: Audit;
Key Skills and Experience:
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John Cahill
Select Business Experience: • Vice Chairman of The Kraft Heinz Company (“Kraft Heinz”), a food and beverage company (2015-Present) • Chairman and Chief Executive Officer of Kraft Foods Group, Inc. (“Kraft Foods Group”), until its merger with H.J. Heinz Company (2014-2015) • Non-Executive Chairman of Kraft Foods Group (March 2014-December 2014) • Executive Chairman of Kraft Foods Group (2012-2014) • Executive Chairman, North American Grocery of Kraft Foods, Inc., the former parent of Kraft Foods Group (January 2012-December 2012)
Current Public Company Directorships: • Kraft Heinz, a food and beverage company (2015-Present) • Colgate-Palmolive Company, a consumer products company (2005-Present)
Past Public Company Directorships: • Kraft Foods Group (2012-2015) • Legg Mason, Inc. (2009-2014) • The Pepsi Bottling Group, Inc. (1999-2007) • Frontier Holdings, Inc. (1984-1985)
Other Leadership Experience and Service: Former Industrial Partner at Ripplewood Holdings LLC; spent nine years with The Pepsi Bottling Group, Inc., culminating in the position of Chairman and Chief Executive Officer; and worked at PepsiCo, Inc. for nine years in a variety of leadership positions.
Key Experience/Director Qualifications: Leadership and operations experience in executive leadership roles at global public companies, as well as airline experience, investment, accounting and financial expertise, experience in consumer products industries and public company board and corporate governance experience. | ||||
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2024 Proxy Statement
Independent
Director Since: 2013
Committees:
Key Skills and Experience:
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Mike Embler
Select Business Experience: • Chief Investment Officer of Franklin Mutual Advisers, LLC (“Franklin Mutual Advisers”), an asset management company (2005-2009) • Head of Franklin Mutual Advisers’ Distressed Investment Group (2001-2005)
Current Public Company Directorships: • NMI Holdings, Inc., a mortgage insurance provider (2012-Present) • Ventas, Inc., a healthcare REIT (2022- Present)
Past Public Company Directorships: • Taubman Centers, Inc., a shopping mall REIT (2018-2020) • CIT Group Inc. (2009-2016) • Dynegy Inc. (2011-2012) • AboveNet Inc. (2003-2012) • Kindred Healthcare Inc. (2001-2008)
Other Leadership Experience and Service: Worked at Nomura Holding America Inc. for almost a decade in positions of increasing responsibility culminating in the position of Managing Director; former member of the board of trustees of The Mohonk Preserve; and holds certificates in Cyber
Key Experience/Director Qualifications: Experience in finance, asset management and restructurings, capital markets and capital management, experience as a senior executive, perspective as an institutional investor, success as an investor and service as a director of global public and private companies. | ||||
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2024 Proxy Statement
Independent
Director Since: 2013
Committees: Audit (Chair); Safety
Key Skills and Experience:
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Matt Hart
Select Business Experience: • President and Chief Operating Officer of Hilton Hotels Corporation (“Hilton”), a hotel developer and operator, until its acquisition by a private equity firm (2004-2007) • Executive Vice President and Chief Financial Officer of Hilton (1996-2004)
Current Public Company Directorships: • AMH (formerly American Homes 4 • Air Lease Corporation, an aircraft leasing company (2010-Present)
Past Public Company Directorships: • B. Riley Financial, Inc. (2009-2015) • US Airways Group, Inc. (2006-2013) • Kilroy Realty Corporation (1997-2008) • America West Holdings Corporation (2004-2005)
Other Leadership Experience and Service: Former Senior Vice President and Treasurer of The Walt Disney Company; former Executive Vice President and Chief Financial Officer of Host Marriott Corp.; member of the Advisory Board of INTELITY, Inc.; and member of the board of directors of Heal the
Key Experience/Director Qualifications: Financial expertise, risk management experience, extensive experience as a senior operating and finance executive for large global public companies, including companies in the consumer travel industry, investment and mergers and acquisitions experience, service as a public company director and airline experience. | ||||
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2024 Proxy Statement
Chief Executive Officer
Director Since: 2022
Key Skills and Experience:
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Robert Isom
Select Business Experience: • Chief Executive Officer of AAG and American (2022-Present) • President of AAG and American (2016-Present) • Executive Vice President and Chief Operating Officer of AAG and American (2013-2016) • Executive Vice President and Chief Operating Officer of US Airways Group, Inc. and US Airways, Inc. (2007-2013)
Current Public Company Directorships: • AAG (2022-Present)
Past Public Company Directorships: • Pinnacle Airlines Corporation (2003-2005)
Other Leadership Experience and Service: Prior to joining US Airways, Mr. Isom held senior executive finance, commercial, operations, strategy and international roles at GMAC, LLC, Northwest Airlines and America West Airlines. He started his career at The Procter & Gamble Company. Mr. Isom serves as a board member of Airlines for America and as a member of the oneworld Governing
Key Experience/Director Qualifications: Financial, airline, marketing, human resources and labor relations experience, as well as nearly 30 years of experience in the airline industry; over 20 years of experience as an airline senior executive; and safety, sustainability and risk management experience. | ||||
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Independent
Director Since: 2015
Committees:
Key Skills and Experience:
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Sue Kronick
Select Business Experience: • Operating Partner at Marvin Traub Associates, a New York based retail consulting firm (2012-2022) • Vice Chairman of Macy’s, Inc. (“Macy’s”), owner of Macy’s and Bloomingdales retail department stores (2003-2010) • Group President, Regional Department Stores of Macy’s (2001-2003) • Chairman and Chief Executive Officer of Burdines/Macy’s Florida (1997-2001)
Current Public Company Directorships: • Hyatt Hotels Corporation, a hospitality company (2009-Present)
Past Public Company Directorships: • The Pepsi Bottling Group, Inc. (1999-2010)
Other Leadership Experience and Service: Member of the board of directors of the John S. and James L. Knight Foundation and the Miami City Ballet.
Key Experience/Director Qualifications: Financial, marketing and operational expertise, as well as experience serving as a global public company director and building industry leading brands as a result of the various executive management positions held with Macy’s. | |||
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2024 Proxy Statement
Independent
Director Since: 2015
Committees: Audit;
Key Skills and Experience:
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Marty Nesbitt
Select Business Experience: • Co-Chief Executive Officer of The Vistria Group, LLC, a private-equity investment firm (2013-Present) • President and Chief Executive Officer of PRG Parking Management (PRG), an owner and operator of off-airport parking facilities (1996-2012)
Current Public Company Directorships: • Chewy, Inc., an online retailer for pet needs (2020-Present) • Center Point Energy,
Past Public Company Directorships: • Jones Lang LaSalle Incorporated, a public commercial real estate company (2011-2021) • Pebblebrook Hotel Trust (2009-2010) • Norfolk Southern Corporation (2013-2018)
Other Leadership Experience and Service: Former member of the board of directors of PRG; former officer of the Pritzker Realty Group, L.P.; former Vice President and Investment Manager at LaSalle Partners, one of the predecessor corporations of Jones Lang LaSalle Incorporated; Trustee of Chicago’s Museum of Contemporary Art; and Chairman of the Barack Obama Foundation.
Key Experience/Director Qualifications: Executive leadership, operational, financial and investment experience, as well as global public company board experience. | |||
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Independent
Director Since: 2013
Committees:
Key Skills and Experience:
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Denise O’Leary
Select Business Experience: • Private venture capital investor (1997-Present) • Partner (1987-1996) and associate (1983-1987) at Menlo Ventures, a venture capital firm
Current Public Company Directorships: • Medtronic plc, a medical technology company (2000-Present)
Past Public Company Directorships: • Calpine Corporation (2009-2018) • US Airways Group, Inc. (2005-2013) • Chiron Corporation (2002-2006) • America West Holdings Corporation (1998-2005)
Other Leadership Experience and Service: Chair Emerita of the board of trustees of the University of Denver; member of the Board of Regents of the Smithsonian Institution;
Key Experience/Director Qualifications: Executive leadership experience in the investment industry, financial expertise, experience in the oversight of risk management, human resources expertise, extensive service as a global public company director, success as an investor and airline industry expertise. | |||
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2024 Proxy Statement
Independent
Director Since: 2022
Committees: Compensation; CGPR Key Skills and Experience:
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Vicente Reynal
Select Business Experience: • Chairman of the board of directors of Ingersoll Rand Inc. (“Ingersoll”) (2021-Present) • Chief Executive Officer and President of Ingersoll (2020-Present) • Chief Executive Officer and President of Gardner Denver Inc. (“Gardner Denver”) (2017-2020) • President, Chief Executive Officer—Industrials Segment of Gardner Denver (2015-2016) • Various roles, including Group President at Danaher Corporation, a design and manufacturing company (2004-2015) • Vice President Global Operations and Supply Chain at Thermo Fisher Scientific Inc., a scientific instrumentation company (2002-2004) • Business Unit Manager, Aerospace Aftermarket at Honeywell Transportation Systems, a manufacturing company (1998-2002)
Current Public Company Directorships: • Ingersoll Rand Inc., an industrial manufacturing company (2020-Present)
Past Public Company Directorships: • Gardner Denver Inc. (2017-2020)
Other Leadership Experience and Service: Member of the board of directors of
Key Experience/Director Qualifications: Executive leadership experience in the industrial, energy and medical industries, extensive strategic, operational and general management experience, as well as experience serving as a public company director. | |||||
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Director Since: 2022
Key Skills and Experience:
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Greg Smith
Select Business Experience: • Chief Financial Officer and Executive Vice President of Enterprise Operations of The Boeing Company (“Boeing”) (2020-2021; 2012-2021); Interim Chief Executive Officer of Boeing (2019-2020); Vice President of Finance and Corporate Controller of Boeing (2010-2012); and Vice President of Financial Planning and Analysis of Boeing (2008-2010) • Vice President of Investor Relations of Raytheon Company (2004-2008)
Current Public Company Directorships: • Intel Corporation, a technology company (2017-Present)
Other Leadership Experience and Service: Member of the boards of directors of the Lurie Children’s Hospital
Key Experience/Director Qualifications: Financial expertise and extensive experience as a senior executive for a large global public company, risk management experience, extensive industry experience as executive officer of airplane manufacturer, extensive experience as a global business leader, with experience in regulatory affairs, as well as experience serving as a public company director. | |||
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2024 Proxy Statement
Independent
Director Since: 2020
Committees: Compensation; Finance (Chair)
Key Skills and Experience:
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Doug Steenland
Select Business Experience: • Senior Advisor to The Blackstone Group L.P. (2009-Present) • Chief Executive Officer of Northwest Airlines Corporation (2004-2008) • President of Northwest Airlines Corporation (2001-2004) • Senior Partner of law firm that is now DLA Piper LLP (1984-1991)
Current Public Company Directorships: •
Past Public Company Directorships: • American International Group, Inc., an insurance company (2009-2023) • London Stock Exchange Group
• Performance Food Group (2012-2019) • Travelport LLC (2012-2019)
Other Leadership Experience and Service: Member of the board of trustees of the Brookings Institute, board of directors of the Middle East Investment Initiative and board of visitors of the Duke University Fuqua Business School; former Chairman of the Air Transport Association.
Key Experience/Director Qualifications: Former airline president and CEO, extensive experience as a global business leader, with experience in finance, safety, restructuring and regulatory affairs, as well as experience serving as a public company director. | |||
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2024 Proxy Statement
BOARD COMPOSITION
How We Build a Board that is Right for American Airlines
Each of the 1211 current nominees for director recommended for election at the Annual Meeting is a current member of the Board, one of whom was appointed since our 2022 annual meeting of stockholders.Board. The effectiveness of the Board and the recruitment of directors are overseen by the CGPRSCGPR Committee. In evaluating candidates for director, the CGPRSCGPR Committee considers the qualifications described below. Based on its evaluation of each of the current nominees’ qualifications and his or her prior performance as a director, the CGPRSCGPR Committee determined to recommend each nominee for election. The CGPRSCGPR Committee received no nominations from stockholders for the Annual Meeting.
Consistent with its charter, the CGPRSCGPR Committee proposes for nomination of existing directors and new candidates who have the highest personal and professional integrity, have demonstrated exceptional judgment, have proven leadership skills, as well as the requisite skills necessary to advance our long-term strategic plan, are committed to our success and have the ability to work effectively with the Company’s Chief Executive Officer and other members of the Board. Also, a nominee must possess skills, experience and expertise appropriate to best serve the long-term financial interests of our stockholders.
The Corporate Governance Guidelines (the “Governance Guidelines”) specify that it is the objective of the Board that it be composed of individuals who have, among other things, a diversity of skills, expertise and perspective, due to, among other things, age, gender, racial and ethnic diversity, appropriate for the business and operation of the Company. The Board currently includes a group of individuals who have demonstrated success and leadership in a variety of fields and endeavors, with a broad diversity of experience, opinions, perspectives, professions, skills, expertise, education, geographic representation and backgrounds. The CGPRSCGPR Committee and the Board believe that the Board is, and should continue to be, comprised of persons who can contribute experience in public company board service and corporate governance and areas such as strategic planning, leadership of large, complex organizations, international and global operations, the airline, travel and transportation industry, finance, accounting, and investment, risk management, customer service, marketing and consumer products, labor relations and human resources (including leadership assessment and diversity), safety, information technology, and sustainability. The CGPRSCGPR Committee does not assign specific weight to particular criteria and no particular criterion is necessarily applicable to all prospective nominees.
The Governance Guidelines also require that any directors who also serve as chief executive officers of public companies should not serve on more than two boards of public companies other than the Company’s Board, and other directors should not serve on more than four boards of public companies, other than the Company’s Board.
In accordance with applicable listing standards of The Nasdaq Stock Market (“Nasdaq”), the Board confirms that at least a majority of the Board is independent in accordance with the Nasdaq definition of independence and that the members of the Board, as a group, maintain the requisite qualifications under applicable Nasdaq listing standards for service on the Audit, Compensation and CGPRSCGPR Committees.
Board Refreshment and Succession Planning
The Board believes that thoughtful refreshment of the members of the Board is important to ensure that the Board continues to meet the changing needs of the Company and that new viewpoints and perspectives are regularly considered. The Board and CGPRSCGPR Committee regularly evaluate the composition of the Board and its committees in an effort to develop a long-term succession plan for the Board and its leadership. The Company’s Governance Guidelines do not provide for an absolute limit on the length of time that a director may serve, but the CGPRSCGPR Committee and the Board consider the overall tenure of the Board during succession planning discussions and director nomination decisions. The Governance Guidelines also state that the retirement age for non-employee directors is 75. No individual is eligible for election to the Board after his or her 75th birthday. A special thank you to Jeffrey Benjamin, who will not be standing for re-election at the Annual Meeting, for his dedication to the Company and his extensive contributions during his service on our Board.
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The active work of our CGPRSCGPR Committee to add engaged and dynamic leaders to our Board has resulted in four of our 11ten independent director nominees having joined our Board sincein or following 2020, representing 36%40% of our independent director nominees. With these additions, and the retirementsretirement of Messrs. Albaugh, Parker and Robinson,Mr. Benjamin, the average tenure of our director nominees is 5.46.1 years. Additional biographical information on each nominee is set out above beginning on page 7.
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2024 Proxy Statement
In addition, as a culmination of the Board’s CEO succession planning over several years, in December 2021, we announced that Robert Isom would succeed Doug Parker as the CEO of the Company and be appointed as a member of our Board effective March 31, 2022. As part of this plan, the Board determined that it was important to retain Mr. Parker in the role of Chairman of the Board in order to ensure a successful transition in leadership. This allowed Mr. Isom to focus on executing on our strategy and operations, and Mr. Parker to devote his time and attention to matters of Board oversight and governance and providing continued advisory support to the management team throughout the transition.
As part of the long-term succession planning process, inIn February 2023, following the successful transition of our CEO role, we announced that Mr. Parker willwould retire from our Board on April 30, 2023 and the appointment of Greg Smith would serve as the Company’s Independent Chairman effective April 30, 2023. By separating the roles of Chairman and CEO, our CEO is able to continue to focus on executing on our strategy and operations, and our Independent Chairman can devote time and attention to matters of Board oversight and governance.
Board Diversity and Tenure
The CGPRSCGPR Committee recognizes the benefits of diversity in the boardroom, including better reflecting our diverse customer and employee base and the healthy debate that stems from different viewpoints that may result from diverse backgrounds. Accordingly, our Board is diverse in many ways, with differing geographic, business, gender and racial backgrounds. Over 40%45% of our Board nominees are diverse based on gender or ethnicity.
Of our 12 director nominees, seven have served on our Board for less than ten years and another five have been on our Board for less than five years. We believe this attains the right balance between new directors who bring new ideas and insights and longer-serving directors with deep institutional knowledge of our Board and Company.
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2024 Proxy Statement
The demographic information presented below is as of the date of this Proxy Statement and is based on voluntary self-identification by each nominee. Additional biographical information on each nominee is set out above beginning on page 7.
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RACE/ETHNICITY | ||||||||||||||||||||||||||||||||||||||||||||||
African American or Black | ● | ● | ||||||||||||||||||||||||||||||||||||||||||||
Hispanic or Latinx | ● | |||||||||||||||||||||||||||||||||||||||||||||
White | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||||||||||||||||
GENDER | ||||||||||||||||||||||||||||||||||||||||||||||
Male | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||||||||||||||||
Female | ● | ● | ● | |||||||||||||||||||||||||||||||||||||||||||
BOARD TENURE | ||||||||||||||||||||||||||||||||||||||||||||||
Years | 9 | 2 | 9 | 9 | 9 | 1 | 7 | 7 | 9 | 0 | 1 | 2 | 3 | 10 | 10 | 10 | 2 | 8 | 8 | 10 | 1 | 2 | 3 | |||||||||||||||||||||||
Age | 61 | 64 | 65 | 58 | 70 | 59 | 71 | 60 | 65 | 48 | 56 | 71 | 65 | 66 | 60 | 72 | 60 | 72 | 61 | 66 | 49 | 57 | 72 | |||||||||||||||||||||||
Stockholder Recommendations or Nominations of Director Candidates
The Board welcomes recommendations from its stockholders for director candidates that they believe meet the standards described above under “How We Build a Board that is Right for American Airlines.” We encourage stockholders with any such director candidate recommendations to contact us directly prior to going through the formal director nomination procedures described below. The CGPRSCGPR Committee has a policy of considering candidates who are recommended by stockholders for membership to the Board in the same manner as candidates recommended by members of the Board.
Under our Bylaws, any stockholder wishing to nominate a director should submit in writing the candidate’s name, biographical information, business qualifications and other information required by the Bylaws, to Susan D. Kronick,Martin H. Nesbitt, Chair of the Corporate Governance and Public Responsibility and Safety Committee, American Airlines Group Inc., MD8B503, 1 Skyview Drive, Fort Worth, Texas 76155. All submissions must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director, if elected, and must otherwise be in compliance with our Bylaws. The Bylaws require that written nominations be received by the Company no sooner than 120 days and no later than 90 days prior to the first anniversary of the preceding year’s annual meeting of stockholders. For the 20242025 annual meeting of stockholders, notice must be delivered no sooner than January 11, 2024February 5, 2025 and no later than February 10, 2024.March 7, 2025. All qualified submissions will be reviewed by the CGPRSCGPR Committee at the next appropriate meeting.
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2024 Proxy Statement
In addition, our Bylaws permit certain of our stockholders who have beneficially owned 3% or more of our outstanding Common Stock continuously for at least three years to submit nominations to be included in the Company’s proxy materials for up to 20% of the total number of directors then serving. Notice of proxy access director nominations for the
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2024 2025 annual meeting of stockholders must be delivered to our Corporate Secretary at our principal executive offices no earlier than November 1, 2023, 2024 and no later than the close of business on December 1, 2023., 2024. The notice must set forth the information required by our Bylaws with respect to each proxy access director nomination that eligible stockholder or stockholders intend to present at the 20242025 annual meeting of stockholders and must otherwise be in compliance with our Bylaws.
Any notice of director nomination other than through proxy access must include the additional information required by Rule 14a-19(b) under the Exchange Act and otherwise comply with our Bylaws. In connection with the 20242025 annual meeting of stockholders, we intend to file a proxy statement and a WHITE proxy card with the SEC in connection with our solicitation of proxies for that meeting.
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2024 Proxy Statement
PROPOSAL 2—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ratification of Independent Registered Public Accounting Firm
Our Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm. Our Audit Committee annually reviews the independent registered public accounting firm’s qualifications, performance, fees and independence. Following its review, our Audit Committee has selected KPMG LLP (“KPMG”) to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2023,2024, and our Board has directed that KPMG’s appointment be submitted to our stockholders for ratification at the Annual Meeting.
KPMG has served as our independent registered public accounting firm since 2014. The Audit Committee believes it is important for the independent registered public accounting firm to maintain its objectivity and independence. In accordance with SEC rules and KPMG policies, the firm’s lead engagement partner rotates every five years. The Audit Committee and its Chair are directly involved in the selection of KPMG’s new lead engagement partner. Furthermore, in order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered public accounting firm.
The Board has directed that KPMG’s appointment for the fiscal year ending December 31, 20232024 be submitted to our stockholders for ratification at the Annual Meeting. The Audit Committee and the Board believe that the continued retention of KPMG to serve as the Company’s independent external auditor is in the best interests of the Company and its stockholders. If the stockholders do not ratify the appointment of KPMG, the Audit Committee will reconsider the appointment.
A representative of KPMG is expected to be present at the Annual Meeting. The representative will have an opportunity to make a statement if he or she desires to do so, and the representative is also expected to be available to respond to appropriate questions from stockholders.
The Audit Committee and the Board unanimously recommend that the stockholders vote “FOR” the proposal to ratify the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2023.
The Audit Committee and the Board unanimously recommend that the stockholders vote “FOR” the proposal to ratify the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2024. | ||||
Independent Registered Public Accounting Firm Fees
The following table presents fees billed for professional services rendered by KPMG, AAG’s independent registered public accounting firm for the audit of the financial statements of AAG and its subsidiaries as of and for the fiscal years ended December 31, 20222023 and 2021,2022, as well as fees billed in this period for other services rendered by KPMG.
Fiscal Year 2022 ($) | Fiscal Year 2021 ($) | Fiscal Year 2023 ($) | Fiscal Year 2022 ($) | |||||||||||||||||||||||||||
Audit Fees |
| 4,300,000 |
| 3,860,000 | ||||||||||||||||||||||||||
Audit-Related Fees |
| 1,220,000 |
| 1,530,000 | ||||||||||||||||||||||||||
Tax Fees |
| 32,000 |
| 30,000 | ||||||||||||||||||||||||||
All Other Fees |
| 23,000 |
| – |
| - |
| 23,000 | ||||||||||||||||||||||
Total |
| 5,575,000 |
| 5,420,000 |
| 6,130,000 |
| 5,575,000 | ||||||||||||||||||||||
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“Audit Fees” are for professional services rendered for the audits of the annual financial statements included in our Annual Report on Form 10-K (including fees for the audits of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002, as amended) and quarterly reviews of the financial statements included in our quarterly reports on Form 10-Q.
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“Audit-Related Fees” are for professional services rendered in connection with securities offerings and other SEC filings, significant auditing work on transactions and consultations concerning financial accounting and reporting standards and attestation services.
“Tax Fees” for the fiscal year ended December 31, 2022 primarily include fees for professional services rendered in connection with tax compliance services. There were no fees that fall into the classification of “Tax Fees” for the fiscal year ended December 31, 2023.
“All Other Fees” for the fiscal year ended December 31, 2022 included conference registration fees. There were no fees that fall into the classification of “All Other Fees” for the fiscal year ended December 31, 2021.2023.
Policy on Audit Committee Pre-Approval
The Audit Committee is responsible for appointing, setting compensation for and overseeing the work of the independent registered public accounting firm. The Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm, including audit services, audit-related services, tax services and other services. The Audit Committee has delegated pre-approval authority to its Chair. Under this delegation, the Chair must report any pre-approval decision he or she makes to the Audit Committee at its next meeting following such approval.
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2024 Proxy Statement
PROPOSAL 3—ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (SAY-ON-PAY)
Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), allows our stockholders to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, commonly known as a “say-on-pay” vote. The Board has adopted a policy providing for an annual say-on-pay advisory vote. Unless the Board modifies its policy on the frequency of future say-on-pay advisory votes, we will bring these proposals to our stockholders annually and the next say-on-pay advisory vote will be held at the 20242025 annual meeting of stockholders.
Our Compensation Committee and the Board believe that our compensation practices align our executive compensation structure with stockholders’ interests and current market practices. Our compensation strategy is designed to provide a total compensation package that will attract and retain high-caliber executives and align their objectives, incentives and contributions with our corporate objectives and stockholder interests, as well as to be flexible and complementary to meet our compensation objectives. At the 20222023 annual meeting of stockholders, our stockholders approved the compensation of our named executive officers with an approval representing approximately 93.4%96% of the shares represented in person or by proxy at the meeting and entitled to vote.
As a condition ofvote on the payroll support and loan agreements entered into with the federal government under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the payroll support agreement under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (“PSP2”) and the payroll support agreement under section 7301 of the American Rescue Plan Act of 2021 (“PSP3”), we implemented significant reductions to the total target direct compensation for our named executive officers in order to comply with the applicable limits. Under the applicable limits, each of our named executive officers’ total compensation during any 12-month period from March 24, 2020 until April 1, 2023, is capped at an amount equal to the sum of (i) $3 million and (ii) 50% of the total compensation in excess of $3 million received by such executive officer in calendar year 2019. For example, Mr. Isom’s total compensation for 2019 was approximately $7.1 million and his total compensation for any 12-month period while the limits are in effect was limited to approximately $5.0 million, a decrease of approximately 29%. These limits have continued to be a primary determinant of our named executive officers’ compensation over the remaining period during which they are in effect. Mr. Isom’s 2022 total target direct compensation remained below the level in 2019, despite Mr. Isom’s promotion to CEO on March 31, 2022. Despite these limitations,for 2022, we re-established our historical performance-based cash and equity incentive programs.
Highlights of our compensation program and our pay-for-performance results include:
2022 Compensation Program Places Significant Pay at Risk.Going into 2022, our named executive officers continued to experience substantial limitations to their compensation. In making 2022 compensation decisions, the Compensation Committee continued to consider concerns related to the need to retain and reward our management team throughout the COVID-19 pandemic and the backdrop of significant reductions in compensation. Despite these concerns, the Compensation Committee re-established the performance-based components of our LTIP programs for 2022 for the named executive officers.proposal.
Our 2022executive compensation program is heavily performance-based and directly linked with our established goals of delivering record operational results, continuing to close our margin gap with our largest competitors, and reducing total debt by $15 billion by the end of 2025. Our 2023 LTIP for our named executive officers returned to incorporatingincorporated both performance- and time-vesting components, with half of the target value consisting of the performance-vesting component. The performance-vesting component weighted 50% by target value andis tied to attainment of total debt reduction (60%(50% weighting) and relative pre-tax income margin improvement (40% weighting) versus our industry peers.peers (50% weighting). The performance-vesting component of the 20222023 LTIP will be earned, if at all, no earlier thanfollowing the third anniversarycompletion of the grant date. In addition, the Compensation Committee re-established oura three-year performance period. The 2023 performance-based STIP. The STIP iswas designed to align management with our goals to run a reliable operation and to return to profitability as we emerged from the COVID-19 pandemic while building on our momentum on diversity, equity and inclusion.
2020 Performance-Vesting RSUs Earned Below Target. Historically, our LTIP As more fully described under the “Compensation Discussion and Analysis” section, in making 2023 compensation decisions, the Compensation Committee continued to consider concerns related to the need to retain and create appropriate incentives for our named executive officers has incorporated both performance- and time-vesting components, withmanagement team against the performance-vesting component weighted at least 50% by target value. Asbackdrop of significant reductions in compensation during the end of 2022, the 2020 performance-vesting RSUs were tracking at significantly below target and vested at only 62.9% of target in February 2023.
Realizable Compensation Continues to be Significantly Less Than Target Compensation. As of December 31, 2022, Mr. Isom’s three-year average realizable compensation from 2020-2022 was 70% of his three-year average
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target compensation, while the three-year average realizable compensation from 2020-2022 for our non-CEO named executive officers was 76% of their three-year average targeted compensation.
No Employment, Change in Control or Severance Agreements. None of our executive officers is party to any employment or severance agreement providing change in control or severance benefits. These were eliminated at our executive officers’ request.pandemic.
A Continued Commitment to Good Compensation Governance Practices. Compensation packages for our executive officers are (i) established by our Compensation Committee that consists solely of independent directors, (ii) consistent with market and industry practice, and (iii) reasonable in light of our corporate and each individual executive’s performance.
Clawback Provisions. All cash and equity awards grantedThe Company’s clawback policy requires the recoupment of incentive compensation determined to ourbe erroneously awarded to executive officers are subjectin the event of an accounting restatement but also continues to clawback provisions.provide the Compensation Committee with broad discretion as to what actions may be taken based on the circumstances, including recovery of compensation paid under the Company’s STIP, LTIP and other equity incentive awards.
Robust Stock Ownership Guidelines. We maintain stock ownership guidelines that further align our executives’ long-term interests with those of our stockholders, as well as good disclosure practices.stockholders.
Mitigating Compensation Risk. We mitigate compensation risk by providing a compensation package that focuses on both short- and long-term goals and requiringrequires a substantial stock ownership commitment, which encourageencourages our executives to focus on the Company’s success both during the immediate fiscal year and for the future.
For more information about our compensation practices and philosophy, see the section entitled “Compensation Discussion and Analysis” beginning on page 52.48.
We are asking our stockholders to indicate their support for our named executive officer compensation as described in this Proxy Statement pursuant to the compensation disclosure rules of the SEC. This vote gives stockholders the opportunity to express their views on the named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our executive officers and our philosophy, policies and practices described in this Proxy Statement. Accordingly, we are asking our stockholders to vote “FOR” the following resolution at the Annual Meeting:
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2024 Proxy Statement
“RESOLVED, that AAG’s stockholders approve, on a non-binding, advisory basis, the compensation of AAG’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC in the Compensation Discussion and Analysis section, the compensation tables, narrative discussion and any related material disclosed in this Proxy Statement for the Annual Meeting.”
The say-on-pay vote is advisory, and therefore not binding on us, our Compensation Committee or the Board. However, the Board and Compensation Committee value the opinions of our stockholders and will consider the outcome of this advisory vote when making future decisions about executive compensation.
The Board unanimously recommends that the stockholders vote “FOR” the approval of executive compensation.
The Board unanimously recommends that the stockholders vote “FOR” the approval of executive compensation. | ||||
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2024 Proxy Statement
PROPOSAL 4—ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (SAY-ON-PAY FREQUENCY)
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 enables our stockholders to indicate how frequently they would like the Company to hold a non-binding, advisory vote on the compensation of our named executive officers, as disclosed pursuant to the SEC’s compensation disclosure rules. By voting on this proposal, stockholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two or three years.
The Board has determined that holding a “say-on-pay” vote on executive compensation every year is the most appropriate alternative for the Company, and therefore recommends that you vote for a one-year interval for the advisory vote on executive compensation.
In formulating its recommendation, the Board considered that an advisory vote every year on executive compensation allows our stockholders to provide us with their direct input on our compensation philosophy, policies and practices as disclosed in the proxy statement every year. Additionally, an advisory vote every year on executive compensation is consistent with our policy of seeking input from, and engaging in discussions with, our stockholders on corporate governance matters and our executive compensation philosophy, policies and practices.
The frequency vote on executive compensation is advisory and therefore not binding on the Company, the Compensation Committee or the Board. The Board and our Compensation Committee value the opinions of our stockholders and will consider the outcome of this advisory vote when determining how often the Company should submit to stockholders an advisory vote to approve the compensation of its named executive officers.
The Board unanimously recommends the approval of an advisory vote to approve executive compensation to be held every “ONE YEAR.”
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PROPOSAL 5—APPROVAL OF THE 2023 INCENTIVE AWARD PLAN
On March 22, 2023, the Board adopted, subject to stockholder approval, the American Airlines Group Inc. 2023 Incentive Award Plan (the “2023 Plan”). The 2023 Plan is intended to replace our 2013 Incentive Award Plan (the “2013 Plan”), which will, by its terms, expire in December 2023. Upon stockholder approval of the 2023 Plan, the 2023 Plan will become effective and will supersede and replace in its entirety the 2013 Plan, and no further awards will be granted under the 2013 Plan; however, the terms and conditions of the 2013 Plan will continue to govern any outstanding awards granted thereunder. If the 2023 Plan is not approved by our stockholders, it will not become effective, and we may continue to grant awards under the 2013 Plan until its expiration in December 2023, using the shares available for issuance thereunder.
Employees and consultants of the Company and its subsidiaries, as well as members of our Board, are eligible to receive awards under the 2023 Plan. The 2023 Plan provides for the grant of stock options, including incentive stock options (“ISOs”) and nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance bonus awards, performance stock units, other stock or cash-based awards, and dividend equivalents to eligible individuals.
The Board approved a share reserve under the 2023 Plan equal to 17,200,000 shares of our Common Stock. The 2023 Plan’s share reserve will be reduced by one share of Common Stock for every one share granted under the 2013 Plan after March 22, 2023 (the date of Board approval of the 2023 Plan) and prior to the effective date of the 2023 Plan.
In addition, as described below, if an award under the 2023 Plan or, after March 22, 2023, the 2013 Plan expires, lapses or is terminated, is converted into an award in respect of shares of another entity in connection with a spin-off or other similar event, exchanged or settled for cash, surrendered, repurchased, cancelled without having been fully exercised or forfeited, in any case, in a manner that results in us acquiring the underlying shares at a price not greater than the price paid by the participant for such shares or not issuing the underlying shares, such unused shares subject to the award will be available for future grants under the 2023 Plan.
In designing the 2023 Plan, we sought to implement current compensation and governance best practices to ensure the 2023 Plan furthers our compensation plan objectives and supports long-term stockholder interests. Approval of the 2023 Plan will constitute approval pursuant to the stockholder approval requirements of Section 422 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), relating to ISOs.
Key Features of the 2023 Plan
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Background on Share Request
In its determination to approve the 2023 Plan, our Board reviewed with Korn Ferry, the Compensation Committee’s compensation consultant, an analysis of our historical share usage, certain burn rate metrics and the anticipated costs of the 2023 Plan. Specifically, our Board considered the following:
In light of the factors described above, and that the ability to continue to grant equity compensation is vital to our ability to continue to attract and retain employees in the competitive labor markets in which we compete, our Board has determined that the size of the share reserve under the 2023 Plan is reasonable and appropriate at this time.
Key Equity Metrics
On March 22, 2023, the date the 2023 Plan was adopted by the Board, the Company had an aggregate of 652,817,674 shares of Common Stock outstanding and a total of approximately 16,111,017 shares of Common Stock reserved for issuance and available for future grants under the 2013 Plan. As of March 22, 2023, there were approximately 10,473,272 RSUs outstanding under the 2013 Plan, 9,612,834 of which were subject solely to time-based vesting conditions, and 860,438 of which were subject to performance-based vesting conditions (with performance-based awards counted assuming “max” performance).
The following table provides information regarding the grant of equity awards over the past three completed fiscal years and which we considered in setting the number of shares available for issuance under the 2023 Plan:
Fiscal Year | Time-Based Vesting RSUs Granted | Performance- Based Vesting RSUs Granted(1) | Actual Performance- Based Vesting RSUs Earned(2) | Total Granted(3) | Weighted Average # of Shares | Burn Rate(4) | ||||||||||||||||||||
2020 | 5,401,755 | 481,661 | 168,169 | 5,569,924 | 483,888,366 | 1.15 | % | |||||||||||||||||||
2021 | 5,525,006 | - | - | 5,525,006 | 644,015,420 | 0.86 | % | |||||||||||||||||||
2022 | 5,451,595 | 430,219 | - | 5,451,595 | 650,344,628 | 0.84 | % | |||||||||||||||||||
Average Three-Year Burn Rate (2020-2022) |
| 0.95 | % | |||||||||||||||||||||||
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| Performance-Based Vesting RSUs
| Number of
| Number of
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Unearned and Outstanding as of December 31, 2019 | 981,707 | 1,963,414 | ||||||
Granted during fiscal 2020 | 481,661 | 963,322 | ||||||
Earned during fiscal 2020 | (168,169 | ) | (168,169 | ) | ||||
Forfeited during fiscal 2020 | (130,528 | ) | (429,225 | ) | ||||
Unearned and Outstanding as of December 31, 2020 | 1,164,671 | 2,329,342 | ||||||
Granted during fiscal 2021 | — | — | ||||||
Earned during fiscal 2021 | — | — | ||||||
Forfeited during fiscal 2021 | (277,259 | ) | (554,518 | ) | ||||
Unearned and Outstanding as of December 31, 2021 | 887,412 | 1,774,824 | ||||||
Granted during fiscal 2022 | 430,219 | 860,438 | ||||||
Earned during fiscal 2022 | — | — | ||||||
Forfeited during fiscal 2022 | (456,362 | ) | (912,724 | ) | ||||
Unearned and Outstanding as of December 31, 2022 | 861,269 | 1,722,538 | ||||||
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Summary of 2023 Plan
A summary of the principal provisions of the 2023 Plan is set forth below. The summary is qualified by reference to the full text of the 2023 Plan, which is attached as Appendix A to this Proxy Statement.
Administration
The Compensation Committee (or, with respect to awards to non-employee directors, our Board) (together, the “administrator”) is charged with the general administration of the 2023 Plan. The 2023 Plan provides that, subject to certain limitations, our Board and the Compensation Committee may from time to time delegate its authority to grant awards to a committee consisting of one or more members of our Board or the Compensation Committee or one or more of our officers. Subject to the terms and conditions of the 2023 Plan, the administrator will have the authority to select the persons to whom awards are to be made; to determine the type of awards to be granted, the number of shares to be subject to awards and the terms and conditions of awards; to determine when awards can be settled in cash, shares, or other property or whether an award may be cancelled, forfeited or surrendered; to accelerate vesting or lapse restrictions; and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2023 Plan. The administrator will also be authorized to adopt, amend or repeal rules relating to the administration of the 2023 Plan.
Eligibility
Persons eligible to participate in the 2023 Plan include all members of the Board (currently comprised of 14 non-employee directors) and approximately 140,000 employees of the Company and its subsidiaries, in each case, as determined by the administrator of the 2023 Plan. Only employees may be granted ISOs under the 2023 Plan. Consultants are not eligible to receive equity awards under the Company’s existing grant guidelines.
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Shares Available and Limitations on Awards
If our stockholders approve the 2023 Plan, the number of shares available for issuance under the 2023 Plan will be equal to 17,200,000 shares of our Common Stock. The 2023 Plan’s share reserve will be reduced by one share of Common Stock for every one share granted under the 2013 Plan after March 22, 2023 and prior to the effective date of the 2023 Plan. The maximum number of shares that may be issued under the 2023 Plan upon the exercise of ISOs is 17,200,000.
In addition, if all or any part of an award under the 2023 Plan or, after March 22, 2023, the 2013 Plan expires, lapses or is terminated, converted into an award in respect of shares of another entity in connection with a spin-off or other similar event, exchanged or settled for cash, surrendered, repurchased, cancelled without having been fully exercised or forfeited, in any case, in a manner that results in us acquiring the underlying shares at a price not greater than the price paid by the participant for such shares or not issuing the underlying shares, such unused shares subject to the award at such time will be available for future grants under the 2023 Plan. In addition, the following items will not be counted against the shares available for issuance under the 2023 Plan: (i) the payment of dividend equivalents in cash in conjunction with any outstanding awards; (ii) any awards that are settled in cash rather than by issuance of shares and (iii) shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by us or any of our subsidiaries, except shares acquired upon the exercise of ISOs will count against the maximum number of shares that may be issued under the 2023 Plan pursuant to the exercise of ISOs.
The following types of shares will not be added back to the shares available for issuance under the 2023 Plan: (i) shares tendered by a participant or withheld by us in payment of the exercise price of an option; (ii) shares tendered by a participant or withheld to satisfy any tax withholding obligation with respect to an award; (iii) shares subject to a SAR that are not issued in connection with the stock settlement of the SAR on exercise; and (iv) shares purchased on the open market with the cash proceeds from the exercise of options.
No awards granted under the 2023 Plan may vest earlier than one year measured from the date of grant, or, with respect to any such award subject to performance-based vesting, based on an applicable performance period that is shorter than one year, provided that an award may provide for the accelerated vesting, exercisability and/or payment (as applicable) of an award upon a participant’s termination of service or in connection with a change in control of the Company. However, up to an aggregate of 5% of the number of shares reserved for issuance under the 2023 Plan may be granted without regard to the foregoing minimum vesting requirement. For purposes of awards to non-employee directors, a vesting period shall be deemed to be one year if it runs from the date of one annual meeting of the Company’s stockholders to the next annual meeting of the Company’s stockholders, so long as the period between such meetings is not less than 50 weeks.
In addition, under the 2023 Plan, the sum of the grant date fair value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 718) of all equity-based awards and the maximum amount that may become payable pursuant to all cash-based awards that may be granted to a director as compensation for services as a non-employee director during any calendar year may not exceed $1,500,000.
As of March 22, 2023, the closing price of a share of our Common Stock on Nasdaq was $13.82.
Awards
The 2023 Plan provides that the administrator may grant or issue stock options, SARs, restricted stock, RSUs, performance bonus awards, performance stock units, other stock or cash-based awards, dividend equivalents or any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.
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Any award may be granted as a performance award, meaning that the award will be subject to vesting and/or payment based on the attainment of specified performance goals.
Prohibition on Repricing
Except in connection with a corporate transaction involving the Company, the terms of outstanding awards may not be amended without the approval of our stockholders to (i) reduce the exercise price per share of outstanding options or SARs or (ii) cancel outstanding options or SARs in exchange for cash or other awards when the exercise price of such option or SAR exceeds the fair market value of the underlying shares.
Awards Subject to Clawback
All awards (including any proceeds, gains or other economic benefit actually or constructively received by a participant) granted under the 2023 Plan will be subject to our clawback policy.
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Adjustment Upon Certain Events
The administrator has broad discretion to take action under the 2023 Plan, as well as to make adjustments to the terms and conditions of existing and future awards, to prevent the dilution or enlargement of intended benefits and facilitate necessary or desirable changes in the event of certain transactions and events affecting our Common Stock, such as stock dividends, stock splits, mergers, acquisitions, consolidations, change in control events, and other corporate transactions. Notwithstanding the foregoing, in the event of a change in control, the administrator may take any action with respect to outstanding awards as it deems appropriate, consistent with applicable provisions of the Code and applicable federal or state securities laws.In addition, in the event of certain non-reciprocal transactions with our stockholders known as “equity restructurings,” the administrator will make equitable adjustments to the 2023 Plan and outstanding awards.
Foreign Participants, Transferability and Participant Payments
The administrator may modify awards granted to participants who are foreign nationals or employed outside the United States or establish subplans or procedures to address differences in laws, rules, regulations or customs of such foreign jurisdictions. Except as the administrator may determine or provide in an award agreement, awards under the 2023 Plan are generally non-transferrable, except by will or the laws of descent and distribution, or, subject to the administrator’s consent, pursuant to a domestic relations order, and are generally exercisable only by the participant. With regard to tax withholding obligations arising in connection with awards under the 2023 Plan, and exercise price obligations arising in connection with the exercise of stock options under the 2023 Plan, the administrator may, in its discretion, accept cash, wire transfer or check, shares of our Common Stock that meet specified conditions, a promissory note, a “market sell order,” such other consideration as the administrator deems suitable, or any combination of the foregoing.
Plan Amendment and Termination
The administrator may amend, suspend or terminate the 2023 Plan at any time. However, we must generally obtain stockholder approval to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule), and generally no amendment may materially and adversely affect any outstanding award without the affected participant’s consent.
No ISOs may be granted pursuant to the 2023 Plan after the tenth anniversary of the effective date of the 2023 Plan. Any award that is outstanding on the termination date of the 2023 Plan will remain in force according to the terms of the 2023 Plan and the applicable award agreement.
Material U.S. Federal Income Tax Consequences
The following is a general summary under current law of the principal United States federal income tax consequences related to awards under the 2023 Plan. This summary deals with the general federal income tax principles that apply and is provided only for general information. Some kinds of taxes, such as state, local and foreign income taxes and federal employment taxes, are not discussed. This summary is not intended as tax advice to participants, who should consult their own tax advisors.
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New Plan Benefits
Other than with respect to annual grants of RSUs to our non-employee directors that will be made on the date of the Annual Meeting (reflected in the table below), all future awards under the 2023 Plan (assuming it is approved by stockholders) are subject to the discretion of the administrator and are not currently determinable, and therefore it is not possible to determine the benefits that will be received in the future by other participants in the 2023 Plan.
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To be approved, this proposal must receive a “For” vote from the holders of a majority of the shares of our Common Stock which are present or represented by proxy and entitled to vote on the proposal. Abstentions will have the same effect as an “Against” vote for purposes of determining whether this matter has been approved. Broker non-votes will not be counted for any purpose in determining whether this matter has been approved.
The Board unanimously recommends that the stockholders vote “FOR” the approval of the 2023 Incentive Award Plan.
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PROPOSAL 6—ADVISORY4—APPROVE AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO ALLOW OUR BYLAWS TO BE AMENDED IN THE FUTURE BY SIMPLE MAJORITY VOTE ON A STOCKHOLDER PROPOSAL
A stockholder has informedAt our 2023 annual meeting of stockholders, the Company that he intends to present thestockholders voted on a stockholder-sponsored proposal set forth below at our Annual Meeting. The name and address of the stockholder and the number of the Company’s securitiesrequesting that the stockholder owns will be providedBoard take the steps necessary to stockholders promptly upon request. If theeliminate each stockholder (or his “qualified representative”) is present at the Annual Meeting and properly submits the proposal for a vote, then the stockholder proposal will be voted upon at the Annual Meeting. In accordance with federal securities laws, the stockholder proposal is presented below as submitted by the stockholder and is quoted verbatim. The Company disclaims all responsibility for the content of the proposal and the supporting statement, including other sources referenced in the supporting statement.
Stockholder Proposal
Proposal 6—Enable Bylaws to be Updated by Simple Majority Vote
Shareholders request that our board take each step necessary so that each voting requirement in our charter and bylaws (that is explicitCertificate of Incorporation or implicit due to default to state law)Bylaws that calls for a greater than simple majority vote be replaced by a requirement forvote. The proposal passed with the support of a majority of the votes cast for and against such proposals, or a simple majority in compliance with applicable laws toat the fullest extent possible.
If necessary this means the closest standard to a majority of the votes cast for and against such proposals consistent with applicable laws. This includes any existing supermajority vote requirement that results from default to state law and can be subject to replacement. This proposal topic is particularly important because it was approved by 99% of American Airlines voting shares in 2022 as a management proposal.
This 2023 proposal includes that the Board take all the steps necessary at its discretion to help ensure that the topic of this proposal is approved by the required of 80% of all outstanding shares including a commitment to hire a proxy solicitor to conduct an intensive campaign, a commitment to adjourn the annual meeting to obtain the votes required if necessary and to take a 2- year process if applicable to obtain the necessary shareholder vote turnout to adopt this proposal topic. This proposal does not restrict the Board from using a means to obtain the necessary vote that is not mentioned in this proposal.
For instance PPG Industries, Inc. (PPG) adjourned its annual meeting for weeks to obtain the necessary votes on this proposal topic in 2022 and Raytheon Technologies Corporation (RTX) announced a 2- year process to obtain shareholder approval of this proposal topic in its 2022 proxy.
This proposal includes that the Board make an EDGAR filing approximately 10- days before the annual meeting urging shareholders to vote in favor of a binding simple majority vote proposal like this proposal. Also to explain all the efforts the board has taken or will take to obtain the necessary vote and all the available efforts that the Board has not taken with an explanation for each available effort not taken.
Extraordinary measures need to be taken to adopt this proposal topic because it won 99% approval from the shares that voted in 2022. However not enough shareholders cast ballots in 2022 to obtain shareholder approval for this proposal topic. American Airlines directors were negligent in not taking effective means to increase the alarmingly low American Airlines shareholder voting turnout. Ms. Susan Kronick, Chair of the American Airlines governance committee, is responsibility for this alarmingly low American Airlines shareholder voting turnout.
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With simple majority vote it will be less difficult to adopt improvements to the governance of American Airlines. The principle of a simple majority vote to update the bylaws is a win for shareholders, the Board and management.
Please vote yes:
Enable Bylaws to be Updated by Simple Majority Vote—Proposal 6
The Board’s Statement in Supportmeeting.
The Board has carefully considered this proposalthe advantages and agrees that the removaldisadvantages of maintaining the supermajority voting provisions in our Bylaws and Certificate of Incorporation, is inincluding the best interests ofprovision requiring the Company and our stockholders. Therefore, the Board recommends a vote FOR this proposal, but such recommendation is subject to several clarifications provided below.
Our Bylaws contain only one supermajority voting provision, which requires theaffirmative vote of the holders of at least 80% of the voting power of the shares outstanding and entitled to vote for the election of directors in order for our stockholders to amend our Bylaws. OurWhile this provision is designed to ensure that the interests of all stockholders are fully protected by requiring any amendments to our Bylaws to be supported by a significant portion of our stockholders, the Board recognizes that there are different perspectives on this matter and, after weighing these considerations, has determined that it is in the best interests of the Company and its stockholders to amend our Certificate of Incorporation contains only twoto eliminate the supermajority voting provisions: (i) Article X, which requiresrequirement for amendments to the Bylaws by our stockholders (the “Bylaw Voting Threshold Amendment”). The Board recommends that stockholders approve the Bylaw Voting Threshold Amendment.
This proposal is separate and independent from the Supermajority Elimination Amendment in Proposal 5 because the vote required to approve this proposal is different than that required to approve Proposal 5.
An affirmative vote of the holders of at least 80% of the voting power of the shares outstanding and entitled to vote for the election of directors as of the Record Date is required to adopt Proposal 4. If approved, this proposal would become effective upon the filing of a certificate of amendment setting forth the Bylaw Voting Threshold Amendment with the Secretary of State of Delaware, which we intend to do if, and promptly after, the required stockholder approval is obtained.
The Board has also approved an amendment to the Bylaws to remove the corresponding supermajority amendment threshold from the Bylaws, the effectiveness of which is subject to stockholder approval of the Bylaw Voting Threshold Amendment at the 2024 Annual Meeting of Stockholders and the filing of the certificate of amendment setting forth the Bylaw Voting Threshold Amendment. If the foregoing events occur, such amendment to the Bylaws will be effective immediately following the filing of the Bylaw Voting Threshold Amendment with the Secretary of State of Delaware.
The description in order forthis Proposal of the Bylaw Voting Threshold Amendment to eliminate the supermajority voting requirement in the Certificate of Incorporation with respect to amendments to the Bylaws by our stockholders is qualified in its entirety by reference to the text of the Bylaw Voting Threshold Amendment, which is attached to this Proxy Statement as Appendix A.
The Board unanimously recommends that the stockholders vote “FOR” the approval of the proposal to amend our Certificate of Incorporation to allow our Bylaws to be amended by simple majority vote. | ||||
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2024 Proxy Statement
PROPOSAL 5—APPROVE AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO ALLOW ALL OTHER PROVISIONS OF THE CERTIFICATE OF INCORPORATION TO BE AMENDED BY SIMPLE MAJORITY VOTE
At our 2023 annual meeting of stockholders, the stockholders voted on a stockholder-sponsored proposal requesting that the Board take the steps necessary to eliminate each stockholder voting requirement in our Certificate of Incorporation or Bylaws (the “Bylaw Provision”),that calls for a greater than simple majority vote. The proposal passed with the support of a majority of the votes cast at the meeting.
The Board has carefully considered the advantages and (ii) Article XIII, which requiresdisadvantages of maintaining the supermajority voting provisions in our Certificate of Incorporation, including the provisions requiring the affirmative vote of the holders of at least two-thirds of the voting power of the shares outstanding and entitled to vote for the election of directors in order for our stockholders to amend certain provisions of our Certificate of Incorporation (including, among other things, provisions related to the size and terms of our Board, vacancies on the Board, stockholder consents, special meetings of stockholders and the requirements to amend the Certificate of Incorporation) (the “Certificate of Incorporation Provision” and, together with the Bylaw Provision, the “Supermajority Voting Provisions”).
The Board cannot remove the Supermajority Voting Provisions from our Certificate of Incorporation without a vote of the stockholders. For this reason, for our 2022 Annual Meeting, the Board approved and unanimously recommended that our stockholders approve two proposals to amend the Certificate of Incorporation in order to eliminate the Supermajority Voting Provisions from our Certificate of Incorporation (collectively, the “Proposed Amendments”). Had the Proposed Amendments passed, the Board would have amended the Bylaws to remove the one supermajority provision.
In advance of the 2022 Annual Meeting, we engaged a proxy solicitor and worked diligently with them to encourage our stockholders to vote in favor of the Proposed Amendments. Unfortunately, despite the Board’s unequivocal support and solicitation efforts, the Proposed Amendments failed to obtain the necessary support by our stockholders.
We believe the primary reason the Proposed Amendments did not pass was due to the large number of our shares held by individual stockholders at the record date of the 2022 annual meeting. We believe that individual stockholders who purchase securities for their own personal accounts often do not direct the voting of their shares regardless of the solicitation efforts undertaken.
These stockholders typically return a significantly lower proportion of their proxies than the Company’s institutional stockholder base. The costs to solicit votes from these stockholders, each of whom typically holds a small number of shares, are significant.
While the Board recommends a vote in favorsupermajority voting provisions are designed to ensure that the interests of this proposal, we strongly disagree with the opinions expressed in the proposal’s supporting statement, and in particular the proponent’s mischaracterization of our directors and their efforts to pass the Proposed Amendments at our 2022 Annual Meeting.
Subject to stockholders’ approval of this proposal at our 2023 Annual Meeting, at the 2024 Annual Meeting, we will once again proposeall stockholders are fully protected by requiring any amendments to our Certificate of Incorporation to be supported by a significant portion of our stockholders, the Board recognizes that there are different perspectives on this matter and, after weighing these considerations, has determined that it is in the best interests of the Company and its stockholders to amend our Certificate of Incorporation to eliminate the supermajority voting provisions (the “Supermajority Elimination Amendment”). The Board recommends that stockholders approve the Supermajority Elimination Amendment.
This proposal is separate and independent from the Bylaw Voting Provisions and enactThreshold Amendment in Proposal 4 because the Proposed Amendments. In advancevote required to approve this proposal is different than that required to approve Proposal 4.
An affirmative vote of the 2024 Annual Meeting, we will engage in solicitation efforts designedholders of at least two-thirds of the voting power of the shares outstanding and entitled to encourage stockholder voting in supportvote for the Proposed Amendments.election of directors as of the Record Date is required to adopt Proposal 5. If approved, this proposal would become effective upon the filing of a certificate of amendment setting forth the Supermajority Elimination Amendment with the Secretary of State of Delaware, which we intend to do if, and promptly, after the required stockholder approval is obtained.
We believe these proposed efforts are consistent withThe description in this Proposal of the Board’s longstanding commitmentSupermajority Elimination Amendment to effective corporate governance best practices that create long-term value for our stockholders.eliminate the supermajority provisions in the Certificate of Incorporation is qualified in its entirety by reference to the text of the Supermajority Elimination Amendment, which is attached to this Proxy Statement as Appendix A.
The Board unanimously recommends that the stockholders vote “FOR” the approval of the proposal to amend our Certificate of Incorporation to allow all other provisions of the Certificate of Incorporation to be amended by simple majority vote. | ||||
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2024 Proxy Statement
PROPOSAL 6—ADVISORY VOTE ON A STOCKHOLDER PROPOSAL
The Treasurer for the State of Illinois, as Trustee of the Bright Start College Savings Trust, has informed the Company of their intention to present the proposal set forth below at our Annual Meeting. The address of the stockholder and the number of the Company’s securities that the stockholder owns will be provided to stockholders promptly upon request. If the stockholder (or their “qualified representative”) is present at the Annual Meeting and properly submits the proposal for a vote, then the stockholder proposal will be voted upon at the Annual Meeting. In accordance with the federal securities laws, the stockholder proposal is presented below as submitted by the stockholder and is quoted verbatim. The Company disclaims all responsibility for the content of the proposal and the supporting statement, including other sources referenced in the supporting statement.
For the reasons stated in the Board’s Statement in Opposition, which follows the stockholder proposal, the Board unanimously urges stockholders to vote “AGAINST” the stockholder proposal. | ||||
For these reasons,Stockholder Proposal
Resolved:Shareholders of American Airlines Group Inc. (“American” or the “Company”) ask the Board of Directors unanimously urges stockholders to vote “FOR”commission an independent, third-party audit of how effectively American is implementing its various environmental and social commitments, including its commitment to reduce greenhouse gas (“GHG”) emissions, and compliance with American’s Safety Policy and Human Rights Statement. The audit should identify whether there are areas of misalignment between those commitments and American’s actions and provide recommendations for promoting greater alignment. A report on the stockholder proposal.audit, prepared at reasonable cost and omitting confidential and proprietary information, should be made available on American’s website.
Supporting Statement
American’s operations have meaningful environmental and social impacts that present potentially material risks to investors. Accordingly, American has made several commitments designed to manage such impacts and mitigate exposures to associated financial, regulatory, reputational, and legal risks. While these commitments are important, evidence suggests there is a gap between policy creation and policy implementation.
For example, the Sustainability Accounting Standards Board (“SASB”) identifies GHG emissions as a material risk for airlines.1 While American has stated its commitment to the goals of the Paris Agreement and aims to reach net zero GHG emissions by 2050,2 there are concerns about American’s net zero plan. Fifteen percent of American’s net zero pathway involves the use of carbon offsets,3which are plagued by findings of overstated benefits,4 lack of standardization, and conflicted third-party verifiers.5American also committed to align its lobbying activities with Paris goals and to report on the lobbying alignment of its trade associations.6 No such assessment has yet been disclosed, making it difficult to assess how American is implementing its net zero commitment.
| 1 | https://sasb.org/standards/materiality-finder/find/?industry%5B0%5D=TR-AL |
| 2 | https://www.aa.com/content/images/customer-service/about-us/corporate-governance/esg/aag-esg-report-2021.pdf at 7. |
| 3 | https://s202.q4cdn.com/986123435/files/images/esg/aa-sustainability-report-2022.pdf#page=12&zoom=100,60,514 |
| 4 | https://www.science.org/doi/10.1126/science.ade3535; https://www.source-material.org/vercompanies-carbon-offsetting-claims-inflated-methodologies-flawed/ |
| 5 | https://www.courthousenews.com/wp-content/uploads/2023/05/berrin-vs-delta.pdf |
| 6 | American Airlines - 2021 ESG Report (aa.com) |
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2024 Proxy Statement
SASB also identifies labor practices as a material issue for airlines.7 American’s Safety Policy states the objective is to “provide a safe and secure environment for our customers and our team members.”8 However, there are concerns about mounting workplace health and safety issues.
American reported that workplace injury rates rose by 22% from 2020 to 20229without a credible explanation, amid numerous recent reports of safety incidents.10
According to the Safety Policy, “[b]eing accountable to each other means reporting hazards, threats, safety concerns, risks, and incidents immediately.”11 However, a 2023 OSHA whistleblower investigation found that American retaliated against flight attendants who reported that fuel fumes in aircraft cabins were causing illness.12
Finally, American’s Human Rights Statement commits the Company to respect the International Labour Organization’s core conventions and fundamental principles,13 which include freedom of association and the right to bargain collectively. Yet American recently threatened to discipline flight attendants for wearing shirts bearing union logos, prompting a union grievance.14
Although American’s environmental and social commitments are laudable, evidence suggests implementation of various commitments is uneven, undermining risk management. An independent audit would allow the Company and shareholders to better evaluate compliance with stated policies and management of potential risks.
The Board’s Statement in Opposition
The Board has considered this proposal and concluded that its adoption is unnecessary in light of American’s existing environmental and social disclosures, recent internal and external audits of those disclosures and robust oversight of our environmental and social practices and initiatives. We believe that it is not in the best interests of our stockholders to conduct a third-party audit, as requested by the proposal, that will divert limited corporate resources and potentially undermine our existing safety assurance programs. Accordingly, the Board unanimously recommends a vote AGAINST this proposal for the following reasons.
Our annual Sustainability Report provides regular, measurable information regarding our environmental and safety efforts that holds us accountable for the success of this work.
We are committed to providing regular and transparent information to our stockholders about our sustainability initiatives, including our strategies, oversight mechanisms and results of our sustainability efforts. We release an annual Sustainability Report, available on our website1, in which we describe, among other things, our coordinated approach to addressing climate change and meeting our goal of net zero greenhouse gas (“GHG”) emissions by 2050. Our Sustainability Report annually states our goals and reports on our progress towards meeting those goals. In 2023, we took the additional step of engaging our independent accountant, KPMG LLP, to provide assurance on certain 2022 greenhouse gas emissions data, as disclosed in our 2022 Sustainability Report. We believe this annual public disclosure ensures public accountability as we work to address climate-related risks.
We are also committed to the safety and security of our customers and team members. Our annual Sustainability Report provides extensive disclosure regarding our Safety Management System (“SMS”), an organization-wide approach to identifying and managing risk that emphasizes safety management as a fundamental business process across our Company. Core to our SMS is maintaining and strengthening a culture where all team members and contractors are encouraged to ask questions and report safety hazards, concerns and incidents without fear of retaliation. The annual Sustainability Report also includes the disclosure of safety metrics, including the number of safety incidents, that allow
| 7 | https://sasb.org/standards/materiality-finder/find/?industry%5B0%5D=TR-AL |
| 8 | https://www.aa.com/content/images/customer-service/about-us/corporate-governance/aag-commitment-to-safety.pdf |
| 9 | https://s202.q4cdn.com/986123435/files/images/esg/aa-sustainability-report-2022.pdf |
| 10 | https://www.nytimes.com/2023/10/05/health/heat-exposure-workers-osha.html; https://www.foxbusiness.com/economy/osha-fines-american-airlines-subsidiary-15k-after-worker-sucked-plane-engine-dies; https://www.washingtonpost.com/travel/2023/11/02/flight-attendants-toxic-uniforms-verdict/; https://www.politico.com/news/2023/09/05/sweltering-plane-cabins-are-travelers-newest-misery-00113720 |
| 11 | https://www.aa.com/content/images/customer-service/about-us/corporate-governance/aag-commitment-to-safety.pdf |
| 12 | https://www.dol.gov/newsroom/releases/osha/osha20230104-1 |
| 13 | https://www.aa.com/i18n/customer-service/about-us/human-rights-statement.jsp |
| 14 | https://www.paddleyourownkanoo.com/2023/10/18/lawyer-representing-american-airlines-flight-attendants-serves-company-with-cease-and-desist-and-threatens-to-sue-airline/ |
| 1 | https://news.aa.com/esg/ |
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2024 Proxy Statement
stockholders to track our progress and hold the Company accountable for our efforts. In 2022, we engaged our internal audit function to review the safety and other non-financial metrics disclosed in our Sustainability Report. That internal review resulted in a set of new, documented controls that are in place today.
Our governance is designed to ensure accountability for our management of environmental and safety risks and commitments.
The Board is responsible for the oversight of the Company’s ongoing assessment and management of material risks impacting our business. The CGPR Committee has primary responsibility for overseeing our environmental sustainability efforts, including our efforts to address climate change, and dedicates significant time to evaluating climate risks and opportunities. The CGPR Committee is also responsible for oversight of the Company’s implementation of our Human Rights Policy. At the management level, our CEO formally oversees our climate change strategy and works with our dedicated Vice President for Sustainability, as well as other team members, to direct the implementation of our climate change and related sustainability goals.
The Board’s Safety Committee oversees implementation of, and compliance with, our Safety Policies, as well as the Company’s culture related to safety. The Safety Committee is also charged with reviewing the Company’s safety management systems, including our approach to handling and response to safety incidents. The Safety Committee works with our CEO, Chief Operating Officer and Vice President for Safety to set safety expectations and oversee compliance with our Safety Policies.
Of particular relevance to the stockholder proposal, the Audit Committee of the Board reviewed the results of both the 2022 internal audit of the Company’s environmental and social disclosures and work by our independent accountant, KPMG LLP, in 2023 to provide assurance on certain 2022 GHG emissions.
We conduct regular audits and are audited by third parties with the goal of ensuring compliance with our safety standards.
On a regular and ongoing basis, we perform safety audits of our own operations and those of our contractors against the safety standards in our SMS. Our regular safety audits are based on the risk level inherent to the activities of each group, and we perform out-of-cycle audits when an incident occurs or we otherwise have evidence that there may be a gap in a specific activity leading to a possible safety concern.
Since launching our continuous Pilot Line Operations Safety Audit (“LOSA”) program in 2017, we have been sending highly trained pilot observers onto the flight deck to better understand how pilot practice reflects our expectations. We are also the only U.S. airline to implement a Cabin LOSA program, designed to help us keep the cabin safe for crew members and passengers. Observing our frontline team members in action and gathering safety-related data on environmental conditions, operational complexities and crew performance in real time provides us with valuable insights for enhancing safety and resilience.
The FAA oversees American’s safety program, including the wide range of audits we perform. They do this through ongoing surveillance and by participation in our regularly scheduled safety meeting. Also, on a biannual basis, American undergoes the International Air Transport Association’s Operational Safety Audit, which is an internationally recognized evaluation system designed to assess the operational management and control systems of an airline. And as a contractor for the U.S. Department of Defense (“DoD”), American is also subject to the DoD’s biannual operational safety audit.
We believe this interlocking and continuous system of audits, reviews of audit findings and development of mitigation plans is effective in detecting and reducing safety risks. Layering in an additional audit, as the proponent suggests, we believe is likely to cause confusion and introduce an ill-advised distraction from the vigilance that we exercise every day which is designed to oversee, assess and mitigate the risk in our operations.
We stand by our Human Rights Statement and respect the freedom of association of all employees.
We pride ourselves on conducting business in a socially responsible and ethical manner that is consistent with human rights principles. Our comprehensive Human Rights Statement, which is available on our website2, applies to all team members and contractors, employees of our wholly owned carriers and our suppliers and other business relationships.
| 2 | https://www.aa.com/i18n/customer-service/about-us/human-rights-statement.jsp |
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2024 Proxy Statement
We continuously evaluate our operations and supply chain to identify, assess and address human rights risks and to engage key stakeholders. We are steadfast in our commitment to running every aspect of our business in a manner that respects fundamental human rights.
In light of our existing public commitment to sustainability, safety and human rights and our transparent and robust oversight of, and reporting on, our progress, our Board has determined that conducting a third-party audit is unnecessary, will only serve to divert time and resources away from furthering our goals, and is not in the best interests of the Company or its stockholders.
For these reasons, the Board of Directors unanimously urges stockholders to vote “AGAINST” the stockholder proposal. | ||||
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information regarding the beneficial ownership of our Common Stock as of March 13, 2023,April 9, 2024, by (1) each of our directors and nominees for director, (2) each of the individuals named in the section entitled “Executive Compensation—Summary Compensation Table” beginning on page 6368 and (3) all of our directors and executive officers as a group, based in each case on information furnished to us by these persons. We believe that each of the named individuals and each director and executive officer included in the group has sole voting and investment power with regard to the shares shown, except that certain individuals may share voting and investment power with their spouses and except as otherwise noted.
| AAG Common Stock Beneficially Owned(1) | ||||||||||||||
Name of Beneficial Owner and Relationship to Company |
Amount and Nature of Beneficial Ownership |
Percent of Class | ||||||||||||
Robert Isom Chief Executive Officer and Director | (2) | * | ||||||||||||
Vice Chair | (3) | * | ||||||||||||
| (4) | * | ||||||||||||
| (5) | * | ||||||||||||
| (6) | * | ||||||||||||
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Jeff Benjamin Director | * | |||||||||||||
Adriane Brown Director | * | |||||||||||||
John Cahill Director | * | |||||||||||||
Mike Embler Director | * | |||||||||||||
Matt Hart Director | * | |||||||||||||
Sue Kronick Director | * | |||||||||||||
Marty Nesbitt Director | * | |||||||||||||
Denise O’Leary Director | * | |||||||||||||
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Vicente Reynal Director | * | |||||||||||||
| * | |||||||||||||
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Doug Steenland Director | * | |||||||||||||
All directors and executive officers as a group | * | |||||||||||||
| * | Represents less than 1% of the outstanding shares of our Common Stock. |
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| (1) | Beneficial ownership as reported in the table has been determined in accordance with SEC rules and regulations and includes |
| (2) | Includes |
| (3) | Includes |
| (4) | Includes |
| (5) | Includes |
| (6) | Includes |
| (7) | Includes |
|
| (8) | Includes 17,951 shares held directly and 10,460 shares underlying unvested RSUs that vest within 60 days of April 9, 2024. |
| (9) | Includes |
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| (10) | Includes 59,358 shares held directly and 10,460 shares underlying unvested RSUs that vest within 60 days of April 9, 2024. |
| (11) | Includes |
| (12) | Includes |
| (13) | Includes |
| (14) | Includes |
| (15) | Includes |
| (16) | Includes |
|
|
|
Includes |
Includes |
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2024 Proxy Statement
The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 13, 2023April 9, 2024 for each person known to us to be the beneficial owner of more than 5% of our outstanding Common Stock.
| Common Stock Beneficially Owned | Common Stock Beneficially Owned | |||||||||||||||||||
| Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership | Percent of Class |
Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||||||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355
| 72,960,262 | (a) | 11.18% | |||||||||||||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355
| ||||||||||||||||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355
| ||||||||||||||||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355
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The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355
| 75,371,075 | (a) | 11.49% | |||||||||||||||||
Blackrock, Inc. 55 East 52nd Street New York, NY 10055
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Blackrock, Inc. 55 East 52nd Street New York, NY 10055
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Blackrock, Inc. 55 East 52nd Street New York, NY 10055
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Blackrock, Inc. 55 East 52nd Street New York, NY 10055
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Blackrock, Inc. 55 East 52nd Street New York, NY 10055
| 38,064,291 | (b) | 5.80% | |||||||||||||||||
PRIMECAP Management Company 177 E. Colorado Blvd., 11th Floor Pasadena, CA 91105
| 38,098,701 | (b) | 5.84% | |||||||||||||||||
Blackrock, Inc. 55 East 52nd Street New York, NY 10055
| 35,622,648 | (c) | 5.46% | |||||||||||||||||
PRIMECAP Management Company 177 E. Colorado Blvd., 11th Floor Pasadena, CA 91105
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PRIMECAP Management Company 177 E. Colorado Blvd., 11th Floor Pasadena, CA 91105
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PRIMECAP Management Company 177 E. Colorado Blvd., 11th Floor Pasadena, CA 91105
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PRIMECAP Management Company 177 E. Colorado Blvd., 11th Floor Pasadena, CA 91105
| 37,047,931 | (c) | 5.65% | |||||||||||||||||
| (a) | The amount shown and the following information are derived solely from the Schedule 13G/A filed by The Vanguard Group on February |
| (b) | The amount shown and the following information are derived solely from the Schedule 13G/A filed by |
| (c) | The amount shown and the following information are derived solely from the Schedule 13G/A filed by |
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2024 Proxy Statement
INFORMATION ABOUT THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Governance Overview
Maintaining leading governance practices is and has been a long-standing priority, and we regularly assess and refine our corporate governance policies and procedures to take into account evolving best practices.
Our Board has adopted the Governance Guidelines to facilitate our mission and to establish general principles and policies by which the Board manages its affairs. The Governance Guidelines are reviewed periodically by the CGPRSCGPR Committee and are posted on our website at www.aa.com under the links “Investor Relations”—“Corporate Governance.”
Board Leadership and Structure—Separate Chairman and CEO Roles
Pursuant to our Bylaws, the Board is responsible for filling the positions of Chairman and Chief Executive Officer, with the persons they deem qualified, as well as for removing and replacing such persons as and when the Board may deem necessary or appropriate. The Board periodically reviews AAG’s leadership structure and may modify the structure as it deems appropriate, given the specific circumstances then facing the Company.
As a culmination of the Board’s CEO succession planning, in December 2021, we announced that Robert Isom would succeed Doug Parker as the CEO of the Company and be appointed as a director of AAG effective March 31, 2022. The Board determined that it was important to retain Mr. Parker in the role of Chairman of the Board in order to ensure a successful transition in leadership. In February 2023, we announced that Mr. Parker will retireretired from the Board on April 30, 2023. Also in February 2023, we announced the appointment of Greg Smith as the Company’s Independent Chairman effective April 30, 2023. By separating the roles of Chairman and CEO, our CEO is able to focus on executing on our strategy and operations, and our Board Chairman, who is an independent director, can devote his time and attention to matters of Board oversight and governance. John Cahill will continue to serveserved as the Lead Independent Director through the effective date of the election of Mr. Smith as our Independent Chairman.
Board Meetings
The Board conducts its business through meetings of the full Board and committees of the Board. The Board regularly meets in executive session with only independent directors of the Board present. Each Director is expected to attend all meetings of the Board and of each committee of which the Director is a member and the Company’s annual meeting of stockholders, except where unusual circumstances arise. During 2023, the Board held eight meetings, five of which included executive sessions comprised of only independent directors. In 2023, each incumbent director attended at least 75% of the aggregate number of meetings of the Board and of the committees on which he or she served.
Committees
The Board has five standing, principal committees: the Audit Committee, the Compensation Committee, the CGPR Committee, the Finance Committee and the Safety Committee. The primary responsibilities, membership and meeting information for the committees of our Board during 2023 are summarized below. Copies of the charters of the Audit Committee, Compensation Committee, CGPR Committee and Safety Committee are available on our website at www.aa.com under the links “Investor Relations”—“Corporate Governance.”
Director Independence
The Governance Guidelines contain standards for determining director independence that meet or exceed the applicable rules of the SEC and Nasdaq listing standards. The Governance Guidelines define an “independent” director as one who:
| • | is not an executive officer or employee of the Company or any other individual having a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director; |
| • | is not, and has not at any time during the past three years been, employed by the Company; |
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| • | has not accepted, and does not have any spouse, parent, child or sibling, whether by blood, marriage or adoption, any person residing in such individual’s home, or any relative supported financially (each, a “Family Member”) who has accepted, any compensation from the Company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the determination of independence, other than (A) compensation for Board or committee service, (B) compensation paid to a Family Member who is an employee (other than an executive officer) of the Company, or (C) benefits under a tax-qualified retirement plan or non-discretionary compensation; |
| • | is not a Family Member of an individual who is, or at any time during the past three years was, employed by the Company as an executive officer; |
| • | is not, and does not have a Family Member who is, a partner in, or a controlling stockholder or an executive officer of, any organization to which the Company made, or from which the Company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than (A) payments arising solely from investments in the Company’s securities and (B) payments under non-discretionary charitable contribution matching programs; |
| • | is not, and does not have a Family Member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the Company served on the compensation committee of such other entity; |
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| • | is not, and does not have a Family Member who is, a current partner of the Company’s outside auditor, and was not, and does not have a Family Member who was, a partner or employee of the Company’s outside auditor who worked on the Company’s audit at any time during any of the past three years; and |
| • | satisfies any additional requirements for independence promulgated from time to time by Nasdaq. |
The Governance Guidelines also provide that the Board will consider all other relevant facts and circumstances, including issues that may arise as a result of any director compensation (whether direct or indirect), any charitable contributions we make to organizations with which a director is affiliated and any consulting arrangement between the Company and a director. The CGPRSCGPR Committee reports annually to the full Board on these matters.
Pursuant to the Governance Guidelines, the CGPRSCGPR Committee and the Board undertake an annual review of director independence. Based on the CGPRSCGPR Committee’s review in March 2023,2024, the Board affirmatively determined that all of our directors are independent under the standards provided in the Governance Guidelines and under applicable Nasdaq listing standards, except for Mr. Isom, who serves as our Chief Executive Officer. Mr. Parker, ourwho served as Chairman until April 30, 2023, who previously servedwas determined by the Board in 2023 as our Chief Executive Officer, and Mr. Isom, who servesnot an independent director, due to his prior service as our Chief Executive Officer.
The following types and categories of transactions, relationships and arrangements were considered by our Board in making its independence determinations in 2023.2024. Excluded were ordinary course air transportation by corporations or other organizations where the director’s interest solely arises from such person’s position as a director or advisor to such other corporation or organization. All of the reviewed transactions and arrangements were entered into in the ordinary course of business and none of the business transactions, donations or grants involved an amount that exceeded the greater of 5% of the recipient entity’s revenues or $200,000.
EachBoth of Mses.Ms. Kronick and O’Leary and Messrs. Benjamin andMr. Steenland served during 20222023 or continues to serve as a member on the board of directors or an advisory board of companies or entities that engage, or whose affiliates engage, in ordinary course commercial transactions with AAG involving goods or services other than air transportation. Additionally, Mr. Reynal’s brother is an executive of a company that engages in ordinary course commercial transactions with AAG involving goods or services other than air transportation. The Board has concluded that these transactions and arrangements do not impair the directors’ exercise of independent judgment in carrying out their responsibilities as directors.
The Board also considered Mr. Smith’s prior role as Chief Financial Officer of Boeing, which is one of our significant commercial partners. In light of the fact Mr. Smith retired from Boeing in July 2021, before his appointment as a director, and has no continuing role with Boeing, our Board determined that this past relationship does not impair his exercise of independent judgment in carrying out his responsibilities as a director.
Board Diversity and Tenure
Our Board believes that diversity is an important aspect of an effective board. The CGPRSCGPR Committee seeks to recommend individuals to the Board with, among other things, a diversity of skills, experience, expertise and perspective appropriate for the business and operation of the Company. We recognize the benefits of racial and gender diversity in the
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boardroom, including better reflecting our diverse customer and employee base and the healthy debate that stems from different viewpoints that may result from diverse backgrounds. Accordingly, our Board is diverse in many ways, with differing geographic, business and racial backgrounds. Over 40%45% of our Board nominees are diverse based on gender or ethnicity.
We believe that fresh perspectives and new ideas are critical to a forward-looking and strategic Board. At the same time, given the extremely complex nature of our business, it is equally important to benefit from the valuable experience and institutional knowledge that longer-serving directors bring to the boardroom. In September 2022, Mr. Reynal joined our Board, bringing our total board size to 15.Board. Mr. Reynal was identified to the Company by a third-party search firm. Previously, in January and March 2022, respectively, Mr. Smith and Mr. Isom joined our Board, and prior to that in October 2020 and February 2021, respectively, Mr. Steenland and Ms. Brown joined our Board and in November 2015, Ms. Kronick and Mr. Nesbitt joined our Board. Our remaining directors joined our Board in December 2013 at the effective date of the merger with US Airways. The Board strongly believes that the current mix of directors provides the Company with an appropriate balance of knowledge, experience and capability, allowing us to leverage deep company experience and knowledge in addition to new viewpoints and innovative ideas among newer directors. Out of our 1211 Board nominees, sevensix have served on our Board for less than ten or fewer years and another five have been on our Board for less than five years.
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Board Self-Evaluation
Our Governance Guidelines and CGPRSCGPR Committee charter provide that the CGPRSCGPR Committee must conduct a periodic assessment of the performance of the Board, including the committees, and provide the results to the full Board for discussion. The purpose of the review is to increase the effectiveness of the Board as a whole and of each of the committees. The assessment includes an evaluation of the Board and each committee’s contribution as a whole, of specific areas in which the Board, the applicable committee and/or management believe better contributions could be made and of the overall make-up and composition of the Board and its committees.
Board Meetings
The Board conducts its business through meetings of the full Board and committees of the Board. The Board regularly meets in executive session with only independent directors of the Board present. Each Director is expected to attend all meetings of the Board and of each committee of which the Director is a member and the Company’s annual meeting of stockholders, except where unusual circumstances arise. During 2022, the Board held 9 meetings, 4 of which included executive sessions comprised of only independent directors. In 2022, each incumbent director attended at least 75% of the aggregate number of meetings of the Board and of the committees on which he or she served.
Committees
The Board currently has four standing, principal committees: the Audit Committee, the Compensation Committee, the CGPRS Committee and the Finance Committee. The primary responsibilities, membership and meeting information for the committees of our Board during 2022 are summarized below. A copy of the charter of the Audit Committee, Compensation Committee and CGPRS Committee is available on our website at www.aa.com under the links “Investor Relations”—“Corporate Governance.”
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2024 Proxy Statement
| Audit Committee |
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Members in Matt Hart (Chair) Adriane Brown John Cahill
Marty Nesbitt
Meetings in
The Board has determined that each member is independent under SEC and Nasdaq rules and the Governance Guidelines. Each member is a “financial expert” under applicable SEC rules and has the financial management expertise required by Nasdaq listing standards. | Primary Responsibilities • Oversee the Company’s internal accounting function; report to the Board with respect to other auditing and accounting matters
• Appoint or replace the independent auditor; oversee the work of the independent auditor for the purpose of preparing or issuing an audit report or related work, including determining the scope of annual audits and fees to be paid
• Oversee the Company’s risk management policies that relate to the financial control environment, financial reporting and disclosure controls
• Establish and maintain procedures for compliance with significant applicable legal, ethical and regulatory requirements and for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters
• Review and approve all significant conflicts of interest and related party transactions in accordance with Company policies
• Review
• Pre-approve audit and permitted non-audit services provided by the independent auditor
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| Compensation Committee | ||
Members in Denise O’Leary (Chair)
Jeff Benjamin
Doug Steenland
Meetings in
The Board has determined that each member is independent under Nasdaq rules and the Governance Guidelines and is a “non-employee director” as defined by Rule 16b-3 under the Exchange Act. |
Primary Responsibilities • Review and approve the Company’s overall compensation strategy and policies, including performance goals for executive officers
• Review the relationship between the Company’s compensation strategy and risk management policies
• Together with the Board, oversee leadership succession planning
• Evaluate the performance of the Company’s Chief Executive Officer and approve his compensation and other terms of employment
• Evaluate the performance of and determine the compensation and other terms of employment of the other executive officers and other members of senior management
• Administer the Company’s incentive and stock plans, including establishing guidelines, interpreting plan documents, selecting participants, approving grants and awards and making other decisions regarding the operation of such plans
• Review the Company’s workforce diversity and inclusion
• Review the compensation of the non-employee members of the Board and make recommendations regarding changes to the full Board
• Retain outside advisors; directly retain and oversee its independent compensation consultant
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2024 Proxy Statement
| Corporate Governance and Public Responsibility | ||
Members in Marty Nesbitt (Chair) Jeff Benjamin Sue Kronick
Meetings in
The Board has determined that each member is independent under Nasdaq rules and the Governance Guidelines. |
Primary Responsibilities • Oversee all aspects of the Company’s corporate governance functions, including the procedures for compliance with significant applicable legal, ethical and regulatory requirements that impact corporate governance
• Conduct an annual review of director independence and the performance of the Board, including the committees
• Identify individuals qualified to become members of the Board and recommend director nominees
• Periodically review and evaluate, with the Company’s management, the Company’s governance-related risks and risk management practices
• Review and assess the Governance Guidelines and recommend any changes deemed appropriate to the Board
• Oversee the stockholder engagement process and significant stockholder relations issues, including consideration of stockholder proposals
• Oversee the Company’s
• Oversee the Company’s lobbying activities, major advocacy priorities, principal trade association memberships and political contributions, if any, and periodically review reports on the Company’s corporate political contributions and the processes and guidelines of the
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| Finance Committee | ||
Members in Doug Steenland (Chair) John Cahill Mike Embler
Denise O’Leary
Meetings in
The Board has determined that each member is independent under Nasdaq rules and the Governance Guidelines. | Primary Responsibilities • Oversee the Company’s financial affairs and capital spending
• Recommend to the Board financial policies and courses of action that will effectively accommodate the Company’s goals and operating strategies
• Review, approve and/or recommend to the Board,
• Oversee the Company’s financial risk management practices | |
| Safety Committee | ||
Members in 2023: Adriane Brown (Chair) Mike Embler Matt Hart Sue Kronick Meetings in 2023: 2 (inaugural meeting in July 2023) The Board has determined that each member is independent under Nasdaq rules and the Governance Guidelines. | Primary Responsibilities • Oversee the Company’s policies, programs and practices with respect to operational safety and compliance, and matters affecting the safety of the Company’s customers and employees including security and public health • Oversee the Company’s procedures for compliance with significant applicable legal, ethical and regulatory requirements related to safety | |
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Compensation Committee Process for Executive Compensation
The Compensation Committee charter gives the Compensation Committee the authority and responsibility to review and approve our overall compensation strategy and policies, including performance goals for executive officers. The Compensation Committee is responsible for reviewing and approving the compensation and other terms of employment of the Chief Executive Officer and for evaluating his performance. The Compensation Committee also evaluates, after receiving input from the Chief Executive Officer, the compensation and other terms of employment of the other executive officers, including in the case of internal promotions and new hires of executive officers. The Compensation Committee
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administers our incentive compensation, stock, bonus and other similar plans and programs; approves awards under those plans; reviews and, based upon the recommendation of the Chief Executive Officer, approves the adoption of, amendment to, or termination of executive compensation and benefit plans; and determines the general design and terms of, and may delegate authority to executive officers to administer, significant non-executive compensation and benefits plans. The Compensation Committee has delegated to an Equity Incentive Committee, consisting of the Chief Executive Officer, the authority to make equity grants to employees who are not executive officers within guidelines established by the Board or the Compensation Committee.
The Compensation Committee generally receives information from the Chief Executive Officer, the Chief People Officer, the Managing Director—Global Compensation and compensation consultants engaged by the Compensation Committee in connection with its determinations regarding executive compensation. The Compensation Committee has sole authority to retain and terminate any outside advisors, such as compensation consultants and legal counsel.
Since July 2019, the Compensation Committee has engaged Korn Ferry as its compensation consultant to assist in determining our executive compensation and reviewing and analyzing proposed compensation programs for our executive officers. After review and consultation with Korn Ferry, the Compensation Committee determined that Korn Ferry is independent and there is no conflict of interest resulting from retaining Korn Ferry pursuant to applicable SEC and Nasdaq rules.
Board Role in Risk Oversight
The Board is responsible for the oversight of the Company’s ongoing assessment and management of material risks impacting our business. The Board oversees the Company’s enterprise-wide approach to risk management, which is designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and to enhance stockholder value. A fundamental part of risk management is not only understanding the risks we face and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate. Management is responsible for establishing our business strategy, identifying and assessing the related risks and establishing appropriate risk management practices. The Board, either directly or through one or more of its committees, reviews our business strategy and management’s assessment of the related risks and discusses with management the appropriate level of risk. The Board relies on each Board committee to oversee management of specific risks related to that committee’s function. The CGPRSCGPR Committee periodically reviewsand the Company’s governance-related risk management practices, andAudit Committee, with management’s assistance, the committee hashave developed and coordinated the Board’s current risk oversight program. The Board has not established a separate risk committee because the Board believes that the most significant risks we face are most properly directly overseen by the full Board or, in certain cases, the appropriate standing committee.
The Board oversees and reviews the management of our most significant strategic, financial and operations risks,operational risks: the day-to-day operation of the airline and the interruption of airline service, revenue production, our information technology systems, and business risks related to labor issues and costs. The management of the COVID-19 pandemic and our Board’s oversight of the management of that risk is a case in point. As we implemented our pandemic contingency plan, management regularly communicated with the Board and our Lead Independent Director. During the COVID-19 pandemic, we held frequent Board briefings devoted primarily to reviewing and discussing the planning for and management of the impact of COVID-19 on our team members, our customers and our business, the execution of our contingency plan and risk mitigation efforts, and decision making around the COVID-19 pandemic, our liquidity and federal government support under the CARES Act, PSP2 and PSP3.
The Audit Committee oversees our risk management policies that relate to the financial control environment, financial reporting and disclosure controls, data privacy, cybersecurity risks and cyber-securityother information technology risks, and our procedures for compliance with significant applicable legal, ethical and regulatory requirements that impact our financial statements. The Audit Committee meets regularly with our internal auditors, independent auditors, Chief Executive Officer, Chief Financial Officer, Corporate Controller, Chief Legal Officer and Corporate Secretary, Chief Ethics and Compliance Officer, Corporate Secretary, Chief Digital and Information Officer, Chief Information Security Officer, Chief Privacy Officer and the Company’s external advisors. The Audit Committee receives regular risk and internal controls assessment reports from the independent auditors and internal auditors. The Audit Committee also establishes and maintains procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls
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or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. The Audit Committee also reviews data privacy, cyber-security and other risks relevant to the Company’s computerized information system controls and security.
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The CGPRSCGPR Committee oversees our governance-related risks and risk management policies, programs and practices with respect to operational safety and compliance,the Company’s sustainability strategy, including environmental and climate change risks and matters affectingother public and corporate social responsibility issues that reflect the safety of our customersCompany’s values and employees, including securitycharacter and public health. The CGPRS Committee assesses our obligations and risks and reviewsimpact the adequacy of our policies, programs and practices to meet those obligations and risks. The CGPRS Committee meets regularly with the Chief Operating Officer, the Vice President of Safety Systems, Efficiency and Compliance and other responsible officers to discuss and advise on developing safety risks and standards.Company’s reputation among its stakeholders.
The Compensation Committee oversees compensation risk management by participating in the creation of, and approving, compensation structures that create incentives that encourage an appropriate level of risk-taking behavior consistent with our business strategy, as is further described in the section entitled “Risk Assessment with Respect to Compensation Practices” below. The Compensation Committee also works with the Chief Executive Officer and the Chief People Officer to oversee risks associated with the retention of our most senior executives.
The Finance Committee oversees financial risk by working with senior management to evaluate elements of credit risk, advising on financial strategy, capital structure and liquidity needs and reviewing our financial risk management policies and practices. Our Chief Executive Officer, and Chief Financial Officer and other senior financial executives meet periodically with the Finance Committee to discuss and advise on elements of these risks.
The Safety Committee oversees our risk management policies, programs and practices with respect to operational safety and compliance, matters affecting the safety of our customers and employees, including security and public health and the Company’s safety culture. The Safety Committee meets regularly with the Chief Operating Officer, the Vice President of Safety Systems, Efficiency and Compliance, and other responsible officers to discuss and advise on developing safety risks and standards.
Risk Assessment with Respect to Compensation Practices
Management and the Compensation Committee, with the support of the Committee’s compensation consultant, have reviewed the compensation policies and practices for our employees as they relate to our risk management and, based upon these reviews, we believe that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect on us in the future.
Our basis for this conclusion includes that our compensation programs are designed to include the following features:
| • | Formulaic annual and long-term incentive plan awards with maximum pay-out caps or guidelines instead of discretionary pay-out decisions. |
| • | Equity incentive awards are subject to performance- or time-based vesting periods that are intended to incentivize long-term rather than short-term results. |
| • | Our incentive compensation plans include a set of pre-established goals and metrics that focus on areas of priority for the Company and may include financial, operational, ESG, total stockholder return (“TSR”) and/or the achievement of individual goals. The 2023 STIP included financial goals (adjusted pre-tax income—60% weighting), customer operational goals (on-time departure and controllable completion factor—30% weighting) and ESG goals (diversity, equity and inclusion –10% weighting). The 2023 LTIP included total debt reduction and relative adjusted pre-tax income margin improvement goals. In addition, the goals established in our executive compensation programs are not subject to adjustment without Compensation Committee approval. |
| • | All of our performance-based compensation programs are based on overall corporate performance, rather than the performance of any business unit or group. |
| • | For a discussion of the principles underlying our compensation policies for our executive officers who are named in the “Executive Compensation—Summary Compensation Table,” see the section entitled “Compensation Discussion and Analysis” beginning on page 48. |
Oversight of Sustainability and Related Matters
Our purpose isWe strive to care for people on life’s journey. Operatingoperate a sustainable business that has the ability to serve our stakeholders over the long-term is an important part of this purpose.long-term. We have long recognized the importance of environmental social and governancesocial issues and have developed an integrated and transparent approach to oversight, management, measurement, assurance and reporting of these issues.
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We periodically conduct sustainability-focused materiality assessment processes, most recently in early 2023, that serve as the foundation of our analysis of areas of risk and opportunity. And, through ongoing engagement across our Company and with a broad range of external stakeholders, we validate and, as needed, refine our assessment based on the input we receive and changes in our operating environment. We also continually monitor trends, standards and practices relevant to our industry, and look to widely-adopted external reporting frameworks, including the Taskforce on Climate-related Financial Disclosures, as key indicators of stakeholder perspectives on the most significant environmental, social and governance risks and opportunities for our company.
In 2022,2023, these activities affirmed our focus on the following priority issues:
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Driving progress across all these issues is a key objective for American. Many of these issues are not new for our Company—indeed, a key reason American has thrived for more than 95 yearsnearly a century is because we have long recognized the importance of these issues. At the same time, we recognize that the business landscape is evolving rapidly and that we must be ready to address new areas if and when they emerge. Over time we have worked to develop a more integrated approach to our management of key risks and opportunities. We will continue to seek stakeholder input while also closely monitoring emerging practices and trends.
Safety. TheOur commitment to safety, security and continuous improvement is at the foundation of our customersoperations. Our Chief Executive Officer retains ultimate responsibility and team members is a top priority. Our approach toauthority for American’s safety is guided by ourculture and performance, while the Board’s Safety Management System, an organization-wide approach to identifying and managing risk. Our CGPRS Committee has primary responsibilityformal oversight responsibilities for oversight of safety, and oursafety. The Board reviews ourreceives regular updates on key safety performance at least quarterly.metrics and programs throughout the year.
Union relations and team member engagement, compensation and benefits and DEI.Human capital. Our Compensation Committee has oversight responsibility for our human capital issues, including team member compensation, and benefits, and engagement, talent development and DEI.diversity, equity and inclusion (“DEI”). Our Board receivedreceives updates on each of these topics at each quarterly, Board meeting in 2022, and our full Board reviews union relations regularly in its meetings.
Customer satisfaction and operational performance. We fly to more than 300 destinations in the United States and internationally, and we are committed to providing our customers with a world-class travel experience and running a reliable operation. We continued to rigorously measure and track our operational performance and customer satisfaction in 2023, efforts that led to further improvements in our operations and the services we provide. Our full Board reviews customer satisfaction and operational performance regularly in its meetings.
Climate change and fuel efficiency. Although our full Board continues to oversee our sustainability efforts, in 2020 we assignedThe CGPR Committee has primary responsibility for coordinating oversight of the Company’s sustainability strategy to the CGPRS
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Committee. Notably, the CGPRS Committee has oversight responsibility for the Company’s climate change strategy and in 2022 dedicated significant time to review the Company’s(including climate change risks and opportunities. We review our climate change strategy with our CGPRS Committee several times throughout the year.opportunities), objectives, efforts, progress and achievements. In 2022, we formally assigned responsibility for oversight of our climate change strategy at the management level to our Chief Executive Officer.
As we reported in our Annual Report on Form 10-K, we have established ambitious goals to achieve net zero greenhouse gas (“GHG”) emissions by 2050. We have also set an intermediate science-based target to drive progress toward that goal. In April 2022, we received validation from the Science Based Targets initiative (“SBTi”) that our 2035 GHG reduction targets comply with the SBTi criteria. Our current strategy for reaching net zero emissions by 2050 is focused on running a more fuel-efficient operation, with more fuel-efficient aircraft, increasingly powered by lower-carbon fuel. Achieving our ambitious climate goals will require significant action and investments by governments, manufacturers and other stakeholders. We are committed to engaging with our stakeholders to seek to advance these initiatives, and we have dedicated resources to advance our progress.
Customer satisfaction and operational performance. We fly to more than 300 destinations in the United States and internationally, and we are committed to providing our customers with a world-class travel experience and running a reliable operation. We continued to rigorously measure and track our operational performance and customer satisfaction in 2022, efforts that led to further improvements in our operations and the services we provide. Our full Board reviews customer satisfaction and operational performance regularly in its meetings.
We are committed to providing regular and transparent information about our strategies and performance on the sustainability issues that are most important to our company and our stakeholders, and westakeholders. We have produced an annual report on these topics since 2007. In 2020,2007, and we beganintend to continue providing our stakeholders with information on our sustainability performance annually. We align our reporting with the recommendations of the Task Force on Climate-related Financial Disclosures, and thewe monitor evolving disclosure standards for the airline industry developed by the Sustainability Accounting Standards Board. We intend to continue providing our stakeholders with information on our sustainability performance annually.best practices. Our most recent such report is available at www.aa.com/esgreport but is not incorporated by reference into this Proxy Statement.
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In 2022,2023, the Company was named to the Dow Jones Sustainability World Index for the first time, one of only two passenger airlines included in the index. The Company was also named to the Dow Jones Sustainability North America Index for the second consecutive year.third year in a row. The recognition is a testament to the Company’s ongoing commitment to sustainability, including our efforts to transition to a low-carbon airline over time; advancing diversity, equitytime, invest in our team members, and inclusion; and providingprovide regular and transparent ESG disclosures.
Codes of Ethics
Our employees, including our principal executive officer, principal financial officer, principal accounting officer, and our directors are governed by one of two codes of ethics of the Company (collectively, the “Codes of Ethics”). The Codes of Ethics have been approved by our Board and require our employees and directors to conduct Company business in the highest legal and ethical manner. The Codes of Ethics meet the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K and the requirements of a code of business conduct and ethics under applicable Nasdaq listing standards. The full texts of the Codes of Ethics and further details regarding the scope of each of the Codes of Ethics are available on our website at www.aa.com under the links “Investor Relations”—“Corporate Governance.” We will also provide a copy of the Codes of Ethics to stockholders, free of charge, upon request to our Corporate Secretary. Any amendments to or waivers from the Codes of Ethics will be posted at this location on our website as required by applicable SEC and Nasdaq rules.
Public Policy Engagement and Political Participation
Engagement in the political, legislative and regulatory process is important to the success of the Company. Compliance and oversight of our public policy and political engagement is provided by our Executive Vice President and Chief Government Affairs Officer, who reports to the Chief Executive Officer. At the Board level, the CGPRSCGPR Committee is responsible for reviewing and assessing the Company’s public policy and political activities. In 2022, the CGPRS Committee recommended, and the Board adopted, revisions to theThe Company’s Statement on Public Policy Engagement and Political Participation which is available at www.aa.com/esg, but is not incorporated by reference into this Proxy Statement. The Board reviews this Statement and the Company’s Human Rights Statement annually. This statement brings the Company’s practices and disclosures into closer alignment with best practices in this area. American’s score on the Center for Political Accountability Zicklin Index of Corporate Political Disclosure and Accountability in 2022 was 82.9, on a scale of zero to 100. The Zicklin Index benchmarks the political disclosure and accountability policies and practices of leading U.S. public companies. This score puts the Company in the First Tier of S&P 500 companies.
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We do not use corporate funds to contribute to candidates, political party committees or political action committees, including Super PACs and political committees organized under Section 527 of the Internal Revenue Code to promote the election or defeat of candidates for office. We do not use corporate funds to make independent political expenditures or electioneering communications. If the Company makes payments to other tax-exempt organizations, such as 501(c)(4)s, that the recipient may use for political purposes, we will publicly disclose those payments on our corporate website. On rare occasions, we may use corporate funds to support or oppose state and local ballot initiatives if we believe an initiative would materially affect our business or the transportation infrastructure in the communities we serve. If we make any such contribution, we will disclose the amount and recipient on our corporate website. We did not make any such contribution in 2022.
As part of our public policy engagement, we are members of several trade and industry associations, and we disclose on our corporate website a full list of the Company’s trade association memberships for which our fees exceed $25,000. We also disclose the non-deductible portion of the dues we pay our major trade associations.
For further information, please see our Statement on Public Policy Engagement and Political Participation, available on our website at www.aa.com under the links “About us”—“Corporate Governance.”
Risk Assessment with Respect to Compensation Practices
Management and the Compensation Committee, with the support of the compensation consultant, have reviewed the compensation policies and practices for our employees as they relate to our risk management and, based upon these reviews, we believe that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect on us in the future.
Our basis for this conclusion includes that our compensation programs are designed to include the following features:
Prohibition on Hedging and Pledging
Our insider trading policy prohibits the members of our Board, our executive officers, managing directors and director-level employees and our other employees with any with regular access to material non-public information, from hedging the economic risk of security ownership. This prohibition includes options trading on any of the stock exchanges or futures exchanges, as well as customized derivative or hedging transactions with third parties, such as zero-cost collars and forward sale contracts.contracts with respect to Company securities. In addition, the members of our Board and such employees are prohibited from pledging Company securities to secure margin or other loans.
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Annual Meeting Attendance
Our Governance Guidelines provide that each of our directors is expected to attend our Annual Meeting of stockholders, except where unusual circumstances arise. All of the directors who were on our Board at the time attended our 20222023 annual meeting of stockholders.
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Director Continuing Education
Non-employee directors are encouraged to attend seminars, conferences and other director education programs periodically. We reimburse the directors for the costs associated with these seminars and conferences, including related travel expenses. Management also conducts a comprehensive orientation process for new directors. In addition, directors receive continuing education through educational sessions at meetings and mailings between meetings.
Communications with the Board and Non-Management Directors
The Board has approved procedures to facilitate communications between the directors and employees, stockholders and other interested third parties. Pursuant to these procedures, a person who desires to contact the Board, a standing committee of the Board or a director may do so in writing to the following address:
American Airlines Group Inc.
The Board of Directors
MD8B503
1 Skyview Drive,
Fort Worth, Texas 76155
We will review the communications with the directors, a standing committee of the Board or an officer, in each case depending on the facts and circumstances outlined in the communication. The CGPRSCGPR Committee also reviews with senior management the nature of the communications and our responses to them. Any communication relating to a stockholder nominee for a position on the Board or a stockholder proposal for business to be considered at any annual meeting of stockholders or included in any proxy statement will be sent to the Chair of the CGPRSCGPR Committee. Our Independent Chair or Lead Independent Director, as applicable, has been designated as the primary director representative for consultation and direct communication with our stockholders.
Stockholder Engagement
Our stockholder engagement program is designed to share relevant updates with our investors and to better understand their perspectives on key challenges at the Company and in the broader airline industry and capital markets. These conversations play a critical role in informing our corporate governance practices, executive compensation program, and sustainability initiatives and reporting, among other topics. In 2023, we contacted stockholders representing approximately 40% of outstanding shares, and held discussions with investors representing nearly 20% of our outstanding shares. We also held engagements with the leading proxy advisor firms. Our Vice President, Deputy General Counsel & Corporate Secretary led the majority of our off-season engagements with involvement from our Vice President, Investor Relations, Vice President, Sustainability and other members of management as appropriate. Greg Smith, our Independent Chairman, and Denise O’Leary, our Compensation Committee Chair, also participated in select engagements.
Detailed stockholder feedback received during our 2023 engagement program was shared directly with the Board’s CGPR and Compensation Committees , which helped inform American’s decision-making processes and disclosures. Additionally, we shared the most impactful takeaways from these engagements with the full Board to supplement the reports from those Committee Chairs. We plan to continue discussions with stockholders during the 2024 proxy season.
2023 Engagement Feedback
During our engagements with stockholders, we received feedback on American’s corporate governance and leadership practices, sustainability initiatives and investments and executive compensation program and actions. Please see “Compensation Discussion and Analysis—Stockholder Engagement on Executive Compensation” on page 61, for a discussion of engagements related to our executive compensation program.
Governance and Leadership Feedback: Stockholders recognized that American implemented a comprehensive leadership team transition during the pandemic amidst an extremely challenging operating environment. Investors were interested to learn about our approach to Board and executive succession planning, including the processes that led to appointing Robert Isom as CEO and electing Greg Smith as our first Independent Chair. We also discussed how we use Board refreshment to ensure that we have the right combination of diverse skills, perspectives, and experiences to effectively oversee American’s strategy and drive long-term stockholder value creation. Specifically, we highlighted the
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2024 Proxy Statement
addition of four new independent directors since 2020 – Vicente Reynal (2022), Greg Smith (2022), Adriane Brown (2021), and Doug Steenland (2020) – and the retirement of three longer-tenured directors in 2023 – Doug Parker, James Albaugh, and Ray Robinson. We also discussed our Board’s ongoing work to continue to identify potential director candidates with the appropriate skills for our Company.
In addition, we shared recent changes to the structure and leadership of our Board committees. In 2023, American separated the oversight of compliance with safety policies and the management of the associated risks (formerly addressed by the now CGPR Committee) to a new, standalone Safety Committee, chaired by Adriane Brown. We also refreshed the leadership of two committees – Doug Steenland was appointed Finance Committee Chair and Martin Nesbitt was appointed CGPR Committee Chair. Several of our discussions focused on the Board’s oversight of risk management against the backdrop of this committee structure.
Sustainability Feedback: Stockholders were interested in discussing aspects of our strategy that relate to climate change and our team members. An area of particular interest was our support of, and investments in, the technological and industry potential for scaling the production of sustainable aviation fuel. Stockholders also expressed an interest in understanding more about how we consider, align, and measure progress towards climate and DEI goals in our compensation program. We also received positive feedback from stockholders regarding the quality and transparency of our Sustainability Report.
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DIRECTOR COMPENSATION
The table below provides information regarding compensation we paid to our non-employee directors in 2022.2023. The compensation elements are described in the narrative following the table. Robert Isom, our Chief Executive Officer and Doug Parker, our former Chief Executive Officer and retiring Chairman of the Board, area director, is not included in the table because they arehe is a “named executive officers”officer” for 20222023 and their compensation, including, in the case of Mr. Parker, his compensation for his services as Chairman of the Board, is disclosed in the “Executive Compensation”—“Compensation—Summary Compensation Table” beginning on page 6368 of this Proxy Statement.
| Name | Fees Earned or Paid in Cash ($)(a) | Stock Awards ($)(b) | All Other Compensation ($)(c) | Total ($) | ||||||||||||||||||||
| Name | Fees Earned or Paid in Cash ($)(a) | Stock Awards ($)(b) | All Other Compensation ($)(c) | Total ($) | ||||||||||||||||||||
Jim Albaugh | 130,000 | 150,000 | 16,906 | 296,906 | ||||||||||||||||||||
Jim Albaugh(d) | ||||||||||||||||||||||||
Jim Albaugh(d) | ||||||||||||||||||||||||
Jeff Benjamin | ||||||||||||||||||||||||
Jeff Benjamin | 130,000 | 150,000 | 48,346 | 328,346 | ||||||||||||||||||||
Adriane Brown | 130,000 | 150,000 | 6,478 | 286,478 | ||||||||||||||||||||
Adriane Brown | ||||||||||||||||||||||||
John Cahill | ||||||||||||||||||||||||
John Cahill | 160,000 | 150,000 | 17,106 | 327,106 | ||||||||||||||||||||
Mike Embler | 150,000 | 150,000 | 23,864 | 323,864 | ||||||||||||||||||||
Mike Embler | ||||||||||||||||||||||||
Matt Hart | ||||||||||||||||||||||||
Matt Hart | 140,000 | 150,000 | 24,946 | 314,946 | ||||||||||||||||||||
Sue Kronick | 150,000 | 150,000 | 21,152 | 321,152 | ||||||||||||||||||||
Sue Kronick | ||||||||||||||||||||||||
Marty Nesbitt | ||||||||||||||||||||||||
Marty Nesbitt | 130,000 | 150,000 | 61,068 | 341,068 | ||||||||||||||||||||
Denise O’Leary | 150,000 | 150,000 | 14,896 | 314,896 | ||||||||||||||||||||
Denise O’Leary | ||||||||||||||||||||||||
Vicente Reynal(d) | 31,868 | 113,014 | 8,974 | 153,856 | ||||||||||||||||||||
Doug Parker(d) | ||||||||||||||||||||||||
Doug Parker(d) | ||||||||||||||||||||||||
Ray Robinson | 130,000 | 150,000 | 25,044 | 305,044 | ||||||||||||||||||||
Vicente Reynal | ||||||||||||||||||||||||
Vicente Reynal | ||||||||||||||||||||||||
Greg Smith(e) | 130,000 | 208,356 | 34,280 | 372,636 | ||||||||||||||||||||
Ray Robinson(d) | ||||||||||||||||||||||||
Ray Robinson(d) | ||||||||||||||||||||||||
Greg Smith | ||||||||||||||||||||||||
Greg Smith | ||||||||||||||||||||||||
Doug Steenland | 130,000 | 150,000 | 14,978 | 294,978 | ||||||||||||||||||||
Doug Steenland | 140,000 | 150,000 | 17,630 | 307,630 | ||||||||||||||||||||
| (a) | The amounts represent the aggregate dollar amount of all fees the directors earned or were paid in |
| (b) | The amounts represent the aggregate grant date fair value, as calculated in accordance with |
| (c) | The amounts include (i) the value of flight privileges received in |
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| Name | Flight Privileges ($) | Tax Gross-Up on Flight Privileges ($) | Insurance Premiums ($) | ||||||||||||
Jim Albaugh | 8,453 | 8,453 | - | ||||||||||||
Jeff Benjamin | 24,173 | 24,173 | - | ||||||||||||
Adriane Brown | 3,239 | 3,239 | - | ||||||||||||
John Cahill | 8,553 | 8,553 | - | ||||||||||||
Mike Embler | 11,932 | 11,932 | - | ||||||||||||
Matt Hart | 6,442 | 6,442 | 12,062 | ||||||||||||
Sue Kronick | 10,576 | 10,576 | - | ||||||||||||
Marty Nesbitt | 30,534 | 30,534 | - | ||||||||||||
Denise O’Leary | 5,465 | 5,465 | 3,966 | ||||||||||||
Vicente Reynal | 4,487 | 4,487 | - | ||||||||||||
Ray Robinson | 12,522 | 12,522 | - | ||||||||||||
Greg Smith | 17,140 | 17,140 | - | ||||||||||||
Doug Steenland | 7,489 | 7,489 | - | ||||||||||||
Name | Flight Privileges ($) | Tax Gross-Up on Flight Privileges ($) | Insurance Premiums ($) | Charitable ($) | ||||||||||||||||
Jim Albaugh(d) | 178,765 | (e) | 13,528 | (e) | 25,000 | |||||||||||||||
Jeff Benjamin | 20,374 | 20,374 | ||||||||||||||||||
Adriane Brown | 5,592 | 5,592 | ||||||||||||||||||
John Cahill | 16,284 | 16,284 | ||||||||||||||||||
Mike Embler | 13,241 | 13,241 | ||||||||||||||||||
Matt Hart | 5,559 | 5,559 | 12,062 | |||||||||||||||||
Sue Kronick | 10,207 | 10,207 | ||||||||||||||||||
Marty Nesbitt | 23,296 | 23,296 | ||||||||||||||||||
Denise O’Leary | 4,692 | 4,692 | 3,966 | |||||||||||||||||
Doug Parker(d) | 265,746 | (e) | 19,035 | (e) | 6,240 | |||||||||||||||
Vicente Reynal | 15,826 | 15,826 | ||||||||||||||||||
Ray Robinson(d) | 384,929 | (e) | 23,174 | (e) | 25,000 | |||||||||||||||
Greg Smith | 23,404 | 23,404 | ||||||||||||||||||
Doug Steenland | 8,815 | 8,815 | ||||||||||||||||||
| (d) | Mr. |
| (e) |
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Director Compensation
The Compensation Committee will periodically review the overall compensation of our directors in consultation with the Board and, from time to time, the assistance of the Compensation Committee’s compensation consultant. The Compensation Committee has authority to retain and terminate any outside advisors, such as compensation consultants and legal counsel, and to determine their compensation.
Annual Retainers and Grants of RSUs. For 2022,2023, the compensation for our non-employee directors included the following cash-based annual retainers:
| • | an annual retainer of $100,000 for service on the Board; |
| • | an annual retainer of $15,000 for service on each of the Audit, Compensation, |
| • | an annual retainer of $25,000 for service as the Chair of the Audit Committee and an annual retainer of $20,000 for service as the Chair of each of the Compensation, |
On the date of the 20222023 annual meeting of stockholders, each continuing non-employee director received a number of RSUs equal to $150,000 divided by the closing price of our Common Stock on the date of the annual meeting. In connection with his appointment to the Board on January 18, 2022, Mr. Smith received a pro-rated award of RSUs valued at approximately $58,356 divided by the closing price of our Common Stock on the grant date. In connection with his appointment to the Board on September 6, 2022, Mr. Reynal received a pro-rated award of RSUs valued at approximately $113,014 divided by the closing price of our Common Stock on the grant date. Each of the RSU awards granted to our non-employee directors will vest fully on the earlier of the first anniversary of the date of grant or the date of the next annual meeting of stockholders, subject to the continued service of the non-employee director through the vesting date.
In connection with the Board’s CEO succession planning, on June 8, 2022, the Board approved the retainer payable to Mr. Parker for his first year of service as non-employee Chairman of the Board, consisting of a quarterly cash retainer of $250,000, payable in arrears, and a grant of 185,758 RSUs that will vestvesting in full upon the earlier of (i) the first anniversary of the date of grant or (ii) the Company’s annual meeting of stockholders in 2023, subject to Mr. Parker’s continued service to the
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Company through the vesting date or acceleration by the Board in accordance with the terms of the 2013 Plan. The Board determined that this grant was necessary to retain Mr. Parker in the role of Chairman of the Board in order to ensure a successful transition in leadership following the most challenging time in our industry’s history. Our non-employee director compensation program for 2022 was otherwise unchanged from 2021.
In February 2023, we announced the retirement of Mr. Parker from the Board on April 30, 2023 and election of Greg Smith as the Company’s Independent Chairman effective April 30, 2023. The Board has approved for Mr. Smith’s service as Independent Chairman an additional annual RSU grant with a grant date fair value of $200,000. Mr. Cahill also received an additional annual retainer of $30,000 for his service as Lead Independent Director through April 30, 2023.
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Other Compensation. As is customary in the airline industry, we provide our directors with flight benefits. During the period of time they serve on the Board, non-employee directors are entitled to complimentary personal air travel for the non-employee director and his or her immediate family members on American and American Eagle, 12 round-trip or 24 one-way passes for complimentary air travel for the non-employee director’s family and friends each year, as well as American Airlines Admirals Club® membership, and AAdvantage® ConciergeKeySM program status. Non-employee directors receive a tax gross-up for imputed taxable income related to these flight benefits. In addition, these travel benefits (except for the tax gross-up) will be provided (i) for a non-employee director’s lifetime if he or she has served as a director for seven or more years or has otherwise vested in such benefits by virtue of the merger with US Airways or service with a predecessor airline or (ii) for five years if he or she has served for less than seven but more than two years. Non-employee directors will also be reimbursed for all reasonable out-of-pocket expenses incurred in connection with attendance at meetings upon submission of receipts.
Some ofIn addition, the company purchases tickets to certain sporting and other events in advance for business purposes. On occasion, unused tickets purchased are made available for personal use by our current directors are eligibleor other employees. These tickets typically result in no incremental cost to continue participation under certain legacy programs related to service for predecessor companies, as described below.the company.
Legacy Director Compensation Programs
Following the closing of the merger with US Airways, the America West Directors’ Charitable Contribution Program (the “Charitable Contribution Program”), a legacy director compensation program, continues to be in effect. In 1994, America West established the Charitable Contribution Program under which all directors of America West were invited to participate. This program was discontinued for new directors following the merger between America West and US Airways in 2005. Under the Charitable Contribution Program, upon the death of a participant, America West (or its successor) is required to donate $1 million to one or more qualifying charitable organizations chosen by the participant. All participants serving as directors of America West at the time of the merger became vested in the Charitable Contribution Program, and the Charitable Contribution Program may not be terminated with respect to these individuals. During 2022,2023, the directors who were participants in the Charitable Contribution Program were Messrs. Hart and Parker and Ms. O’Leary. The charitable contributions will be substantially funded by life insurance proceeds from policies maintained by us on the lives of the participants. Under the terms of the Charitable Contribution Program, America West was allowed to place joint life insurance on two directors. The life insurance policies currently in place under the Charitable Contribution Program are structured as joint policies on the lives of two directors and the insurance benefits are payable at the death of the last survivor. Individual directors derive no direct financial benefit from the Charitable Contribution Program because all insurance proceeds are to be paid by us, and all tax deductions for the charitable contributions accrue solely to us.
Stock Ownership Guidelines
We adopted stock ownership guidelines for our non-employee directors in January 2014. Non-employee directors are required to hold a number of shares of stock equal to the lesser of either (i) five times the director’s annual cash retainer or (ii) 15,000 shares of our Common Stock. Ownership is determined based on the combined value of the following director holdings: (a) shares owned outright or by immediate family members residing in the same household or in a trust for the benefit of the director or an immediate family member; (b) Common Stock, stock units or other stock equivalents obtained through the exercise of SARs/stock appreciation rights (“SARs”)/stock options or vesting of equity awards; (c) unvested equity awards granted under any equity and deferral plans; and (d) other stock or stock equivalent awards determined by the CGPRSCGPR Committee. Non-employee directors have five years from the later of: (i) the date the guidelines were adopted and (ii) the date the individual became a director to comply with the stock ownership guidelines. Under the stock ownership guidelines, until a non-employee director has reached the minimum ownership guideline, such director may not sell or otherwise dispose of the shares of Common Stock acquired upon the exercise, vesting or settlement of any equity awards except to the extent such sales do not cumulatively exceed 50% of such shares. Each of our directors with a compliance date before the date of this Proxy Statement owns shares that exceed the minimum stock ownership guidelines.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since January 1, 2022,2023, the Company has not participated in, nor is there currently planned, any transaction or series of similar transactions with any of the Company’s directors, nominees, executive officers, holders of more than 5% of Common Stock or any member of such person’s immediate family that is required to be reported under Regulation S-K Item 404(a) of the rules of the SEC.SEC, other than the following: in October 2023, the Company committed to a donation of $2,500,000, to be paid over a five-year period, to a non-profit organization founded by our former Chairman, Doug Parker, called Breaking Down Barriers, whose mission is to remove the barriers that exist for underrepresented young adults to have rewarding careers in aviation, particularly as pilots. This donation was approved by the Audit Committee in accordance with the Company’s policies.
We have entered into indemnity agreements with our executive officers and directors that provide, among other things, that we will indemnify each such officer or director, under the circumstances and to the extent provided for in the indemnity agreements, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings in which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of the Company.
Policies and Procedures for Review and Approval of Related Person Transactions
We believe that business decisions and actions taken by our officers, directors and employees should be based on the best interests of the Company and must not be motivated by personal considerations or relationships. We attempt to analyze all transactions in which we participate and in which a related person may have a direct or indirect material interest, both due to the potential for a conflict of interest and to determine whether disclosure of the transaction is required under applicable SEC rules and regulations. Related persons include any of our directors or executive officers, certain of our stockholders and immediate family members of any of the above persons. The Audit Committee is responsible for reviewing and approving all significant conflicts of interest and related party transactions in accordance with our company policies.
A conflict of interest occurs when an individual’s private interest interferes, or appears to interfere, in any way with the interests of the Company. Our Codes of Ethics require our employees, including our principal executive officer, principal financial officer,Chief Executive Officer, Chief Financial Officer, Corporate Controller, who is our principal accounting officer, and our directors who may have a potential or apparent conflict of interest to fully disclose all the relevant facts to either the Chair of the Audit Committee or the Chief Ethics and Compliance Officer, as applicable. Once the Chair of the Audit Committee or the Chief Ethics and Compliance Officer receives notice of a conflict of interest, they will report the relevant facts to our internal auditors. The internal auditors will then consult with the Audit Committee and a determination will be made as to whether the activity is permissible. The full texts of our Codes of Ethics are available on our website at www.aa.com under the links “About Us”—“Corporate Governance.”
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2024 Proxy Statement
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee has reviewed and discussed with our management our audited consolidated financial statements for the fiscal year ended December 31, 20222023 (the “Audited Financial Statements”).
The Audit Committee has discussed with KPMG, our independent registered public accounting firm, the matters required to be discussed with the Audit Committee under the applicable requirements of the Public Company Accounting Oversight Board and the Securities and Exchange Commission.
The Audit Committee has received the written disclosures and the letter from KPMG regarding its independence as required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence, has discussed with KPMG its independence and has considered the compatibility of the non-audit services provided by KPMG with respect to maintenance of that independence.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, that the Audited Financial Statements be included in our Annual Report on Form 10-K for the year ended December 31, 2022,2023, for filing with the SEC.
Respectfully submitted,
Audit Committee
Matt Hart (Chair)
Adriane Brown
John Cahill
Mike Embler
Marty Nesbitt
Greg Smith
This report of the Audit Committee is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy rules or the liabilities of Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by us under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act.
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COMPENSATION DISCUSSION AND ANALYSIS
Overview
This section discusses our performance and the principles underlying our compensation policies for our “named executive officers,” who for 20222023 were: Mr. Isom, our Chief Executive Officer; Mr. Parker, our Chairman of the
| – | Robert Isom, our Chief Executive Officer and Director; |
| – | Steve Johnson, our Vice Chair and Chief Strategy Officer; |
| – | Priya Aiyar, our Executive Vice President and Chief Legal Officer; |
| – | Devon May, our Executive Vice President and Chief Financial Officer; and |
| – | Vasu Raja, our Executive Vice President and Chief Commercial Officer. |
American has executed significant Board and until March 31, 2022, Chief Executive Officer; Derek Kerr, who servedsenior leadership team succession since 2021:
| – | In December 2021, American announced that Mr. Isom would succeed Doug Parker as CEO, effective March 2022 |
| – | Mr. Parker remained Chairman to ensure a successful transition before retiring from the Board in April 2023 |
| – | Effective April 2023, Greg Smith was elected as American’s Independent Chairman, succeeding Mr. Parker |
| – | In tandem with the CEO transition, American made additional updates to rebuild and retain our broader senior leadership team to lead our next chapter and drive stockholder value: |
| • | Mr. Raja was promoted to Senior Vice President and Chief Revenue Officer in June 2020 and to Executive Vice President and Chief Commercial Officer in April 2022 |
| • | Mr. May was promoted to Senior Vice President of Finance and Investor Relations in February 2022 and to Executive Vice President and Chief Financial Officer in January 2023 |
| • | Ms. Aiyar was promoted to Executive Vice President and Chief Legal Officer in April 2022 |
| • | Mr. Johnson was promoted to Vice Chair and Chief Strategy Officer in May 2023 |
To successfully lead American through the critical post-pandemic chapter, our Vice Chairleadership team established a targeted list of primary goals to improve the reliability, profitability and Chief Financial Officer throughaccountability of our operations to create long-term stockholder value. year-end 2022; Steve Johnson, our Executive Vice President; Maya Leibman, who served as our Executive Vice President and Chief Information Officer through year-end 2022; and David Seymour, our Executive Vice President and Chief Operating Officer. Mr. Kerr has continued as our Vice Chair and President of American Eagle and also assumed the role of strategic advisor. Ms. Leibman has also continuedWe produced exceptionally strong performance in a managing director level role.2023, including:
As a condition of the payroll support and loan agreements entered into with the federal government under the CARES Act, PSP2 and PSP3, we implemented significant reductionsReliability
| – | Operated nearly two million flights with an average load factor of 83.5% |
| – | Delivered on-time performance that was record-setting for American and best among the major network airlines, including during the summer peak travel period |
| – | Produced a full-year completion factor that was record-setting for American and best among the major network airlines, with the lowest number of cancellations since the merger with US Airways |
| – | Achieved our best-ever completion factor and on-time departures as well as our lowest mishandled baggage rate over the November and December holidays |
| – | Reached new, long-term collective bargaining agreements with three of our workgroups, providing those team members with significantly improved wages and other benefits |
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Profitability
| – | Achieved record 2023 revenue of approximately $53 billion, an increase of more than $22 billion compared to 2021 |
| – | On a GAAP basis, reversed our pre-tax loss in 2021 of over $2.5 billion and produced pre-tax income of $186 million in 2022 and pre-tax income of more than $1.1 billion in 2023 |
| – | Excluding pre-tax net special items,(1) reversed our pre-tax loss in 2021 of nearly $7 billion and produced pre-tax income of $458 million in 2022 and nearly $2.5 billion in 2023 |
|  See Appendix B for a Reconciliation of Non-GAAP Pre-Tax Income (Loss) Excluding Net |
Accountability
| – | Enhanced liquidity: |
| • | Generated GAAP operating cash flow of $3.8 billion and the airline’s highest full-year free cash flow(2) of $1.8 billion in 2023 |
| • | Ended 2023 with approximately $10.4 billion of total available liquidity(3) |
| – | Strengthened the balance sheet: |
| • | Reduced total debt(4) by $3.2 billion in 2023 |
| • | Achieved more than 75% of the way towards our 2025 total debt reduction goal of $15 billion |
| – | Improved credit ratings. Fitch and S&P provided double-notch upgrades, and Moody’s provided a single-notch upgrade |
| (1) | See Appendix B for details on the components of pre-tax net special items and for a reconciliation of pre-tax income (loss) excluding net special items, a non-GAAP measure. |
| (2) | See Appendix B for a reconciliation of free cash flow, a non-GAAP measure. |
| (3) | Total available liquidity includes unrestricted cash and short-term investments, and undrawn capacity under our credit facilities. |
| (4) | Total debt includes debt, finance and operating lease liabilities and pension obligations. |
Our 2023 executive compensation program is designed to the total target direct compensation forimplement our named executive officers in order to comply with the applicable compensation limits imposed upon us. These limits have continued to be a primary determinant of our named executive officers’ compensation over the remaining period during which they are in effect. Under the applicable limits, each of our named executive officers’ total compensation during any 12-monthstrategy period from March 24, 2020 until April 1, 2023, is capped at an amount equal to the sum of (i) $3 million and (ii) 50% of the total compensation in excess of $3 million received by such executive officer in calendar year 2019. For example, Mr. Isom’s total compensation for 2019 was approximately $7.1 million and his total compensation for any 12-month period while the limits are in effect was capped at approximately $5.0 million, a decrease of approximately 29%. Mr. Isom’s 2022 total target direct compensation remained below the level in 2019, despite Mr. Isom’s promotion to CEO on March 31, 2022. Despite these limitations, for 2022, we re-established our historical performance-based cash and equity incentive programs.
Going into 2022,Our executive compensation program is heavily performance-based and directly linked with our named executive officers continuedestablished goals of delivering record operational results, continuing to experience substantial limitations to their compensation. In making 2022 compensation decisions,close our margin gap with our largest competitors and reducing total debt by $15 billion by the Compensation Committee continued to consider concerns related to the need to retain and reward our management team as we continued to recover from the COVID-19 pandemic and the backdropend of significant reductions in compensation. Despite these concerns, the Compensation Committee 2025.
re-established the performance-based components of our LTIP programs for 2022 for the named executive officers. Our 20222023 LTIP for our named executive officers returned to incorporatingincorporated both performance- and time-vesting components, with half of the target value consisting of the performance-vesting component. The performance-vesting component weighted 50% by target value andis tied to attainment of total debt reduction (60%(50% weighting) and relative pre-tax income margin improvement (40% weighting) versus our industry peers.peers (50% weighting). The performance-vesting component of the 20222023 LTIP will be earned, if at all, no earlier thanfollowing the third anniversarycompletion of the grant date. In addition, the Compensation Committee re-established oura three-year performance period. The 2023 performance-based STIP. The STIP iswas designed to align management with our goals to run a reliable operation and to return to profitability as we emerged from the COVID-19 pandemic while building on our momentum on diversity, equity and inclusion. Set forth below is each component of the Company’s annual target direct compensation:
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2024 Proxy Statement
20222023 Compensation Objectives and Programs
Pay-for-Performance Philosophy
The philosophy underlying our overall executive compensation program is to provide an attractive, flexible and market-based total compensation program that is both tied to our performance and aligned with the interests of our stockholders. We intend for our compensation programs to motivate the management team to maximizeenhance stockholder value over time without creating unnecessary or excessive risk-taking that would have an adverse effect on stockholder value and potentially detract from our ability to reach long termlong-term sustainable levels of income and profitability.
In 2022, the Compensation Committee re-established our historicalOur 2023 executive compensation programs that continue to emphasizeemphasized variable compensation in the form of short-term cash incentives and long-term equity incentives. The following table provides our 2023 annual target direct compensation for each named executive officer. Mr. Isom’s target annual direct compensation is significantly below the last reported value for the CEO of United (2023) and for the CEO of Delta (2022), our two closest peers.
Named Executive Officer | Base Salary ($) | STIP Target (%) | STIP Target ($) | LTIP Target ($) | Total Target Direct Compensation ($) | ||||||||||||||||||||
Robert Isom | 1,300,000 | 200 | % | 2,600,000 | 11,250,000 | 15,150,000 | |||||||||||||||||||
Steve Johnson | 850,000 | 150 | % | 1,275,000 | 3,875,000 | 6,000,000 | |||||||||||||||||||
Priya Aiyar | 730,000 | 125 | % | 912,500 | 2,360,000 | 4,002,500 | |||||||||||||||||||
Devon May | 775,000 | 125 | % | 968,750 | 2,360,000 | 4,103,750 | |||||||||||||||||||
Vasu Raja | 775,000 | 125 | % | 968,750 | 2,860,000 | 4,603,750 | |||||||||||||||||||
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2024 Proxy Statement
The chartsgraphics below show the mix of each element of the 2022 total2023 annual target direct compensation package for (i) Mr. Isom and (ii)the average for our non-CEOother named executive officers.
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2022 Compensation Outcomes Reflected Our Pay-for-Performance Philosophy
Performance-Vesting RSUs. We have historically granted at least 50% of our annual RSUs as performance-vesting RSUs that are earned not earlier than the third anniversary of the grant date. Solely for 2021, to provide more certainty to our management team against the backdrop of the COVID-19 pandemic and significant reductions in compensation, we granted 100% time-vesting RSUs vesting over three years. In 2022, we re-established our historical performance-based equity incentive program.
Our 2022 LTIP for our named executive officers returned to incorporating both performance- and time-vesting components, with the performance-vesting component weighted 50% by target value and tied to attainment of total debt reduction (60% weighting) and relative pre-tax income margin improvement (40% weighting) versus our industry peers. The performance-vesting component of the 2022 LTIP will be earned, if at all, no earlier than the third anniversary of the grant date. In addition, the Compensation Committee re-established our performance-based STIP.
The 2020 performance-vesting RSUs may be earned based on our three-year TSR relative to that of a pre-defined group of airlines, absolute free cash flow and relative adjusted pre-tax income, weighted equally. The 2020 performance-vesting RSUs were tracking at significantly below target as of the end of 2022 and vested at 62.9% of target in February 2023.
Realizable Compensation Continues to be Significantly Less Than Target Compensation. As of December 31, 2022, Mr. Isom’s three-year average realizable compensation from 2020-2022 was 70% of his three-year average target compensation, while the three-year average realizable compensation from 2020-2022 for our non-CEO named executive officers was 76% of their three-year average targeted compensation. Realizable compensation includes base salary earned, annual short-term incentive earned (if the performance period has ended) at target, and values equity awards granted during 2020-2022 as follows: with respect to RSUs that had vested by December 31, 2022, based on the closing stock price on the applicable vesting date, with respect to time-vesting RSUs that were unvested as of December 31, 2022, based on the closing stock price as of December 31, 2022, and with respect to performance-vesting RSUs that were unvested as of December 31, 2022, based on our performance and closing stock price as of December 31, 2022.
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Commitment to Effective Compensation Governance
We are committed to good compensation governance and have adopted compensation policies and practices in furtherance of our commitment, including the following:
| What We Do | What We Do NOT Do | |||||
✓ 91% of CEO’s Annual Target Compensation
✓ Link Pay to Performance with performance goals tied to improving the reliability, profitability and accountability of our operations to create long-term stockholder value. ✓ Performance-Based Long-term Equity Incentives with a Three-year Performance Period to promote long-term focus. ✓Independent Compensation Consultant that is directly engaged by the Compensation Committee to advise on executive and director compensation matters.
✓
✓ ✓ Minimum Vesting Requirements. Subject to limited exceptions, no awards granted under our equity plan may vest until the ✓ Clawback Policy that mandates recoupment of erroneously awarded incentive compensation to executive officers on accounting restatement consistent with SEC and Nasdaq requirements and goes beyond by providing the Compensation Committee with discretion to recover additional compensation paid under the Company’s STIP, LTIP and other equity incentive awards based on circumstances.
✓ |
✖ No Repricing of Awards Without Stockholder Approval. Under our equity plan, awards may not be repriced without stockholder approval if the effect would be to reduce the exercise price for the shares underlying the award. | |||||
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2024 Proxy Statement
Stockholder Approval of 20212022 Executive Compensation
At our 20222023 annual meeting of stockholders, our stockholders voted, in a non-binding advisory vote, to approve the compensation of our named executive officers (with an approval representing approximately 93.4%96% of the shares represented in person or by proxy at the meeting and entitled to vote)vote on the proposal). Our Compensation Committee reviewed the result of the stockholders’ advisory vote on executive compensation and used it as a guide in light of the approval by a substantial majority of stockholders, did not implement changes to theestablishing our executive compensation programs solely as a result of the vote.program.
Determination of Executive Compensation
Role of the Compensation Committee and Management in Compensation Decisions
The Compensation Committee administers the compensation program for all officers, including the named executive officers, and is comprised of fivefour independent directors. The Compensation Committee’s overarching goal is to create executive compensation programs that align management and stockholder interests over the long-term and that allowto compensate our executives fairly and appropriately, commensurate with their peers at our competitors. This allows us to recruit and retain a highly capable management team. In creating such programs, the Compensation Committee considers stockholder input, management input on executive compensation programs but relies onand the perspective and guidance of its outside consultant for perspective and leading practice guidance.consultant. The independent compensation consultant also provides leading practice data for the airline industry and companies of similar size and revenue to us.
Some of the elements we consider when designing our compensation policiesprograms include attrition, diversity,establishing fair and executive development needs. Managementappropriate compensation consistent with market and industry norms, retention, linking compensation to performance, and aligning our programs with the interests of our stockholders. In addition to providing input on our regular compensation programs, management also will from time to time bring matters to the attention of the Compensation Committee that might require alterations to compensation policies, especially when they have identified specific circumstances that require additional executive talent or unique executive skills that we may not currently have in place. Our Chief Executive Officer and Cole Brown, our Chief People Officer, also providesprovide input and recommendations based on his or her direct knowledge of the other named executive officers’ individual performance and contributions givenconsidering the scope of their responsibilities.
Use of Compensation Consultant
For 2022,2023, the Compensation Committee retained Korn Ferry as its independent compensation consultant. The Compensation Committee has sole authority with regard to the decision to retain and the terms of engagement of the compensation consultant and, while
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theconsultant. The compensation consultant interacts with management from time to time in order to best coordinate with, and deliver services to, the Compensation Committee, it reports directly to the Compensation Committee with respect to its executive compensation consulting advice. The Compensation Committee has assessed whether the services provided by Korn Ferry or any other relationships raisedcreated any conflicts of interest pursuant to SEC and Nasdaq rules, and has concluded that no such conflicts of interest exist.
During 2023, Korn Ferry provided the following services for or at the request of the Compensation Committee:
| • | reviewed management’s materials prepared for the Compensation Committee; |
| • | assisted the Compensation Committee in the design of the executive compensation program, including structure, metric selection, payout opportunities, and establishment of performance targets; |
| • | benchmarked compensation levels for senior executives and non-executive directors; |
| • | conducted an annual review of the compensation peer group; |
| • | attended Compensation Committee meetings; and |
| • | responded to various other requests from the Compensation Committee. |
In 2023, in addition to the executive compensation services Korn Ferry performed for or at the request of the Compensation Committee, Korn Ferry provided limited executive search services and broad-based compensation products to the Company.
Use of Market Data
In order to ensure a competitive design for our executive compensation program, in 2022,2023, our Compensation Committee, with advice and analysis from its compensation consultant, reviewed our program against those of our largest competitors,
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Delta, United, and Southwest Airlines, with an emphasis on Delta and United, our closest peers. The Compensation Committee also reviewed a broader spectrum of compensation pay data, including compensation data for Fortune 150 companies of similar size and revenue to us and survey data consisting of Korn Ferry and Equilar Top 25 including 79 organizations with revenue greater than $15 billion with data for 1,972 incumbents.
Executive Compensation with an Emphasis on Performance-Based Pay
For 2022,2023, the Compensation Committee re-established ourcontinued the performance-based STIP and the performance-based components of our LTIP programs for the named executive officers, as described more fully below. As a result, in 2022,2023, our executive compensation structure included both fixed and performance-based pay. Specifically, our 20222023 executive compensation structure consisted of three core components which aligned management and stockholder interests:
| • | a base salary paid in cash; |
| • | an annual incentive program paid in cash based on achievement of profitability, operational and |
| • | a long-term equity incentive program in the form of RSUs that incorporate both performance- and time-vesting components. |
The overarching goal was to emphasize pay for performance (such that compensation is paid only if we meet pre-determined performance targets) and align executive and stockholder interests through cash and equity-based compensation tied to our operational (including DEI) and financial performance.
Base Salary
Base salaries provide a secure, consistent amount of fixed pay that compensates executives for their scope of responsibility, competence and performance. In making 2022 compensation decisions,Mr. Isom’s 2023 base salary remained at the Compensation Committee continued to consider concerns relatedsame level as in 2022. Mr. Johnson’s base salary was increased by 9.7% to the need to retain and reward our management team as we continued to recover fromlevel set forth in the COVID-19 pandemic as welltable below in connection with his appointment as the backdrop of significant reductionsCompany’s Vice Chair and Chief Strategy Officer in compensation in order to comply with the applicable limits under the CARES Act, PSP2 and PSP3, which continued to remain in place for 2022.
In consideration of these factors, for 2022, the Compensation Committee approved shifting a portion of our executives’ fixed total direct compensation to base salary, with a corresponding reduction to their LTIP target opportunities. This was intended to enhance the retentive value of the executives’ 2022 total direct compensation, while assuring that a significant portion of compensation continues to be directly linked to the Company’s operational (including DEI) and financial performance.
May 2023. The 2022 annual base salaries offor Ms. Aiyar and Messrs. May and Raja were increased by 16.8%, 15.8% and 19.2%, respectively, in connection with their promotions to Executive Vice President and to levels that are more competitive with their peers at our named executive officers, other than Mr. Parker, arecompetitor airlines, as set forth in the table below.
| Named Executive Officer | 2022 Base Salary ($) | ||||
Robert Isom | $ | 1,300,000 | |||
Derek Kerr | $ | 900,000 | |||
Steve Johnson | $ | 775,000 | |||
Maya Leibman | $ | 800,000 | |||
David Seymour | $ | 750,000 | |||
| Named Executive Officer | 2023 Base Salary ($) | ||||||||||||||||
| | ||||||||||||||||
Steve Johnson | 850,000 | ||||||||||||||||
| 730,000 | ||||||||||||||||
Devon May | 775,000 | ||||||||||||||||
Vasu Raja | 775,000 | ||||||||||||||||
For the portion of 2022 that Mr. Parker served as Chief Executive Officer, he continued to receive no base salary. Mr. Parker’s compensation for the portion of 2022 that he served as Chief Executive Officer was in the form of an LTIP award, as described more fully below under “—Long-Term Incentive Programs.”
Annual Cash Incentive Program
The second core component of our overall compensation program has been a short-term cash incentive program.
The Compensation Committee re-established our performance-based STIP, with a performance period running from April 1, 2022 to April 1, 2023. This performance period allowed for better alignment of our business recovery with respect to the STIP performance goals, creating a real incentive and serving as a retention tool for management, while allowing for payouts in compliance with and following the end of the restriction period under the CARES Act, PSP2 and PSP3.
The STIP is designed to align management with our goals to run a reliable operation, and to return to profitability while buildingand to continue to build on our momentum on DEI goals, as summarized further below.
The target cash incentive opportunities for each named executive officer are set forth below. Mr. Johnson’s target payout level was increased from 125% to 150% of base salary in connection with his promotion to the table below. AdjustedCompany’s Vice Chair and Chief Strategy Officer. Our other named executive officers’ target cash incentive opportunities remained unchanged from the prior year.
| Named Executive Officer | Target Payout Level as a Percentage of Base Salary | |||
Robert Isom | 200 | % | ||
Steve Johnson | 150 | % | ||
Priya Aiyar | 125 | % | ||
Devon May | 125 | % | ||
Vasu Raja | 125 | % | ||
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2023 STIP
Under the 2023 STIP, adjusted pre-tax income (which, under the terms of the STIP, is calculated by excluding net special items, expenses associated with profit sharing and STIP and related payroll taxes and 401(k) company contributions) accountsaccounted for 50%60% of the plan’s weighting, while operational reliability accountsaccounted for 40%30% of the plan’s weighting and DEI which is a new component, accountsaccounted for 10% of the plan’s weighting, as set forth below.
The Company remains intently focused on profitability and reliability, and the footprint of these two areas continue to comprise 90% of the STIP. To further the Company’s commitment to increasing stockholder value, the Compensation Committee increased focus on profitability, by adjusting the weighting upward from 50% to 60%. The operational component, making up 30% of the STIP, focused on controllable completion factor and on-time departures, the foundational operational metrics that determine reliability. Diversity, equity and inclusion (DEI) engagement and education was implemented as part of the STIP in order to ensure our workplace culture is a competitive advantage that provides team members access to continuous learning, awareness and knowledge.
| Performance Metric | Metric Weighting | |||||
| PROFITABILITY | |||||
Adjusted Pre-tax Income | ||||||
| RELIABILITY | |||||
Mainline | 15% | |||||
Mainline On-time Departure | ||||||
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Regional D-0 | 2.5% | |||||
| DEI | |||||
Diversity, Equity and Inclusion | 10% | |||||
Payouts will be at 0% of target for below-threshold performance, 50% of target for threshold performance, 100% of target for target performance, and 200% of target for maximum performance. The threshold,Threshold, target and maximum goals for adjusted pre-tax income goals wereare shown below, along with the associated payouts as a percentage of target. The adjusted pre-tax income goal of $2.5 billion was set at $200in January 2023 following a pre-tax loss excluding net special items of nearly $7 billion in 2021 and our 2022 pre-tax income excluding net special items of $458 million $400 million and $800 million, respectively. (See Appendix B for a reconciliation of pre-tax income (loss) excluding net special items, a non-GAAP measure).
Below- Performance | Threshold Performance | Target Performance | Maximum Performance | |||||
Adjusted Pre-tax Income | <$1.0 billion | $1.0 billion | $2.5 billion | $4.0 billion | ||||
Payout as a Percentage of Target | 0% | 50% | 100% | 200% | ||||
Any performance falling between threshold, target and maximum levels would result in an adjustment of funding level based on straight-line interpolation. In addition, for any payout under the STIP, the threshold adjusted pre-tax income goal of $200 million$1.0 billion would need to be attained. Payouts for the named executive officers were tied solely to our corporate performance.
DEI engagementFor fiscal year 2023, we attained adjusted pre-tax income of $2.9 billion, an achievement level of 125.1% of target. Adjusted pre-tax income represents pre-tax income for the year ended December 31, 2023, excluding net special items (See Appendix B for a reconciliation of pre-tax income excluding net special items, a non-GAAP measure), expenses associated with profit sharing and education was implementedthe STIP and related payroll taxes and 401(k) company contributions. The Company excludes expenses associated with profit sharing and the STIP from the calculation of adjusted pre-tax income as partthese items are themselves calculated based on the measure. The STIP goals are established at the beginning of the STIP in order to ensure our workplace culture is a competitive advantage that provides team members access to continuous learning, awarenessperformance period and knowledge.account for these adjustments.
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2024 Proxy Statement
The following table shows actual performance in respect of our operational goals (as a percentage of target bonus opportunities forlevels).
| Operational Performance Goal | Threshold Performance | Target Performance | Maximum Performance | Actual Performance | Achievement Level (as a % of Target) | |||||||||||||||
Mainline CCF | 99.3 | % | 99.5 | % | 99.7 | % | 99.9 | % | 200.0 | % | ||||||||||
Mainline D-0 | 61.0 | % | 63.0 | % | 65.0 | % | 63.3 | % | 115.8 | % | ||||||||||
Regional CCF | 99.3 | % | 99.5 | % | 99.7 | % | 99.9 | % | 200.0 | % | ||||||||||
Regional D-0 | 69.0 | % | 71.0 | % | 73.0 | % | 75.9 | % | 200.0 | % | ||||||||||
We also achieved our DEI goals (weighted 10%) at an achievement level of 200%. Based on these weightings and the actual attainment levels, which were reviewed by a third party internal audit consulting firm, each named executive officer (other than Mr. Isom) werereceived an STIP award equal to 150.86% of target under the 2023 STIP, resulting in the dollar amounts set atforth in the same levels as in 2020, prior to the suspension of the STIP in 2021. Mr. Isom’s target bonus opportunity was increased from 175% to 200%, to reflect his promotion to Chief Executive Officer, consistent with the level previously in place for Mr. Parker.table below.
| Named Executive Officer |
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Robert Isom | |||||||
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Steve Johnson | |||||||
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Vasu Raja | 1,461,495 | ||||||
Reporting of STIP Program Payouts
As we disclosed in our proxy statement last year, for 2022 the Compensation Committee re-established the performance-based STIP. In light of the unprecedented business challenges resulting from the COVID-19 pandemic, the 2020 STIP had been terminated and our named executive officers did not participate in the 2021 STIP. Accordingly, no payouts were made under the STIP will be determined followingto our named executive officers for 2020 or 2021. While the Compensation Committee re-established the STIP program for 2022, it reset both the STIP program and the Company’s 2022 profit sharing programs for front-line employees to a 12-month cycle commencing at the end of the first quarter of 2022 and running through the first quarter of 2023. This change was made to incentivize performance period.beginning at the point in time when the most significant impacts of the pandemic had finally concluded.
For 2023, the Compensation Committee resumed our standard calendar year performance-based STIP, reflecting the stabilization of our business following our emergence from the pandemic.
In compliance with SEC reporting requirements, payments under both programs, one of which was almost entirely attributable to performance in 2022, are included in the Summary Compensation Table total compensation for 2023. No portion of the payout under either program was included in the Summary Compensation Table total compensation for 2022. As a result, the 2023 Summary Compensation Table includes two STIP payments due to how they fell on the adjusted calendar applied to the programs.
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2024 Proxy Statement
2022 STIP
For the period from April 1, 2022 through April 1, 2023, the target adjusted pre-tax income goal (weighted 50%) was set at $400 million, at a time when we were just emerging from the pandemic. The goal for this period was set on the heels of very challenging financial results in 2021 and the first quarter of 2022 – a pre-tax loss excluding net special items of nearly $7 billion for fiscal year 2021, and a pre-tax loss excluding net special items of nearly $2 billion for the first fiscal quarter of 2022 (See Appendix B for a reconciliation of pre-tax income (loss) excluding net special items, a non-GAAP measure).
For the period from April 1, 2022 through April 1, 2023, we attained adjusted pre-tax income of $2.8 billion, an achievement level of 200% of target. Adjusted pre-tax income represents pre-tax income, excluding net special items, expenses associated with profit sharing and the STIP and related payroll taxes and 401(k) company contributions.
The following table shows actual performance in respect of our operational goals (as a percentage of target levels).
Operational Performance Goal (weighting %) | Threshold Performance | Target Performance | Maximum Performance | Actual Performance | Achievement Level (as a % of Target) | |||||||||||||||
Mainline CCF (15%) | 99.1 | % | 99.4 | % | 99.7 | % | 99.3 | % | 92.2 | % | ||||||||||
Mainline D-0 (15%) | 63.0 | % | 64.5 | % | 66.0 | % | 61.3 | % | 0.0 | % | ||||||||||
Regional CCF (5%) | 99.1 | % | 99.4 | % | 99.7 | % | 99.9 | % | 200.0 | % | ||||||||||
Regional D-0 (5%) | 69.0 | % | 70.0 | % | 71.0 | % | 74.2 | % | 200.0 | % | ||||||||||
We also achieved our DEI goals (weighted 10%) at an achievement level of 144% of target. Based on these weightings and the actual attainment levels, which were reviewed by a third party internal audit consulting firm, each named executive officer received an STIP award equal to 148.3% of target under the 2022 STIP, resulting in the dollar amounts set forth in the table below.
| Named Executive Officer | 2022 STIP Payout ($) | |||
Robert Isom | | 3,855,800 | ||
Steve Johnson | 1,483,040 | |||
Priya Aiyar | 1,353,274 | |||
Devon May | 879,417 | |||
Vasu Raja | 1,436,695 | |||
Long-Term Incentive Programs
The third core component of our overall compensation program is a long-term equity incentive program that focuses our executives on our performance over time and further links thetheir interests of recipients andwith stockholders. Stock-based awards, coupled with performance- and time-vesting requirements, provide an appropriate incentive to our executives to remain with the Company and meet the long-term goal of maximizingsignificantly increasing stockholder value. Consistent with our emphasis on pay for performancepay-for-performance and our commitment to long-term value creation for our stockholders, our named executive officers’ total target direct compensation is weighted heavily toward long-term equity awards.
The Compensation Committee determines the value of long-term equity awards to be granted to an executive officer based upon the executive’s level of responsibility and job classification level and the results of compensation market analyses.
Historically, including for 2020 and commencing again for 2022,2023, our LTIP included both performance- and time-vesting RSUs, each weighted 50% by target value.
Our 20222023 LTIP for our named executive officers (other than Mr. Seymour, who first became an executive officer in June 2022) returnedcontinued to incorporatinginclude both performance- andperformance-and time-vesting components, with the performance-vesting component weighted 50% by target value tied to attainment of total debt reduction (60%(50% weighting) and relative pre-tax income margin improvement (40% weighting) versus our industry peers (50% weighting), as summarized
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below. The performance goals align to our long-term strategy to improve profitability and reduce overalltotal debt by $15 billion by the end of 2025.
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20222023 Performance Metrics
Total debt reduction from YE2021 to YE2024
Relative adjusted pre-tax income margin*
* excludes net special items | Performance (Payout as % of Target) | Total Debt Reduction | Relative Margin Improvement vs. Peers | |||
| Weighting | 60% | 40% | ||||
Maximum (200%) | $5B | 150 bps | ||||
| Target (100%) | $4B | 100 bps | ||||
Threshold (50%) | $3B | 50 bps |
DueThe total debt reduction metric under our 2023 LTIP reflects the Company’s commitment to stockholders to improve our balance sheet and reduce leverage levels. In 2021, we announced a five-year plan to pay down $15 billion of total debt. The 2023 total debt reduction metric concludes the CARES Act, PSP2remaining years (three, four and PSP3 compensation limits applicable to our named executive officers, the target values of eachfive) of the 2022 LTIP awards continuedfive-year plan and requires a reduction of $7 billion. The relative pre-tax income margin improvement metric measures American’s competitive financial performance relative to be significantly reduced, with Mr. Isom’s LTIP target value reduced over 20%, as compared with 2020 levels. In addition,its peers and requires the 2022 LTIP award values were further reduced from their 2021 levels in proportionCompany to continue to narrow the increases to base salaries.margin gap.
Mr. Isom’s 2023 annual target grant value is significantly below the last reported values for the CEOs at Delta (2022) and United (2023), our two closest peers. The values for the other named executive officers were set in connection with their promotions to be competitive with their peers at our competitor airlines.
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| Named Executive Officer | Target Grant Value ($) | Grant Value ($) | Grant Value ($) | ||||||
Robert Isom | 11,250,000 | | |||||||
| 3,875,000 | | |||||||
| 2,360,000 | | |||||||
| 2,360,000 | | |||||||
| 2,860,000 | | |||||||
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In September 2023, the “Executive Compensation”—“GrantsCompensation Committee also granted to Mr. Johnson a one-time promotion grant of Plan-Based Awards181,554 RSUs valued at $2.4 million in 2022” on page 65connection with his appointment as the Company’s Vice Chair and Chief Strategy Officer in May 2023. This grant, which vests ratably over three years, was awarded to reflect Mr. Johnson’s leadership during and the Company’s success in enduring and emerging from the pandemic and the significant increase in responsibility associated with his new position. It was intended to create incentives for Mr. Johnson to remain with the Company and to assist with the successful design, implementation and execution of its post-pandemic strategies and the implementation of the management succession plan. In connection with that award, Mr. Johnson entered into an agreement to not compete for 18 months following termination of employment for any reason and irrespective of whether Mr. Johnson would be entitled to severance. In July 2023, the Compensation Committee approved a grant of 39,905 RSUs and 65,323 RSUs to Ms. Aiyar and Mr. Raja, respectively, in connection with the expansion of their roles to Executive Vice President and Chief Legal Officer and Executive Vice President and Chief Commercial Officer, respectively. These grants include both performance-and time-vesting components, with the performance-vesting component weighted 50% by target value tied to attainment of total debt reduction (50% weighting) and relative pre-tax income margin improvement versus our industry peers (50% weighting).
See below for a descriptionfull discussion of the grants awarded to our named executive officers during 2022. The values included in the Summary Compensation TableMr. Isom’s 2023 target annual compensation and non-recurring awards and the Grants of Plan-Based Awards Table reflect the accounting grant date fair value of the grants. These values do not reflect amounts actually realizable by our named executive officers.Compensation Committee’s process.
Equity Grant Policy
The Compensation Committee has adopted an equity grant policy to standardize the timing, practices and procedures in granting equity awards. The policy provides that equity awards, other than new hire and promotion or special purpose grants, will be granted once per year at the seconda regularly scheduled meeting of the Compensation Committee, at an Equity Incentive Committee meeting (with respect to awards to non-executive employees), or at a special meeting held for this purpose as close in time to the regularly scheduled meeting as possible.Committee. We have made exceptions to theour equity grant policy in unique circumstances, such as during the restriction period imposed by the CARESCoronavirus Aid, Relief and Economic Security Act PSP2(the “CARES Act”) and PSP3.the payroll support agreement under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (“PSP2”) and the payroll support agreement under section 7301 of the American Rescue Plan Act of 2021 (“PSP3,” and collectively, the “CARES Act and related legislation”).
Payouts of Prior Year LTIP AwardsNon-Recurring Compensation Elements Reported in 2023
Our named2023 Summary Compensation Table reflects multiple key executive officers’leadership transitions during, and our response, to severe industry disruptions caused by the pandemic.
The COVID-19 pandemic was the most challenging time in our industry’s history. It resulted in drastic disruptions in global demand for air travel and a severe decline in our business. Despite these challenges, we remained consistent in our approach and philosophy that our executive compensation programs provide fair pay and pay for performance, support retention, and align with the interests of stockholders. Those circumstances required a thoughtful approach to ensure the fairness of our compensation programs, especially with respect to promotions.
The CARES Act and related legislation required that, beginning in March 2020, LTIP grants were comprised of both time-vestingwe implement significant reductions and performance-vesting RSUs. The performance-vesting RSUs were eligible to vest basedcaps on the Company’s achievementtotal compensation of many of our most senior and most impactful team members. Over the three years that it was in effect (the “CARES restriction period”), the CARES Act and related legislation presented extraordinary incentive and retention challenges, including:
| • | The legislation did not include anyexceptions to provide for compensation increases that we and our competitors have customarily offered in connection with officer-level promotions. |
| • | The compensation limitations applied only to airline employees and did not apply to newly hired employees, hence any of our named executive officers could have left the Company for a position at another employer, even another airline, without being subject to any compensation restrictions. |
Against this backdrop, the Compensation Committee and the Board executed a comprehensive succession plan that resulted in the appointment of a new senior management team, completing an initiative that had begun before the onset of the followingpandemic. In furtherance of that plan, the Compensation Committee undertook multiple key executive transitions and promotions to significantly expanded roles which would be effected, but could not be compensated for, during the pandemic. The execution of this succession plan included the promotion of Mr. Isom as our new CEO, Mr. May as our CFO, Ms. Aiyar as our Chief Legal Officer, and Mr. Raja as our Chief Commercial Officer.
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The amounts reported in the Summary Compensation table reflect several non-recurring items that are unrelated to 2023 annual compensation. They include non-recurring compensation elements associated with those executive promotions which occurred over the prior three metrics: (i) compound annual TSR relativeyears during the CARES restriction period and cash incentive program payouts that are almost entirely attributed to 2022 but were paid in 2023, significantly increasing the reported compensation in this year’s Summary Compensation Table. These amounts reflect the Compensation Committee’s judgments as to the capitalization-weighted compoundbest way to achieve its strategic, retention and incentive objectives.
Compensation Reported for Mr. Isom in the 2023 Summary Compensation Table
The Board’s CEO succession planning process began in 2016 when Mr. Isom was promoted to President and was completed when he was appointed Chief Executive Officer in March 2022, one year before the expiry of the CARES legislation compensation limits. Despite this, because Mr. Isom’s promotion occurred one year before the expiry of the CARES legislation compensation limits, in compliance with those regulations, his total annual TSRcompensation remained capped at $5.0 million. Mr. Isom’s total compensation in 2022 (as reported in the Summary Compensation Table) was $4.9 million, considerably below what his CEO peers at Delta and United earned in 2022 ($9.6 million and $9.8 million, respectively), and even at a level materially below what he earned in 2019 for his service as President ($7.1 million). The Compensation Committee recognized the critical need to retain Mr. Isom as the Board’s long-standing choice for CEO and the most important element of the broad senior leadership succession plan. The Compensation Committee and the Board also recognized the acute retention challenges created by Mr. Isom’s performance and significantly increased profile as an executive leader of a large, complex enterprise.
pre-definedIn September 2023, following a year-long process in close consultation with its independent compensation consultant, the Compensation Committee took action to address Mr. Isom’s compensation as CEO. In setting his compensation, the Compensation Committee considered:
| • | That Mr. Isom had been promoted to CEO in 2022 but had not been compensated as such for over 18 months. |
| • | Compensating Mr. Isom fairly and appropriately for his service as CEO, including relative to his peers at Delta and United, and addressing the concern that Mr. Isom’s equity holdings were significantly below those peers. |
| • | Aligning Mr. Isom’s compensation and incentives with Company performance and the interests of our stockholders, recognizing that his long-term incentive compensation had not increased since 2020, notwithstanding his subsequent promotion from President to CEO. |
| • | Creating appropriate incentives for Mr. Isom to continue to lead our positive business momentum following the Company’s successful post-pandemic transformation, which has driven profitability, strong operational reliability and a strengthened financial position. |
| • | Acknowledging Mr. Isom’s outstanding leadership during and as we emerged from the pandemic, his qualifications and capability for the CEO role, and his successful execution of the comprehensive management succession plan. |
To address the foregoing considerations and ensure Mr. Isom’s retention, the Compensation Committee:
| • | Established Mr. Isom’s 2023 total target annual compensation at $15.2 million to reflect his promotion to CEO, including an annual target LTIP grant of $11.3 million. Approximately 91% of Mr. Isom’s annual target compensation is at risk and half of his 2023 LTIP grant is subject to performance-vesting conditions tied to attaining the Company’s total debt reduction goal and relative pre-tax income margin improvement versus the Company’s industry peers over a three-year performance period. The Compensation Committee determined that these compensation arrangements were appropriate given the significant increase in responsibility associated with his new position, to increase incentives for Mr. Isom to remain with the Company and successfully design, implement and execute our post-pandemic strategies. Mr. Isom’s annual compensation was set at a level $1.7 million below the last-reported annual target compensation of the CEO of Delta (2022). |
| • | Granted to Mr. Isom $11.0 million in awards which reflects the difference between Mr. Isom’s new CEO target compensation and the amount of compensation he actually received following his promotion to CEO on March 31, 2022. This amount includes a one-time cash payment of $2.75 million and a one-time grant of 631,699 RSUs valued at $8.25 million, subject to the same terms and conditions and vesting as the 2023 LTIP grant, except that two-thirds of the RSUs are subject to attaining the Company’s total debt reduction goal and relative pre-tax income margin improvement versus the Company’s industry peers. In practical effect, Mr. Isom was paid for service as the Company’s CEO for both 2022 and 2023 during 2023 but in a form that has a significant |
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performance-based equity component and will incentivize Mr. Isom to continue to build on the Company’s momentum and strong operating and financial performance for the next three years. Further, the equity-based component provides Mr. Isom an opportunity to increase his ownership of Company stock and further his alignment with stockholders. |
| • | Requested and Mr. Isom agreed to enter into an agreement that included a covenant to not compete with the Company for 24 months following termination of employment for any reason, to further incentivize his commitment to the Company and ensure his retention. The non-compete restriction applies irrespective of whether Mr. Isom would be entitled to severance, adding new protections for the Company and its investors. Given Mr. Isom’s performance at the Company and his profile in the airline industry, the Compensation Committee and Mr. Isom considered that a meaningful and material commitment. |
The following table presents the components of Mr. Isom’s total compensation as reported in the Summary Compensation Table for 2023 consisting of: (i) his 2023 annual compensation, (ii) his 2022 STIP payout that was almost entirely attributed to 2022 but was paid in and reported as 2023 compensation, and (iii) the non-recurring incentives awarded to Mr. Isom in connection with his promotion to CEO in March 2022.
Compensation Reported for Ms. Aiyar and Messrs. May and Raja
During the CARES restriction period:
| • | Mr. Raja was promoted to Senior Vice President and Chief Revenue Officer in June 2020 and to Executive Vice President and Chief Commercial Officer in April 2022. |
| • | Mr. May was promoted to Senior Vice President of Finance and Investor Relations in February 2022 and to Executive Vice President and Chief Financial Officer in January 2023. |
| • | Ms. Aiyar was promoted to Executive Vice President and Chief Legal Officer in April 2022. |
These executives had been identified as key members of our next generation leadership team and each of these promotions was an important element of the Company’s comprehensive senior leadership succession plan. However, we were unable to provide immediate compensation increases or equity awards in connection with their promotions, despite each executive’s total compensation being significantly below their predecessors at American and their peers at Delta and United.
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At the time of those promotions, in recognition of the acute retention challenge and the need for each executive to be compensated fairly and appropriately for their new responsibilities, we granted retention awards to Ms. Aiyar and Messrs. May and Raja. Those awards reflected amounts customarily established by the Company for similar promotions and were payable in April 2023 subject to each executive’s continued employment through that date. The amounts paid under those retention awards were consistent with the CARES Act and related legislation limitations and our compensation philosophy. The payments to Ms. Aiyar and Messrs. May and Raja were $1.2 million, $2.4 million and $4.5 million, respectively.
Stockholder Engagement on Executive Compensation
As more fully described under “Information About the Board of Directors and Corporate Governance—Stockholder Engagement” starting on page 41, in 2023, we contacted stockholders representing approximately 40% of our outstanding shares, and held discussions with investors representing nearly 20% of our outstanding shares. We also held engagement sessions with leading proxy advisory firms. Greg Smith, our Independent Chairman, and Denise O’Leary, our Compensation Committee Chair, participated in select engagements.
We discussed our executive compensation program in all off-season group of airlines over a three year period ending December 31, 2022, (ii) free cash flow over a three year period ending December 31, 2022engagements. We engaged in productive dialogue with investors who wanted to better understand our CEO compensation program, and (iii) pre-tax income margin improvement relativein particular, the context for the non-recurring compensation that we awarded to Mr. Isom in 2023 and its relationship to the timing of his appointment as CEO in March 2022. We highlighted that our CEO’s compensation level had been considerably below-market as compared to his peers at Delta and United during the pre-taxCOVID-19 income margin improvement forpandemic and the acute retention challenges we faced during that period.
Stockholders expressed no major concerns with respect to the Committee’s determination of Mr. Isom’s go-forward target annual compensation quantum and program structure. A few stockholders inquired about how we expect to evolve the measures in our STI and LTI programs as we continue to make progress on our strategic priorities and debt reduction goals.
Stockholders acknowledged the unique circumstances facing American and its Board of Directors in executing a pre-defined grouplong-term CEO and senior management succession plan during the COVID-19 pandemic and against the backdrop of airlines based on 2022 pre-tax income margin over a 2019 baseline. In the eventretention challenges imposed by the CARES Act legislation restrictions. They also acknowledged that the Company’scontext of Mr. Isom’s promotion to CEO during this unique time period would serve as an important part of their analysis. Stockholders understood the Board’s concern that Mr. Isom had served as CEO from March 2022 pre-tax income margin was negative, pre-tax income achievement would be capped at 100%,until September 2023 without an increase in compensation. They also understood the Committee’s determination to structure Mr. Isom’s compensation largely as time- and performance-vested equity to increase his incentives and further his alignment with stockholders. They also recognized the value in Mr. Isom’s agreement to a 24-month non-competition and non-solicitation period following departure from American, regardless of whether he is entitled to severance.
Lastly, stockholders encouraged us to provide detailed, transparent disclosure regarding the eventconsiderations in establishing the Company’s TSR was negative for thequantum, mix and performance period, the TSR achievement percentage would be capped at 100%. Basedconditions of Mr. Isom’s non-recurring award, which we have provided in this proxy statement. Please see “–Non-Recurring Compensation Elements Reported in 2023” on our achievement of relative TSR of (11.67) percentage points and relative pre-tax income margin improvement of 2.75 percentage points, and lower than threshold free cash flow attainment level, the award was earned at 62.9% of target in February 2023.page 58.
Change in ControlSeverance Benefits and Severance BenefitsPost Termination Restrictive Covenants
Change in control and severance benefits are a customary component of executive compensation, which are generally used to reinforce and encourage executives’ continued attention and dedication to their assigned duties without the distraction arising from the possibility of a change in control. None ofBeginning in 2023, following consultation with its independent compensation consultant and in line with market practices, the Compensation Committee approved entering into severance agreements with our executive officers isthat are triggered on certain involuntary terminations of their employment. These agreements were only entered into with those executives who also agreed to post-termination restrictive covenants to protect the Company and its investors.
Messrs. Isom, Johnson and May and Ms. Aiyar have agreed to these post-employment restrictive covenants, including non-competition for a party to any individualperiod of 24 months in the case of Mr. Isom and 18 months in the case of the other executives, and non-solicitation for a period of 24 months following the date the executive terminates employment orwith the Company. These restrictive covenants are in place irrespective of whether these executives receive severance in connection with their termination of employment.
Mr. Isom’s severance agreement providingprovides that in the event his employment is terminated by the Company without “cause” or he resigns for “good reason” (each as defined in the severance agreements, and collectively, an “Involuntary
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Termination”), he will be entitled to: (i) a cash severance payment equal to 24 months of his base salary plus two times his annual target cash incentive (payable in substantially equal installments over 24 months), (ii) a payment equal to 24 months’ COBRA premiums and (iii) continued vesting of outstanding equity awards for 24 months following the termination date, except as set forth in Mr. Isom’s grant agreements described below. In addition, Messrs. Johnson and May and Ms. Aiyar have entered into severance agreements that provide that in the event of an Involuntary Termination, the executive will be entitled to: (i) a cash severance payment equal to 18 months of the executive’s base salary plus 1.5 times the executive’s annual target cash incentive (payable in substantially equal installments over 18 months), (ii) a payment equal to 18 months’ COBRA premiums and (iii) continued vesting of outstanding equity awards for 18 months following the termination date, except, in the case of Mr. Johnson, which is subject to acceleration as set forth in his grant agreements described below. The agreements also provide for travel privileges for the executive and eligible family members, pursuant to the terms of the Company’s travel policy for officers during the 18-month period following the termination date. If the executive has become eligible for retiree travel, the executive will continue to be eligible to receive retiree travel privileges in accordance with the terms of our retiree travel policy. Messrs. Isom, Johnson, and May previously vested into lifetime travel benefits. Each severance agreement also provides for acceleration of equity awards in the event of an Involuntary Termination within the 24 month period following a change in control, with equity awards subject to performance-vesting conditions vesting at the greater of target or the expected attainment level based on performance as of the termination date. The severance benefits. agreements require entering into an effective release of claims.
Pursuant to the grant agreements under the 2013 Plan,our equity incentive plans, our employees, including our named executive officers, are entitled to full acceleration of their RSUs in the event of (i) a termination due to death or disability“disability” or (ii) a change“change in control.control” (each, as defined in the applicable plan and award agreements). In addition, beginning in 2021,subject to compliance with the post-employment restrictive covenants and delivery of an effective release of claims, because Mr. Johnson is retirement eligible (age of 55 and has ten or more years of service), under his grant agreements the vesting of each time-vesting RSU award granted to Messrs.Mr. Johnson Kerr and Parker and Ms. Leibman, will accelerate in full in the event of such individual’shis separation from service from the Company (other than a termination by the Company for “cause”) following the date he or she has reached the age of 55 and has 10 or more years of service with the Company or a predecessor,, with performance-vesting RSUs remaining outstanding and eligible to vest based on actual performance through the end of the performance period. Subject to compliance with the post-employment restrictive covenants and delivery of an effective release of claims, Mr. Isom’s grant agreements provide that RSUs granted to Mr. Isom will remain outstanding and will continue to vest upon termination (not including termination by the Company for “cause”), provided that equity awards granted within 12 months prior to the termination will only remain eligible to vest on a pro-rated basis and performance-vesting RSUs remain subject to the performance conditions.
Under the STIP, if an employee separates from service with us and our affiliates while actively employed due to death or disability prior to the payment of the award, but is otherwise eligible for the award, the employee will be treated as having been actively employed on the date of payment of the award.
Information on the estimated payments and benefits that our named executive officers would have been eligible to receive in the event of a termination or change in control as of December 31, 20222023 pursuant to their equity awards, the STIP and other arrangements are set forth in “Potential Payments Upon Termination or Change in Control” on page 69.73.
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Other Benefits and Perquisites
We maintain broad-based employee benefit plans in which all employees, including the named executive officers, participate, such as group life and health insurance plans and a 401(k) plan. These benefits are provided as part of the basic conditions of employment that we offer to other U.S.-based team members.
Other Benefits
We continue to provide certain benefits to our named executive officers that are common in the airline industry. The incremental cost to us of providing these benefits is not material. Following standard airline industry practice, we provide certain flight privileges to our employees. Free flights on our airline are available to all employees, and “positive space” flight privileges are provided to our senior executives, including the named executive officers. We believe that providing such flight privileges is consistent with airline industry practice and that competitive flight privileges are needed for the recruitment and retention of the most senior employees. By providing positive space flight privileges to our executives, we are able to offer a unique and highly-valued benefit at a low cost. This benefit also encourages executives to travel on the airline frequently, and while doing so, meet and listen to employees, solicit feedback from employees and customers,
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audit aircraft and facility appearance and quality, and monitor operational performance throughout the domestic and international route system. In addition, as in prior years, we cover the income tax liabilities of our senior executives, including the named executive officers, related to those flight privileges, which is consistent with industry practice.
The positive space flight privileges provided to our officers, including the named executive officers, include unlimited reserved travel in any class of service for the officer and his or her immediate family, including eligible dependent children, for personal purposes. Officers and their immediate families, including eligible dependent children, also have access to our Admirals Club® travel lounges at various airports and have AAdvantage Executive Platinum status. Officers are also eligible for 12 free round-trip passes or 24 free one-way passes each year for reserved travel for non-eligible family members and friends, and we cover the income tax liability related to these flight privileges. Officers are required to pay any international fees and taxes, if applicable. In addition, each of our named executive officers isMessrs. Isom, Johnson and May are vested into the foregoing lifetime travel benefits and are entitled to continued receipt of the foregoing flightthese benefits upon their termination of employment, other than coverage of income tax liability. Mr. Raja is eligible for lifetime space available travel benefits.
We also offer our named executive officers perquisites in the form of financial advisory services and executive physicals. We will reimburse up to $4,500 annually for their personal tax planning, estate planning and retirement planning services from a certified financial planner, certified public accountant, or attorney. We will pay the full cost of their annual physicals and additional diagnostic tests recommended by the provider.
Mr. Parker is a participant in the Charitable Contribution Program, under which US Airways paid annual premiums on a joint life insurance policy. Under the program established by America West Airlines in 1994, a $1 million death benefit will be donated to one or more qualifying charitable organizations chosen In 2023, we also reimbursed legal expenses incurred by Mr. Parker. For a more detailed descriptionIsom in connection with the negotiation of the charitable contribution program, see the section entitled “Director Compensation”—”Legacy Director Compensation Programs” on page 49.his CEO compensation.
For additional information on any benefits provided to the named executive officers on an individual basis, see the section entitled “Executive Compensation”—“Compensation—Summary Compensation Table” beginning on page 63.68.
AMR Legacy Retirement Programs
As a former AMR executive, Ms. Leibman participates in certain retirement plans we assumed from AMR in connection with the merger, including the Retirement Benefit Plan of American Airlines, Inc. for Agent, Management, Specialist, Support Personnel and Officers (the “AMR Retirement Benefit Plan”) and the Supplemental Executive Retirement Program for Officers of American Airlines, Inc. (the “AMR Non-Qualified Plan”). Mr. Parker is also a participant in the AMR Retirement Benefit Plan as a result of his employment with AMR earlier in his career. All benefits under the AMR Retirement Benefit Plan were frozen for all employees as of October 31, 2012. Effective upon the freeze of benefit accruals under the AMR Retirement Benefit Plan, AMR began making matching contributions under the American Airlines, Inc. 401(k) Plan (the “AA 401(k) Plan”) to eligible employees, including Ms. Leibman, up to 5.5% of eligible earnings. Mr. Parker does not receive matching contributions under the AA 401(k) Plan. Like the AMR Retirement Benefit Plan, as of October 31, 2012, the defined benefits portion of the AMR Non-Qualified Plan was frozen.
For further details regarding AMR’s legacy retirement plans, see the sections entitled “Executive Compensation”—“Pension Benefits” beginning on page 67 and “Executive Compensation”—“Non-Qualified Deferred Compensation” beginning on page 68 and the accompanying narrative discussion and footnotes that follow those tables.
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Continuing Focus on Leading Practices
Stock Ownership Guidelines
We have implemented stock ownership guidelines for our executive officers. Executives are required to hold a number of shares of stock equal to the lesser of either (i) a fixed number of shares or (ii) a number of shares with a total value equal to a designated multiple of their base salary, as provided in the table below. Ownership is determined based on the combined value of the following executive holdings: (a) shares owned outright or by immediate family members residing in the same household or in a trust for the benefit of the executive or an immediate family member; (b) Common Stock, stock units or other stock equivalents obtained through the exercise of SARs/stock options or vesting of equity awards; (c) unvested equity awards granted under any equity and deferral plans; and (d) other stock or stock equivalent awards determined by the CGPRSCGPR Committee. Executives have five years from the time of hire to comply with the ownership guidelines. Under the guidelines, until an executive has reached the minimum ownership guideline, such executive may not sell or otherwise dispose of shares of Common Stock acquired upon the exercise, vesting or settlement of any equity awards granted by us except to the extent such sales do not cumulatively exceed 50% of such shares. Each of our executive officers currently owns shares that exceed the minimum ownership guidelines. The stock ownership guidelines are set forth below.
Stock Ownership Guidelines
Position/Levels | Multiple of Base Salary | Fixed Shares | ||||||||||
Chief Executive Officer | 6x | 116,667 | ||||||||||
Vice Chair; Executive Vice President | 3x | 47,917 | ||||||||||
Clawback Policy
We haveEffective October 2023, our Board adopted a Policy for Recovery of Erroneously Awarded Compensation (the “Clawback Policy”) to implement final clawback policy thatrules issued by the SEC. The Clawback Policy applies to allour current and former executive officers and covers allsubjects their incentive-based compensation under the cash incentive programs and all equity awards. The policy appliesreceived on or after October 2, 2023 to clawback in the event our financial statements are restated as a result ofcompany is required to prepare an accounting restatement to correct its material non-compliancenoncompliance with any financial reporting requirement under U.S. securities laws. In these circumstances, the Clawback Policy requires the Company to recover, reasonably promptly, the portion of incentive-based compensation that is deemed to have been
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erroneously awarded, unless the Compensation Committee (which administers the policy) determines that recovery would be impracticable and that one or more of the allowable impracticability conditions under SEC rules and provideshas been met. Recovery is required whether or not the Boardapplicable officer engaged in misconduct or otherwise caused or contributed to the requirement for the restatement. In addition to these requirements, the Clawback Policy continues to provide the Compensation Committee with broad discretion as to what actions may be taken based on circumstances leading to the restatement, including recovery of incentive-based compensation received by an executive officer during the three-year period preceding the restatement in excess of what the executive officer would have been paid under the restatement. The Compensation Committee is evaluating the Company’s compensation recoupment policiesSTIP or LTIP and will recommend to the Board any changes to the current policy that are necessary or appropriate in light of the recent guidance issued by the SEC.other equity incentive awards.
Prohibition on Hedging and Pledging
As described more fully under the section “Information About the Board of Directors and Corporate Governance–Governance—Prohibition on Hedging and Pledging,” we prohibit our executive officers from engaging in hedging transactions or using our stock as collateral for loans.
Section 280G/Section 4999 Policy
We do not provide any tax gross-ups to cover excise taxes under Section 4999 in connection with a change in control.
Tax Considerations
Section 162(m) of the Code disallows a tax deduction to public companies for compensation in excess of $1 million paid to “covered employees,” which generally includes all named executive officers. While the Compensation Committee may take the deductibility of compensation into account when making compensation decisions, the Compensation Committee will award compensation that it determines to be consistent with the goals of our executive compensation program even if such compensation is not deductible by us.
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2024 Proxy Statement
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in our Annual Report on Form 10-K for the year ended December 31, 2022.2023.
Respectfully submitted,
Compensation Committee
Denise O’Leary (Chair)
Jim Albaugh
Jeff Benjamin
Sue KronickVicente Reynal
Doug Steenland
This report of the Compensation Committee is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy rules or the liabilities of Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by us under the Securities Act or the Exchange Act.
This report of the Compensation Committee is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy rules or the liabilities of Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by us under the Securities Act or the Exchange Act. | ||||
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2024 Proxy Statement
EXECUTIVE OFFICERS
The following table lists AAG’s executive officers as of April , 2024, including their ages and principal occupations.
Name | Age | Title | ||||
Robert D. Isom, Jr | | Chief Executive Officer and Director | ||||
Stephen L. Johnson | 67 | Vice Chair and Chief Strategy Officer | ||||
| 49 | Executive Vice President and Chief Legal Officer | ||||
Devon E. May | 49 | Executive Vice President and Chief Financial Officer | ||||
Vasu S. Raja | 47 | Executive Vice President and Chief Commercial Officer | ||||
David G. Seymour | 59 | Executive Vice President and Chief Operating Officer | ||||
EXECUTIVE OFFICERS
AsBelow is certain information as of March 30, 2023,April , 2024, regarding our executive officers consisted of the following:
(other than Robert D. Isom, Jr., 59, is Chief Executive Officer, President and Director.Isom). For similar information regarding Mr. Isom as of April , 2024, see the section entitled “Proposal 1—Election of Directors” beginning on page 6.
Priya R. Aiyar, 48, is Executive Vice President and Chief Legal Officer. She was most recently Senior Vice President and General Counsel, positions she held since September 2019, when she joined AAG. Previously, she was a partner at Willkie Farr & Gallagher LLP, a role she began in September 2017. From 2015 to 2017, Ms. Aiyar was Acting General Counsel at the U.S. Department of Treasury, after having served as the Deputy General Counsel from 2013 to 2015. From 2009 to 2013, Ms. Aiyar held a variety of positions with the U.S. Federal government, including as Deputy General Counsel at the U.S. Department of Energy and Legal Advisor to the Chairman of the Federal Communications Commission. Earlier she was a partner at Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC. She began her legal career as a clerk to Judge Merrick Garland of the U.S. Court of Appeals for the D.C. Circuit and to Justice Stephen Breyer of the U.S. Supreme Court.
Stephen L. Johnson, 66, is Executive Vice President. He was most recently Executive Vice President—Corporate Affairs, a position he held since December 2013. He also serves on the board of directors of WIZZ Air Holdings PLC, a European airline company that trades on the London Stock Exchange. Previously, Mr. Johnson served as Executive Vice President—Corporate and Government Affairs for US Airways, a role he began in 2009. From 2003 to 2009, Mr. Johnson was a partner at Indigo Partners LLC, a private equity firm specializing in acquisitions and strategic investments in the airline, air finance and aerospace industries. Between 1995 and 2003, Mr. Johnson held a variety of positions with America West prior to its merger with US Airways, including Executive Vice President—Corporate. Prior to joining America West Airlines, Mr. Johnson served as Senior Vice President and General Counsel at GPA Group plc. He was also an attorney at Seattle-based law firm Bogle & Gates, where he specialized in corporate and aircraft finance and taxation. He currently also serves as a Lecturer at the School of Law and the Haas School of Business at the University of California, Berkeley, and serves on the Executive Advisory Board of the University’s Berkeley Center for Law and Business.
Devon E. May, 48, is Executive Vice President and Chief Financial Officer, a position he has held since January 2023. He was most recently Senior Vice President of Finance and Investor Relations, a position he held since 2022. Mr. May has held various roles of increasing responsibility at AAG, including as Senior Vice President, Finance and American Eagle (2020 to 2022), Senior Vice President, American Eagle & Operations Planning (2019 to 2020), Senior Vice President, Network Strategy (2017 to 2019) and Senior Vice President, Finance (2016 to 2017). Mr. May joined AAG in 2013, upon its merger with US Airways, where he held a variety of positions in financial planning and analysis. Between 2002 and 2005, Mr. May held a variety of positions with America West Airlines prior to its merger with US Airways, including as Director, Alliances and Partnerships. Prior to joining America West Airlines, Mr. May served as a Senior Analyst, International Route Planning at Continental Airlines.
Vasu S. Raja, 46, is Executive Vice President and Chief Commercial Officer. He was most recently Chief Revenue Officer, a position he held since 2020. Mr. Raja has held various roles of increasing responsibility at AAG, including Senior Vice President, Strategy (2019 to 2020), Vice President, Planning (2016 to 2019) and Vice President, Pricing and Yield Management (2015 to 2016). Mr. Raja joined AAG’s predecessor airline in 2004 as an Analyst, Sales Planning and Analysis. Mr. Raja began his career with Teach for America in 1999 and taught for three years in Baltimore City Public Schools.
David G. Seymour, 58, is Executive Vice President and Chief Operating Officer. He was most recently Senior Vice President, Operations, a position he held since 2019. From 2016 to 2019, he served as Senior Vice President, Integrated Operations. Previously, he served as Senior Vice President, Technical Operations from 2013 to 2016. Mr. Seymour joined AAG upon its merger with US Airways, where, from 2002 to 2013, he held a variety of positions in operations and planning, including as Senior Vice President, Operations. Between 1999 and 2002, Mr. Seymour held a variety of positions with America West Airlines prior to its merger with US Airways, including as Vice President, Operations Planning and Performance. Mr. Seymour began his career serving as an airborne infantry officer in the U.S. Army.
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Stephen L. Johnson is Vice Chair and Chief Strategy Officer, a position he has held since May 2023. He was most recently Executive Vice President, a position he held since January 2022 and prior to that he served as Executive Vice President—Corporate Affairs, a position he held since December 2013. He also serves on the board of directors and as deputy chair of WIZZ Air Holdings PLC, a European airline company that trades on the London Stock Exchange. Previously, Mr. Johnson served as Executive Vice President—Corporate and Government Affairs for US Airways, a role he began in 2009. From 2003 to 2009, Mr. Johnson was a partner at Indigo Partners LLC, a private equity firm specializing in acquisitions and strategic investments in the airline, air finance and aerospace industries. Between 1995 and 2003, Mr. Johnson held a variety of positions with America West Airlines prior to its merger with US Airways, including Executive Vice President—Corporate. Prior to joining America West Airlines, Mr. Johnson served as Senior Vice President and General Counsel at GPA Group plc. He was also an attorney at Seattle-based law firm Bogle & Gates, where he specialized in corporate and aircraft finance and taxation. | ||||||||||
| Priya R. Aiyar | |||||||||
| Priya R. Aiyar is Executive Vice President and Chief Legal Officer. She was most recently Senior Vice President and General Counsel, positions she held since September 2019, when she joined AAG. Previously, she was a partner at Willkie Farr & Gallagher LLP, a role she began in September 2017. From 2015 to 2017, Ms. Aiyar was Acting General Counsel at the U.S. Department of Treasury, after having served as the Deputy General Counsel from 2013 to 2015. From 2009 to 2013, Ms. Aiyar held a variety of positions with the U.S. Federal government, including as Deputy General Counsel at the U.S. Department of Energy and Legal Advisor to the Chairman of the Federal Communications Commission. Earlier she was a partner at Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC. She began her legal career as a clerk to Judge Merrick Garland of the U.S. Court of Appeals for the D.C. Circuit and to Justice Stephen Breyer of the U.S. Supreme Court. |
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2024 Proxy Statement
| Devon E. May | |
Devon E. May is Executive Vice President and Chief Financial Officer, a position he has held since January 2023. He was most recently Senior Vice President of Finance and Investor Relations, a position he held since 2022. Mr. May has held various roles of increasing responsibility at AAG, including as Senior Vice President, Finance and American Eagle (2020 to 2022), Senior Vice President, American Eagle & Operations Planning (2019 to 2020), Senior Vice President, Network Strategy (2017 to 2019) and Senior Vice President, Finance (2016 to 2017). Mr. May joined AAG in 2013, upon its merger with US Airways, where he held a variety of positions in financial planning and analysis. Between 2002 and 2005, Mr. May held a variety of positions with America West Airlines prior to its merger with US Airways, including as Director, Alliances and Partnerships. Prior to joining America West Airlines, Mr. May served as a Senior Analyst, International Route Planning at Continental Airlines. | ||
| Vasu S. Raja | |
Vasu S. Raja is Executive Vice President and Chief Commercial Officer. He was most recently Chief Revenue Officer, a position he held since 2020. Mr. Raja has held various roles of increasing responsibility at AAG, including Senior Vice President, Strategy (2019 to 2020), Vice President, Planning (2016 to 2019) and Vice President, Pricing and Yield Management (2015 to 2016). Mr. Raja joined AAG’s predecessor airline in 2004 as an Analyst, Sales Planning and Analysis. Mr. Raja began his career with Teach for America in 1999 and taught for three years in Baltimore City Public Schools. | ||
| David G. Seymour | |
| David G. Seymour is Executive Vice President and Chief Operating Officer. He was most recently Senior Vice President, Operations, a position he held since 2019. From 2016 to 2019, he served as Senior Vice President, Integrated Operations. Previously, he served as Senior Vice President, Technical Operations from 2013 to 2016. Mr. Seymour joined AAG upon its merger with US Airways, where, from 2002 to 2013, he held a variety of positions in operations and planning, including as Senior Vice President, Operations. Between 1999 and 2002, Mr. Seymour held a variety of positions with America West Airlines prior to its merger with US Airways, including as Vice President, Operations Planning and Performance. Mr. Seymour began his career serving as an airborne infantry officer in the U.S. Army. |
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2024 Proxy Statement
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides compensation earned by our named executive officers in the years ended December 31, 2023, 2022 2021 and 2020.2021. See the “Compensation Discussion and Analysis – Non-Recurring Compensation Elements Reported in 2023” section on page 58 for a discussion of the non-recurring compensation elements reported in the Summary Compensation Table for 2023.
Name and Principal Position during Fiscal 2022 | Year | Salary ($) | Bonus ($) | Stock Awards ($)(a) | Non-Equity Incentive Plan Compensation ($)(b) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings ($)(c) | All Other Compensation ($)(d) | Total ($) | ||||||||||||||||||||||||||||||||
Robert Isom | 2022 | 1,162,083 | - | 3,653,000 | - | - | 71,566 | 4,886,649 | ||||||||||||||||||||||||||||||||
Chief Executive Officer | 2021 | 766,146 | - | 4,180,000 | - | - | 55,214 | 5,001,360 | ||||||||||||||||||||||||||||||||
and Director | 2020 | 687,139 | - | 5,516,000 | - | - | 49,013 | 6,252,152 | ||||||||||||||||||||||||||||||||
Doug Parker(e) | 2022 | - | - | 6,000,000 | (f) | - | - | 537,694 | 6,537,694 | |||||||||||||||||||||||||||||||
Chairman and, through | 2021 | - | - | 7,200,000 | - | - | 38,011 | 7,238,011 | ||||||||||||||||||||||||||||||||
March 31, 2022, Chief | 2020 | - | - | 10,624,000 | - | 6,361 | 33,505 | 10,663,866 | ||||||||||||||||||||||||||||||||
Executive Officer | ||||||||||||||||||||||||||||||||||||||||
Derek Kerr(g) | 2022 | 839,866 | - | 2,595,000 | - | - | 37,623 | 3,472,489 | ||||||||||||||||||||||||||||||||
Vice Chair and Chief | 2021 | 664,419 | - | 2,825,000 | - | - | 43,314 | 3,532,733 | ||||||||||||||||||||||||||||||||
Financial Officer | 2020 | 603,446 | - | 2,925,000 | - | - | 28,709 | 3,557,155 | ||||||||||||||||||||||||||||||||
Steve Johnson | 2022 | 735,616 | - | 2,695,000 | - | - | 63,492 | 3,494,108 | ||||||||||||||||||||||||||||||||
Executive Vice | 2021 | 643,624 | - | 2,825,000 | - | - | 54,701 | 3,523,325 | ||||||||||||||||||||||||||||||||
President and | 2020 | 603,446 | - | 2,925,000 | - | - | 36,847 | 3,565,293 | ||||||||||||||||||||||||||||||||
Strategic Advisor | ||||||||||||||||||||||||||||||||||||||||
Maya Leibman(h) | 2022 | 766,020 | - | 2,650,000 | - | - | 53,399 | 3,469,419 | ||||||||||||||||||||||||||||||||
Executive Vice | 2021 | 664,419 | - | 2,780,000 | - | - | 69,413 | 3,513,832 | ||||||||||||||||||||||||||||||||
President and Chief | 2020 | 603,446 | - | 2,925,000 | - | 53,767 | 27,065 | 3,609,278 | ||||||||||||||||||||||||||||||||
Information Officer | ||||||||||||||||||||||||||||||||||||||||
David Seymour | 2022 | 750,000 | - | 2,380,000 | - | - | 36,838 | 3,166,838 | ||||||||||||||||||||||||||||||||
Executive Vice | ||||||||||||||||||||||||||||||||||||||||
President and Chief | ||||||||||||||||||||||||||||||||||||||||
Operating Officer | ||||||||||||||||||||||||||||||||||||||||
Name and Principal Position during Fiscal 2023 | Year | Salary ($) | Bonus ($) | Stock Awards ($)(a) | Non-Equity Incentive Plan Compensation ($)(b) | All Other Compensation ($)(c) | Total* ($) | ||||||||||||||||||||||||||||
Robert Isom | 2023 | 1,300,000 | 2,750,000 | (d) | 19,500,000 | 7,778,160 | 110,002 | 31,438,162 | |||||||||||||||||||||||||||
Chief Executive Officer | 2022 | 1,162,083 | - | 3,653,000 | - | 71,566 | 4,886,649 | ||||||||||||||||||||||||||||
and Director | 2021 | 766,146 | - | 4,180,000 | - | 55,214 | 5,001,360 | ||||||||||||||||||||||||||||
Steve Johnson | 2023 | 826,346 | - | 6,046,000 | 3,270,125 | 64,613 | 10,207,084 | ||||||||||||||||||||||||||||
Vice Chair and | 2022 | 735,616 | - | 2,695,000 | - | 63,492 | 3,494,108 | ||||||||||||||||||||||||||||
Chief Strategy Officer | 2021 | 643,624 | - | 2,825,000 | - | 54,701 | 3,523,325 | ||||||||||||||||||||||||||||
Priya Aiyar | 2023 | 693,250 | 1,185,069 | (e) | 3,101,000 | 2,729,908 | 47,838 | 7,757,065 | |||||||||||||||||||||||||||
Executive Vice President and Chief Legal Officer | |||||||||||||||||||||||||||||||||||
Devon May | 2023 | 738,075 | 2,445,527 | (e) | 2,360,000 | 2,340,912 | 53,788 | 7,938,302 | |||||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | |||||||||||||||||||||||||||||||||||
Vasu Raja | 2023 | 731,250 | 4,468,169 | (e) | 4,073,000 | 2,898,190 | 47,425 | 12,218,034 | |||||||||||||||||||||||||||
Executive Vice President and Chief Commercial Officer | |||||||||||||||||||||||||||||||||||
| * | As discussed in the “Compensation Discussion and Analysis—Non-Recurring Compensation Elements Reported in 2023,” the total compensation for 2023 set forth above includes for Ms. Aiyar and Messrs. Isom, Johnson and Raja one-time and promotion awards and for Ms. Aiyar and Messrs. May and Raja, non-recurring payments in April 2023 for services performed in prior years. Furthermore, for each named executive officer, the STIP payout for the 2022 program is reflected as compensation for 2023. The table below is identical to the Summary Compensation Table above except that the reported amounts exclude these non-recurring payments. While the table below is not a substitute for, and should be read together with, the Summary Compensation Table above, we believe this presentation better reflects each named executive officers’ regular compensation attributable to their services in 2023. |
Name | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total Regular Compensation ($) | |||||||||||||||||||||
Robert Isom | 2023 | 1,300,000 | - | 11,250,000 | 3,922,360 | 110,002 | 16,582,362 | |||||||||||||||||||||
Steve Johnson | 2023 | 826,346 | - | 3,675,000 | 1,787,085 | 64,613 | 6,353,044 | |||||||||||||||||||||
Priya Aiyar | 2023 | 693,250 | - | 2,360,000 | 1,376,634 | 47,838 | 4,477,722 | |||||||||||||||||||||
Devon May | 2023 | 738,075 | - | 2,360,000 | 1,461,495 | 53,788 | 4,613,358 | |||||||||||||||||||||
Vasu Raja | 2023 | 731,250 | - | 2,860,000 | 1,461,495 | 47,425 | 5,100,170 | |||||||||||||||||||||
| (a) | Amounts in this column represent the aggregate grant date fair value, as calculated in accordance with ASC Topic 718, of RSUs granted by the Company during each of the fiscal years ending December 31, 2023, 2022 |
Year of Grant | Expected Term(1) | Stock Price Volatility(2) | Risk-Free Interest Rate(3) | |||||||||||||||||||||||||||||||
| American Airlines | Alaska Air Group | Delta Airlines | JetBlue Airways | Southwest Airlines | Spirit Airlines | United Airlines | ||||||||||||||||||||||||||||
2020 | 3 years | 36.05% | 28.75 | % | 25.05 | % | 26.92 | % | 24.43 | % | 40.86 | % | 28.99 | % | 0.85 | % | ||||||||||||||||||
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2024 Proxy Statement
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| (b) | The |
| (c) |
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The following table provides the amounts of other compensation, including perquisites, paid to, or on behalf of, named executive officers during |
| Robert Isom ($) | Doug Parker ($) | Derek Kerr ($) | Steve Johnson ($) | Maya Leibman ($) | David Seymour ($) | Robert Isom ($) | Steve Johnson ($) | Priya Aiyar ($) | Devon May ($) | Vasu Raja ($) | ||||||||||||||||||||||||||||||||||
Flight Privileges(1) | 24,010 | 17,974 | 8,813 | 24,124 | 16,142 | 9,061 | ||||||||||||||||||||||||||||||||||||||
Flight Privileges(1) | ||||||||||||||||||||||||||||||||||||||||||||
Flight Privileges(1) | ||||||||||||||||||||||||||||||||||||||||||||
Flight Privileges(1) | 20,591 | 23,979 | 11,287 | 17,793 | 8,988 | |||||||||||||||||||||||||||||||||||||||
Life Insurance Premiums(2) | - | 6,240 | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
Medical Examinations | ||||||||||||||||||||||||||||||||||||||||||||
Medical Examinations | ||||||||||||||||||||||||||||||||||||||||||||
Medical Examinations | ||||||||||||||||||||||||||||||||||||||||||||
Medical Examinations | 8,274 | - | 7,535 | - | 3,875 | 8,739 | 5,118 | - | 5,436 | - | 9,046 | |||||||||||||||||||||||||||||||||
Financial Advisory Services | 4,500 | - | 4,500 | 4,500 | 4,500 | 4,500 | ||||||||||||||||||||||||||||||||||||||
Financial Advisory Services | ||||||||||||||||||||||||||||||||||||||||||||
Financial Advisory Services | ||||||||||||||||||||||||||||||||||||||||||||
Financial Advisory Services | 50,700 | (3) | 4,500 | 4,500 | 4,500 | 4,500 | ||||||||||||||||||||||||||||||||||||||
Gross-Up Payments(3) | 18,007 | 13,480 | - | 18,093 | 12,107 | - | ||||||||||||||||||||||||||||||||||||||
Gross-Up Payments(2) | ||||||||||||||||||||||||||||||||||||||||||||
Gross-Up Payments(2) | ||||||||||||||||||||||||||||||||||||||||||||
Gross-Up Payments(2) | ||||||||||||||||||||||||||||||||||||||||||||
Gross-Up Payments(2) | 15,443 | 17,984 | 8,465 | 13,345 | 6,741 | |||||||||||||||||||||||||||||||||||||||
401(k) Company Contributions | 16,775 | - | 16,775 | 16,775 | 16,775 | 14,538 | ||||||||||||||||||||||||||||||||||||||
Board Compensation(4) | - | 500,000 | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
401(k) Company Contributions | ||||||||||||||||||||||||||||||||||||||||||||
401(k) Company Contributions | ||||||||||||||||||||||||||||||||||||||||||||
401(k) Company Contributions | 18,150 | 18,150 | 18,150 | 18,150 | 18,150 | |||||||||||||||||||||||||||||||||||||||
| (1) | Amounts represent flight privileges provided for unlimited, top-priority reserved travel in any class of service, for the named executive officer and his or her immediate family, and up to 12 round-trip or 24 one-way passes for non-eligible family members and friends. Amounts |
| (2) |
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Amount represents tax gross-up payments with respect to flight privileges. |
Amount includes $46,200 in legal expenses incurred by Mr. Isom in connection with the negotiation of his CEO compensation that were reimbursed by the Company. |
| (d) | Reflects |
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2024 Proxy Statement
Grants of Plan-Based Awards in 20222023
The following table provides information regarding grants of plan-based awards made to our named executive officers during the year ended December 31, 2022.2023.
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(a) | Estimated Future Payouts Under Equity Incentive Plan Awards(b) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(c) | |||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||
Robert Isom | 1,300,000 | 2,600,000 | 5,200,000 | |||||||||||||||||||||||||||||||||
| 2/24/2022 | 21,539 | 107,695 | 215,390 | 1,826,500 | ||||||||||||||||||||||||||||||||
| 2/24/2022 | 107,695 | (d) | 1,826,500 | |||||||||||||||||||||||||||||||||
Doug Parker | ||||||||||||||||||||||||||||||||||||
| 2/24/2022 | 17,689 | 88,443 | 176,886 | 1,500,000 | ||||||||||||||||||||||||||||||||
| 2/24/2022 | 88,433 | (d) | 1,500,000 | |||||||||||||||||||||||||||||||||
| 6/8/2022 | 185,758 | (e) | 3,000,000 | |||||||||||||||||||||||||||||||||
Derek Kerr | 562,500 | 1,125,000 | 2,250,000 | |||||||||||||||||||||||||||||||||
| 2/24/2022 | 15,301 | 76,504 | 153,008 | 1,297,500 | ||||||||||||||||||||||||||||||||
| 2/24/2022 | 76,504 | (d) | 1,297,500 | |||||||||||||||||||||||||||||||||
Steve Johnson | 500,000 | 1,000,000 | 2,000,000 | |||||||||||||||||||||||||||||||||
| 2/24/2022 | 15,890 | 79,452 | 158,904 | 1,347,500 | ||||||||||||||||||||||||||||||||
| 2/24/2022 | 79,452 | (d) | 1,347,500 | |||||||||||||||||||||||||||||||||
Maya Leibman | 500,000 | 1,000,000 | 2,000,000 | |||||||||||||||||||||||||||||||||
| 2/24/2022 | 15,625 | 78,125 | 156,250 | 1,325,000 | ||||||||||||||||||||||||||||||||
| 2/24/2022 | 78,125 | (d) | 1,325,000 | |||||||||||||||||||||||||||||||||
David Seymour | 468,750 | 937,500 | 1,875,000 | |||||||||||||||||||||||||||||||||
| 12/12/2022 | 167,605 | (f) | 2,380,000 | |||||||||||||||||||||||||||||||||
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(a) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(b) | |||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||
Robert Isom | 1,300,000 | 2,600,000 | 5,200,000 | |||||||||||||||||||||||||||||||||
| 9/20/2023 | 107,676 | 430,704 | 861,408 | (c) | 5,625,000 | |||||||||||||||||||||||||||||||
| 9/20/2023 | 105,283 | 421,133 | 842,266 | (d) | 5,500,000 | |||||||||||||||||||||||||||||||
| 9/20/2023 | 430,704 | (e) | 5,625,000 | |||||||||||||||||||||||||||||||||
| 9/20/2023 | 210,566 | (f) | 2,750,000 | |||||||||||||||||||||||||||||||||
Steve Johnson | 637,500 | 1,275,000 | 2,550,000 | |||||||||||||||||||||||||||||||||
| 9/20/2023 | 35,176 | 140,704 | 281,408 | (c) | 1,837,500 | |||||||||||||||||||||||||||||||
| 9/20/2023 | 140,704 | (e) | 1,837,500 | |||||||||||||||||||||||||||||||||
| 9/20/2023 | 181,554 | (g) | 2,371,000 | |||||||||||||||||||||||||||||||||
Priya Aiyar | 456,250 | 912,500 | 1,825,000 | |||||||||||||||||||||||||||||||||
| 5/2/2023 | 21,423 | 85,693 | 171,386 | (c) | 1,180,000 | |||||||||||||||||||||||||||||||
| 7/12/2023 | 4,988 | 19,953 | 39,906 | (d) | 370,500 | |||||||||||||||||||||||||||||||
| 5/2/2023 | 85,693 | (e) | 1,180,000 | |||||||||||||||||||||||||||||||||
| 7/12/2023 | 19,952 | (f) | 370,500 | |||||||||||||||||||||||||||||||||
Devon May | 484,375 | 968,750 | 1,937,500 | |||||||||||||||||||||||||||||||||
| 5/2/2023 | 21,423 | 85,693 | 171,386 | (c) | 1,180,000 | |||||||||||||||||||||||||||||||
| 5/2/2023 | 85,693 | (e) | 1,180,000 | |||||||||||||||||||||||||||||||||
Vasu Raja | 484,375 | 968,750 | 1,937,500 | |||||||||||||||||||||||||||||||||
| 5/2/2023 | 25,962 | 103,848 | 207,696 | (c) | 1,430,000 | |||||||||||||||||||||||||||||||
| 7/12/2023 | 8,166 | 32,662 | 65,324 | (d) | 606,500 | |||||||||||||||||||||||||||||||
| 5/2/2023 | 103,848 | (e) | 1,430,000 | |||||||||||||||||||||||||||||||||
| 7/12/2023 | 32,661 | (f) | 606,500 | |||||||||||||||||||||||||||||||||
| (a) | Reflects potential payouts under the |
| (b) |
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For solely time-based RSU awards and the time-based vesting portion of each named executive officer’s |
| (c) | Represents the performance-vesting portion of the named executive officers’ 2023 annual RSU awards that vest on the third anniversary of the grant date, subject to the executive’s continued service and based on the Company’s achievement of (i) total debt reduction from year-end 2022 to year-end 2025 and (ii) pre-tax income margin improvement relative to the pre-tax income margin improvement for a pre-defined group of airlines based on 2023-2025 pre-tax income margin over a 2019 baseline. The number of shares that will be issued with respect to the performance-vesting RSUs varies between 25% and 200% depending on the Company’s performance, and no shares will be issued if threshold performance is not achieved. |
| (d) | Represents the |
| (e) | Represents |
| (f) | Represents |
| (g) | Represents Mr. Johnson’s promotion RSU grant that vests over three years, with one-third of the shares vesting on each of the first, second and third anniversaries of the grant |
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2024 Proxy Statement
Outstanding Equity Awards at 20222023 Fiscal Year-End
The following table provides information regarding all outstanding equity awards held by each of our named executive officers as of December 31, 2022.2023.
| Stock Awards | ||||||||||||||||||||
Name | Number of Shares or (#) | Market Value of Shares or ($)(j) | Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) | Market or Payout Value of Not Vested ($)(j) | ||||||||||||||||
Robert Isom | 107,695 | (a) | 1,369,880 | 107,695 | (b) | 1,369,880 | ||||||||||||||
| 140,741 | (c) | 1,790,226 | - | - | ||||||||||||||||
| - | - | 60,043 | (d) | 763,747 | ||||||||||||||||
Doug Parker | 88,443 | (a) | 1,124,995 | 88,443 | (b) | 1,124,995 | ||||||||||||||
| 185,758 | (e) | 2,362,842 | - | - | ||||||||||||||||
| 242,424 | (c) | 3,083,633 | - | - | ||||||||||||||||
| - | - | 115,646 | (d) | 1,471,017 | ||||||||||||||||
Derek Kerr | 76,504 | (a) | 973,131 | 76,504 | (b) | 973,131 | ||||||||||||||
| 95,118 | (c) | 1,209,901 | - | - | ||||||||||||||||
| - | - | 31,845 | (d) | 405,068 | ||||||||||||||||
Steve Johnson | 79,452 | (a) | 1,010,629 | 79,452 | (b) | 1,010,629 | ||||||||||||||
| 95,118 | (c) | 1,209,901 | - | - | ||||||||||||||||
| - | - | 31,845 | (d) | 405,068 | ||||||||||||||||
Maya Leibman | 78,125 | (a) | 993,750 | 78,125 | (b) | 993,750 | ||||||||||||||
| 93,603 | (c) | 1,190,630 | - | - | ||||||||||||||||
| - | - | 31,845 | (d) | 405,068 | ||||||||||||||||
David Seymour | 167,605 | (f) | 2,131,936 | - | - | |||||||||||||||
| 79,804 | (g) | 1,015,107 | - | - | ||||||||||||||||
| 37,217 | (h) | 473,400 | - | - | ||||||||||||||||
| 27,000 | (i) | 343,440 | - | - | ||||||||||||||||
| Stock Awards | ||||||||||||||||||||
Name | Grant Date | Number of (#) | Market Value of ($)(j) | Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) | Market or Payout Not Vested ($)(j) | |||||||||||||||
Robert Isom | 9/20/2023 | 430,704 | (a) | 5,917,873 | 430,704 | (b) | 5,917,873 | |||||||||||||
| 9/20/2023 | 210,566 | (c) | 2,893,177 | 421,133 | (d) | 5,786,367 | ||||||||||||||
| 2/24/2022 | 21,539 | (e) | 295,946 | 172,312 | (f) | 2,367,567 | ||||||||||||||
| 2/16/2021 | 46,914 | (g) | 644,598 | - | - | |||||||||||||||
Steve Johnson | 9/20/2023 | 140,704 | (a) | 1,933,273 | 140,704 | (b) | 1,933,273 | |||||||||||||
| 9/20/2023 | 181,554 | (h) | 2,494,552 | - | - | |||||||||||||||
| 2/24/2022 | 15,891 | (e) | 218,342 | 127,123 | (f) | 1,746,673 | ||||||||||||||
| 2/16/2021 | 31,706 | (g) | 435,640 | - | - | |||||||||||||||
Priya Aiyar | 7/12/2023 | 19,952 | (c) | 274,140 | 19,953 | (d) | 274,154 | |||||||||||||
| 5/2/2023 | 85,693 | (a) | 1,177,422 | 85,693 | (b) | 1,177,422 | ||||||||||||||
| 12/12/2022 | 73,943 | (h) | 1,015,977 | - | - | |||||||||||||||
| 11/16/2021 | 26,462 | (h) | 363,588 | - | - | |||||||||||||||
| 2/16/2021 | 6,079 | (h) | 83,525 | - | - | |||||||||||||||
Devon May | 5/2/2023 | 85,693 | (a) | 1,177,422 | 85,693 | (b) | 1,177,422 | |||||||||||||
| 12/12/2022 | 58,685 | (h) | 806,332 | - | - | |||||||||||||||
| 11/16/2021 | 21,001 | (h) | 288,554 | - | - | |||||||||||||||
Vasu Raja | 7/12/2023 | 32,661 | (c) | 448,762 | 32,662 | (d) | 448,776 | |||||||||||||
| 5/2/2023 | 103,848 | (a) | 1,426,872 | 103,848 | (b) | 1,426,872 | ||||||||||||||
| 12/12/2022 | 24,882 | (h) | 341,879 | - | - | |||||||||||||||
| 11/16/2021 | 8,736 | (h) | 120,033 | - | - | |||||||||||||||
| (a) | Represents the time-vesting portion of the named executive officer’s 2023 annual RSU awards that vest, subject to the executive’s continued employment, with respect to 66.66% on the first anniversary of the grant date and with respect to 33.33% of the shares on the second anniversary of the grant date. |
| (b) | Represents the performance-vesting portion of the named executive officers’ 2023 annual RSU awards that vest on the third anniversary of the grant date, subject to the executive’s continued service and based on the Company’s achievement of (i) total debt reduction from year-end 2022 to year-end 2025 and (ii) pre-tax income margin improvement relative to the pre-tax income margin improvement for a pre-defined group of airlines based on 2023-2025 pre-tax income margin over a 2019 baseline. The number of shares that will be issued with respect to the performance-vesting RSUs varies between 25% and 200% depending on the Company’s performance, and no shares will be issued if threshold performance is not achieved. Based on our expected attainment level as of December 31, 2023, the target number of RSUs is shown. |
| (c) | Represents the time-vesting portion of the named executive officers’ 2023 one-time and promotion RSU awards that vest, subject to the executive’s continued employment, with respect to 66.66% on the first anniversary of the grant date and with respect to 33.33% of the shares on the second anniversary of the grant date. |
| (d) | Represents the performance-vesting portion of the named executive officers’ 2023 one-time and promotion RSU awards that vest on the third anniversary of the grant date, subject to the executive’s continued service and based on the Company’s achievement of (i) total debt reduction from year-end 2022 to year-end 2025 and (ii) pre-tax income margin improvement relative to the pre-tax income margin improvement for a pre-defined group of airlines based on 2023-2025 pre-tax income margin over a 2019 baseline. The number of shares that will be issued with respect to the performance-vesting RSUs varies between 25% and 200% depending on the Company’s performance, and no shares will be issued if threshold performance is not achieved. Based on our expected attainment level as of December 31, 2023, the target number of RSUs is shown. |
| (e) | Represents the time-vesting portion of the RSU awards granted on February 24, 2022, with 80% of the time-vesting shares vesting on February 24, 2023, the first anniversary of the grant date and 20% of the time-vesting shares vesting on February 24, 2024, the second anniversary of the grant date, subject to continued service. |
Represents the performance-vesting portion of the RSUs granted on February 24, 2022, that will vest, subject to continued service, on February 24, 2025, based on the Company’s achievement of (i) total debt reduction from year-end 2021 to year-end 2024 and (ii) pre-tax income margin improvement relative to the pre-tax income margin improvement for a pre-defined group of airlines based on 2024 pre-tax income margin over a 2019 baseline. The number of shares that will be issued with respect to the performance-vesting RSUs varies between 20% and 200% depending on the Company’s performance, and no shares will be issued if threshold performance is not achieved. |
Represents time-vesting RSU |
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2024 Proxy Statement
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Options Exercised and Stock Vested
The following table provides information regarding the vesting of RSUs held by the named executive officers during the year ended December 31, 2022.2023. Our named executive officers did not hold any options or SARs during 2022.2023.
| Stock Awards | ||||||||||
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(a) | ||||||||
Robert Isom | 125,636 | 2,334,251 | ||||||||
Doug Parker | 222,881 | 4,136,419 | ||||||||
Derek Kerr | 80,283 | 1,494,899 | ||||||||
Steve Johnson | 80,283 | 1,494,899 | ||||||||
Maya Leibman | 79,272 | 1,475,872 | ||||||||
David Seymour | 162,495 | 2,468,618 | ||||||||
| Stock Awards | ||||||||
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(a) | ||||||
Robert Isom | 240,026 | 3,806,677 | ||||||
Steve Johnson | 158,818 | 2,520,656 | ||||||
Priya Aiyar | 102,553 | 1,402,276 | ||||||
Devon May | 83,385 | 1,128,972 | ||||||
Vasu Raja | 43,115 | 605,702 | ||||||
| (a) | Represents the closing market price of a share of our Common Stock on the date of vesting, multiplied by the number of shares that vested. |
Pension Benefits
The following table summarizes the present value of the accumulated pension benefits of each of our named executive officers who participated in the AMR Retirement Benefit Plan and/or the AMR Non-Qualified Plan as of December 31, 2022. On October 31, 2012, in connection with the voluntary cases commenced by AMR under chapter 11 of title 11 of the Code (the “Chapter 11 Cases”), credited service and benefit accruals under both the AMR Retirement Benefit Plan and the defined benefit portion of the AMR Non-Qualified Plan were frozen for all participants.
| Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | ||||||||||||||
Doug Parker | AMR Retirement Benefit Plan | 3.730 | 41,227 | 2,115 | |||||||||||||
Maya Leibman | AMR Retirement Benefit Plan | 5.261 | 249,295 | - | |||||||||||||
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| AMR Non-Qualified Plan | 5.261 | 47,339 | - | |||||||||||||
Discussion Regarding the Pension Benefits Table
AMR Retirement Benefit Plan
The AMR Retirement Benefit Plan is a defined benefit plan that complies with the Employee Retirement Income Security Act of 1974, as amended, and qualifies for an exemption from federal income tax under the Code. On January 1, 2002, all participants were given the choice to either continue accruing credited service in the AMR Retirement Benefit Plan or to freeze their AMR Retirement Benefit Plan credited service and begin to earn additional benefits in the Company’s defined contribution plan. Ms. Leibman elected the second option, so her credited service was frozen at January 1, 2002. Mr. Parker was not eligible to make an election as he was not an employee on January 1, 2002. Upon his rehire, he was enrolled, but subsequently declined to participate, in the enhanced defined contribution plan. His defined benefit plan credited service and benefit amount remained frozen. On October 31, 2012, credited service and benefit accruals were frozen for all plan participants in connection with the Chapter 11 Cases. Effective upon the freeze of benefit accruals, affected employees received a replacement benefit under the AA 401(k) Plan in the form of matching employee contributions up to 5.5% of eligible earnings.
The AMR Retirement Benefit Plan was only available to employees hired prior to January 1, 2002 who had also completed 1,000 hours of service in one year prior to that date. To vest in the plan’s benefits, a participant must also (i) complete at least five years of service, (ii) reach age 65 or (iii) be permanently and totally disabled. Normal retirement age under the plan is 65. However, participants with at least ten years of retirement eligible service may retire at age 60
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and receive unreduced benefits. Participants with at least 15 years of retirement eligible service may retire at age 55, but their benefits are reduced 3% for each year that the participant’s age is below age 60. Participants who terminate before age 60 with more than ten but less than 15 years of retirement eligible service may receive reduced retirement benefits starting at age 60. These benefits are reduced 3% for each year that the participant’s age is below age 65. AMR Retirement Benefit Plan benefits are paid as a monthly annuity and the participant may elect the form of annuity payments. Payment options include single life, joint and survivor, guaranteed period or level income. For the level income payment option, the monthly payments are adjusted to coordinate with the receipt of Social Security benefits.
The benefit payable to all participants under the AMR Retirement Benefit Plan and the AMR Non-Qualified Plan was determined using one of four formulas, and the formula that provides the participant the greatest benefit is used. For purposes of the table above, we therefore have assumed that Mr. Parker will receive benefits under the AMR Retirement Benefit Plan pursuant to the “Career Average Formula,” where a participant’s benefit at normal retirement is based on an accumulation of monthly credits and where each month’s credit is 1.25% of average monthly compensation up to $550 plus 2% of average monthly compensation over $550. We have also assumed that Ms. Leibman will receive benefits under the AMR Retirement Benefit Plan and the AMR Non-Qualified Plan pursuant to the “Social Security Offset Formula,” where a participant’s annual benefit at normal retirement will equal the difference between (i) the product of (a) 2% of the participant’s final average compensation times (b) the participant’s years of credited service, and (ii) the product of (a) 1.5% of the participant’s estimated annual Social Security benefit times (b) the participant’s years of credited service, up to a maximum of 33.3 years of service.
AMR Non-Qualified Plan
The AMR Non-Qualified Plan supplemented the AMR Retirement Benefit Plan and the AA 401(k) Plan for participants whose compensation exceeded the maximum recognizable compensation limit allowed under the Code.
The AMR Non-Qualified Plan had two components: (i) a defined benefit component for participants in the AMR Retirement Benefit Plan before it was frozen, and (ii) a defined contribution component for officers who participate in the AA 401(k) Plan. The defined contribution component is discussed below under the “Non-Qualified Deferred Compensation Table” and the accompanying narrative.
As described above, in 2002, Ms. Leibman elected to freeze her AMR Retirement Benefit Plan credited service. As a result of this election, her credited service in the AMR Non-Qualified Plan was also frozen at January 1, 2002. All benefit accruals under the defined benefit portion of the AMR Non-Qualified Plan were frozen for all participants as of October 31, 2012 in connection with the Chapter 11 Cases.
Present Value Calculations
The values of accrued benefits under the AMR Retirement Benefit Plan are determined using the Pri-2012 Nondisabled Annuitant table with white collar adjustments and increased 3% at all ages, and projected generationally using the MP-2021 projection scale. The lump sum amounts payable under the AMR Non-Qualified Plan are calculated using the November 2022 417(e) segment rates and the 2023 417(e) unisex mortality table prescribed by the IRS. Retirement benefits for both plans are then discounted to December 31, 2022 using an interest-only discount rate of 5.6% for the AMR Retirement Benefit Plan and 5.7% for the AMR Non-Qualified Plan. The present value is the amount today that, with fixed interest earned over time, is expected to equal the total amount of benefits paid to the employee. For Ms. Leibman present value assumes retirement as of December 31, 2022, as she has already reached her earliest unreduced retirement age. For Mr. Parker the present value is based on his actual benefit commencement date of May 1, 2022.
Non-Qualified Deferred Compensation
The following table provides information with respect to the non-qualified deferred compensation earned by Ms. Leibman under the AMR Non-Qualified Plan for 2022. The defined contribution component of the AMR Non-Qualified Plan was frozen to new participants as of December 31, 2014 and frozen to Company matching contributions as of December 31, 2015.
Executive Contributions in Last Fiscal Year ($) | Company Contributions in Last Fiscal Year ($) | Aggregate Loss in Last Fiscal Year ($)(a) | Aggregate Withdrawals/ Distributions in Last Fiscal Year ($) | Aggregate Balance at December 31, 2022 ($)(b) | |||||||||||||||||||||
Maya Leibman | - | - | (50,533 | ) | - | 239,332 | |||||||||||||||||||
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2024 Proxy Statement
Discussion Regarding Non-Qualified Deferred Compensation Table
The defined contribution component of the AMR Non-Qualified Plan supplemented the AA 401(k) Plan for Ms. Leibman because her compensation exceeded the maximum recognizable compensation limit allowed under the Code. Contributions vested after three years of service, and participants are entitled to a distribution of their accounts upon a separation from the Company. Investment options for the AMR Non-Qualified Plan mirror the AA 401(k) Plan investment options available to all participating employees. The defined contribution component of the AMR Non-Qualified Plan was frozen to new participants as of December 31, 2014 and frozen to Company matching contributions as of December 31, 2015.
Potential Payments Upon Termination or Change in Control
This section describesquantifies payments that would be made to our named executive officers upon a change in control or following acertain qualifying terminationterminations of employment.
Mr. Parker
In April 2016, at Mr. Parker’s request, the Compensation Committee approved the termination of the Amended and Restated Employment Agreement with Mr. Parker dated November 28, 2007 and the Company’s obligations thereunder, including certain benefits in the event of For a change in control or termination. Therefore, Mr. Parker is entitled only to termination and/or change in control benefits payable to him under general plans in which he participates, as well as certain accelerated vesting of RSUs, as described below.
In May 2015, at his request, the Compensation Committee approved providing 100% of Mr. Parker’s direct compensation in the form of equity incentives. Mr. Parker ceased receiving any base salary and ceased his participation in the Company’s STIP in place in 2015, the value of which was captured in Mr. Parker’s 2015 target equity incentive compensation. In connection with this adjustment, the Compensation Committee provided that in the event of Mr. Parker’s termination of employment other than for misconduct, a portion of his equity incentives will vest to account for the value of Mr. Parker’s base salary and cash incentive award that otherwise would have been earned by him through the termination date.
Messrs. Isom, Kerr and Johnson
Upon the closing of the merger with US Airways, we assumed the executive change in control and severance benefits agreements entered into between US Airways and Messrs. Isom, Kerr and Johnson (the “Executive CIC Agreements”). In April 2017, at their request, all of our executive officers who were party to Executive CIC Agreements, including each of Messrs. Isom, Kerr and Johnson, voluntarily terminated their agreements. As a result of the voluntary forfeituredescription of these agreements, our executive officers, including Messrs. Isom, Kerrbenefits, please see “Compensation Discussion and Johnson, are no longer contractually entitled to any cash severance or continued healthcare benefits upon any terminationAnalysis – Severance Benefits and are entitled only to termination and/or change in control benefits under general plans in which they participate, as described below.
2013 Plan
Pursuant to the terms of grant agreements under the 2013 Plan, all RSUs held by the named executive officers are fully accelerated in the event of either of the following: (i) termination by reason of death or “disability” or (ii) a “change in control” (each, as defined in the applicable plan and award agreements). In addition, beginning in 2021, the vesting of each time-vesting RSU award granted to Messrs. Johnson, Kerr and Parker and Ms. Leibman will accelerate in full in the event of such individual’s separation from service from the Company (other than a termination by the Company for “cause”) following the date he or she has reached the age of 55 and has 10 or more years of service with the Company or a predecessor, with performance-vesting RSUs remaining outstanding and eligible to vest based on actual performance through the end of the performance period.
Short-Term Incentive Plan
Under the STIP, if an employee separates from service with us and our affiliates while actively employed due to death or disability prior to the payment of the award, but is otherwise eligible for the award, the employee will be treated as having been actively employed on the date of payment of the award.
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Estimated Potential PaymentsPost Termination Restrictive Covenants.”
The estimated amounts of the respective benefits for each of our named executive officers, (other than Mr. Parker), assuming the triggering event occurred on December 31, 2022,2023, are provided in the table below. The table below reflects the termination and/or change in control benefits payable to each named executive officer under generalagreements and plans in which he or she participates that were in effect as well as certain accelerated vesting of RSUs, as described below.the end of the fiscal year, and in the case of Mr. May, the severance agreement he entered into in February 2024.
Executive Benefits and Payments Upon Termination | Change in Control ($) | Death ($) | Disability ($) | Any Other Qualifying ($)(d) | ||||||||||||
Robert Isom | ||||||||||||||||
Annual Incentive Award(a) | - | 5,200,000 | 5,200,000 | - | ||||||||||||
Acceleration of Unvested RSUs(b) | 5,293,733 | 5,293,733 | 5,293,733 | - | ||||||||||||
Flight Privileges(c) | - | 118,083 | 198,148 | 198,148 | ||||||||||||
Total | 5,293,733 | 10,611,816 | 10,691,881 | 198,148 | ||||||||||||
Derek Kerr | ||||||||||||||||
Annual Incentive Award(a) | - | 2,250,000 | 2,250,000 | - | ||||||||||||
Acceleration of Unvested RSUs(b) | 3,561,231 | 3,561,231 | 3,561,231 | 3,156,163 | ||||||||||||
Flight Privileges(c) | - | 47,481 | 138,941 | 138,941 | ||||||||||||
Total | 3,561,231 | 5,858,712 | 5,950,172 | 3,295,104 | ||||||||||||
Steve Johnson | ||||||||||||||||
Annual Incentive Award(a) | - | 2,000,000 | 2,000,000 | - | ||||||||||||
Acceleration of Unvested RSUs(b) | 3,636,227 | 3,636,227 | 3,636,227 | 3,231,160 | ||||||||||||
Flight Privileges(c) | - | 83,910 | 151,470 | 151,470 | ||||||||||||
Total | 3,636,227 | 5,720,137 | 5,787,697 | 3,382,630 | ||||||||||||
Maya Leibman | ||||||||||||||||
Annual Incentive Award(a) | - | 2,000,000 | 2,000,000 | - | ||||||||||||
Acceleration of Unvested RSUs(b) | 3,583,198 | 3,583,198 | 3,583,198 | 3,178,130 | ||||||||||||
Flight Privileges(c) | - | 90,726 | 177,217 | 177,217 | ||||||||||||
Total | 3,583,198 | 5,673,924 | 5,760,415 | 3,355,347 | ||||||||||||
David Seymour | ||||||||||||||||
Annual Incentive Award(a) | - | 1,875,000 | 1,875,000 | - | ||||||||||||
Acceleration of Unvested RSUs(b) | 3,963,883 | 3,963,883 | 3,963,883 | - | ||||||||||||
Flight Privileges(c) | - | 51,177 | 142,261 | 142,261 | ||||||||||||
Total | 3,963,883 | 5,890,060 | 5,981,144 | 142,261 | ||||||||||||
Executive Benefits and Payments Upon Termination | Change in Control ($) | Involuntary ($) | Involuntary ($) | Death ($) | Disability ($) | Any Other Qualifying ($)(f) | ||||||||||||||||||
Robert Isom | ||||||||||||||||||||||||
Base Salary(a) | - | 2,600,000 | 2,600,000 | - | - | - | ||||||||||||||||||
Annual Incentive Award(b) | - | 5,200,000 | 5,200,000 | 3,922,360 | 3,922,360 | - | ||||||||||||||||||
COBRA(c) | - | 54,875 | 54,875 | - | - | - | ||||||||||||||||||
Acceleration of Unvested RSUs(d) | 23,823,401 | 15,389,935 | 23,823,401 | 23,823,401 | 23,823,401 | 9,041,151 | ||||||||||||||||||
Flight Privileges(e) | - | 268,043 | 268,043 | 170,308 | 268,043 | 268,043 | ||||||||||||||||||
Total | 23,823,401 | 23,512,853 | 31,946,319 | 27,916,069 | 28,013,804 | 9,309,194 | ||||||||||||||||||
Steve Johnson | ||||||||||||||||||||||||
Base Salary(a) | - | 1,275,000 | 1,275,000 | - | - | - | ||||||||||||||||||
Annual Incentive Award(b) | - | 1,912,500 | 1,912,500 | 1,787,085 | 1,787,085 | - | ||||||||||||||||||
COBRA(c) | - | 40,854 | 40,854 | - | - | - | ||||||||||||||||||
Acceleration of Unvested RSUs(d) | 8,761,753 | 8,761,753 | 8,761,753 | 8,761,753 | 8,761,753 | 8,761,753 | ||||||||||||||||||
Flight Privileges(e) | - | 295,231 | 295,231 | 197,802 | 295,231 | 295,231 | ||||||||||||||||||
Total | 8,761,753 | 12,285,338 | 12,285,338 | 10,746,640 | 10,844,069 | 9,056,984 | ||||||||||||||||||
Priya Aiyar | ||||||||||||||||||||||||
Base Salary(a) | - | 1,095,000 | 1,095,000 | - | - | - | ||||||||||||||||||
Annual Incentive Award(b) | - | 1,368,750 | 1,368,750 | 1,376,634 | 1,376,634 | - | ||||||||||||||||||
COBRA(c) | - | 13,105 | 13,105 | - | - | - | ||||||||||||||||||
Acceleration of Unvested RSUs(d) | 4,366,228 | 2,313,445 | 4,366,228 | 4,366,228 | 4,366,228 | - | ||||||||||||||||||
Flight Privileges(e) | - | 18,775 | 18,775 | - | - | - | ||||||||||||||||||
Total | 4,366,228 | 4,809,075 | 6,861,858 | 5,742,862 | 5,742,862 | - | ||||||||||||||||||
Devon May | ||||||||||||||||||||||||
Base Salary(a) | - | 1,162,500 | 1,162,500 | - | - | - | ||||||||||||||||||
Annual Incentive Award(b) | - | 1,453,125 | 1,453,125 | 1,461,495 | 1,461,495 | - | ||||||||||||||||||
COBRA(c) | - | 45,964 | 45,964 | - | - | - | ||||||||||||||||||
Acceleration of Unvested RSUs(d) | 3,449,730 | 1,869,135 | 3,449,730 | 3,449,730 | 3,449,730 | - | ||||||||||||||||||
Flight Privileges(e) | - | 317,273 | 317,273 | 227,649 | 317,273 | 317,273 | ||||||||||||||||||
Total | 3,449,730 | 4,847,997 | 6,428,592 | 5,138,874 | 5,228,498 | 317,273 | ||||||||||||||||||
Vasu Raja | ||||||||||||||||||||||||
Base Salary | - | - | - | - | - | - | ||||||||||||||||||
Annual Incentive Award(b) | - | - | - | 1,461,495 | 1,461,495 | - | ||||||||||||||||||
COBRA | - | - | - | - | - | - | ||||||||||||||||||
Acceleration of Unvested RSUs(d) | 4,213,194 | - | 4,213,194 | 4,213,194 | 4,213,194 | - | ||||||||||||||||||
Flight Privileges(e) | - | - | - | - | - | - | ||||||||||||||||||
Total | 4,213,194 | - | 4,213,194 | 5,674,689 | 5,674,689 | - | ||||||||||||||||||
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2024 Proxy Statement
| (b) | On an involuntary termination, represents two times Mr. Isom’s annual target cash incentive and 1.5 times the executive’s annual target cash incentive for Ms. Aiyar and Messrs. Johnson and May. On death or disability, amount represents the amount of the annual incentive award |
On an involuntary termination, in the case of Mr. Isom, represents a payment equal to 24 months’ COBRA premiums, and for Ms. Aiyar and Messrs. Johnson and May, a payment equal to 18 months’ COBRA premiums. |
| (d) | Aggregate value of unvested RSUs is calculated at a price of |
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Represents for |
On March 31, 2022, Mr. Parker retired as Chief Executive Officer of the Company and Mr. Isom assumed the role of Chief Executive Officer and was appointed as a director. Mr. Parker will remain in his role as Chairman of the Board of Directors of the Company until April 30, 2023. Mr. Parker’s RSU awards will continue to vest while he provides services as Chairman of the Board of Directors of the Company. In the event he ceases to provide services, his service-vesting RSU awards (other than his RSUs granted for Board service) will accelerate in full, with performance-vesting RSUs remaining outstanding and eligible to vest based on actual performance through the end of the performance period. The aggregate value of the vesting of these RSU awards was $9,167,482, as of December 31, 2022. In addition, when Mr. Parker ceases his services as Chairman of the Board, he will become entitled to lifetime flight privileges under the non-employee director compensation policy, with a value of $235,622 as of December 31, 2022, based on the same assumptions as those described in footnote (c) above.
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CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Isom, who served as CEO as of December 31, 2022.2023.
We offer competitive compensation to our team members. As one of the world’s largest airlines, some of our unique characteristics may make comparisons to the pay ratios at other airlines or companies difficult. We employ over 130,000 team members; our route network is vast and unique; and we insource more of our flying and services than our U.S. peers. For example, American operates three wholly-owned regional airlines, and approximately 22% of our total workforce is employed by those airlines. Additionally, our pay ratio includes approximately 16% part-time and temporary team members. In 2023, mainline and regional salaries, wages and benefits were our largest expense and represented approximately 34% of our total operating expenses. Approximately 87% of our employees as of December 31, 2023 were represented by various labor unions responsible for negotiating the collective bargaining agreements covering their compensation and job duties, among other things. The Company’s employment footprint is quite diverse—with some positions requiring initial education and licensing requirements as well as ongoing certification work. Compensation for positions with more rigorous requirements for continued employment and that draw from smaller applicant pools generally utilize higher pay bands than those positions with fewer educational and training requirements and larger applicant pools.
For 2022,2023, the median annual total compensation of all team members across American (other than our CEO) was $71,665. For$67,788, while the purposesannual total compensation of the Pay Ratio calculation, we annualized our CEO’s 2022 salary since becoming CEO then added all other forms of compensationwas $31,438,162, as outlined in the “Summary Compensation Table” above, for a total of $5,025,572.above. Based on this information, the ratio of the annual total compensation of our CEO to the median annual total compensation of all employees was estimated to be 70464 to 1.1, calculated in accordance with SEC rules. This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
As a conditionIn addition to the required pay ratio calculation above, we have calculated an alternative pay ratio using an adjusted amount of total compensation for Mr. Isom that removes the non-recurring elements of his compensation as set forth under “Compensation Discussion and Analysis— Non-Recurring Compensation Elements Reported in 2023”. When calculated in this manner, Mr. Isom’s adjusted total compensation for 2023 is $16,582,362 and the ratio of the payroll support and loan agreements entered into with the federal government under the CARES Act, PSP2 and PSP3, we implemented significant reductionsannual total compensation of Mr. Isom to the median annual total target direct compensation for our named executive officers, including Mr. Isom, in order to comply with the applicable compensation limits imposed upon us. These limits have continuedof all employees was estimated to be 245 to 1.
This alternative pay ratio is not a primary determinant of our named executive officers’ compensation over the remaining period during which they are in effect, includingsubstitute for 2022, significantly impacting the pay ratio for 2022.calculated in accordance with the SEC disclosure rules, but we believe it is helpful in fully evaluating the ratio of Mr. Isom’s 2022annual total target direct compensation remained belowto the level in 2019, despite Mr. Isom’s promotion to CEO on March 31, 2022.median of the annual total compensation of all American Airlines employees.
Determining the Median Employee
The Company chose December 31, 20222023 as the date for establishing the employee population used in identifying the median employee and 20222023 as the measurement period.
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We captured all full time,full-time, part-time and temporary employees located in the U.S. as of December 31, 20222023 with nonzero W-2 earnings, including team members employed at our three wholly owned subsidiaries, consisting of 133,432139,532 individuals. As permitted by SEC rules, under the 5% “de minimis” exemption, we excluded 6,5506,487 non-U.S. employees. The jurisdictions in which we excluded employees and their employee populations were as follows: Antigua and Barbuda (25)(26); Argentina (468)(475); Aruba (38); Australia (7); Bahamas (145)(148); Barbados (64)(65); Belize (23)(26); Bermuda (22)(19); Brazil (528)(509); Canada (423)(478); Cayman Islands (2)(1); Chile (208)(201); China (58)(29); Colombia (94)(84); Costa Rica (74); Dominican Republic (495)(443); Ecuador (12)(11); El Salvador (38)(35); France (171)(155); Germany (102)(91); Greece (1)(2); Grenada (28)(30); Guatemala (48)(46); Haiti (35)(26); Honduras (49)(46); Hong Kong (4); India (11)(8); Ireland (44)(61); Israel (7)(6); Italy (31)(24); Jamaica (92)(95); Japan (62)(57); Korea, Republic of (9)(6); Mexico (1,190)(1,160); Netherlands (12); Netherlands Antilles (4); Nicaragua (18)(23); Peru (466)(467); Portugal (6)(7); Saint Kitts and Nevis (38)(35); Sint Maarten (2); Spain (141)(131); Switzerland (8)(6); Trinidad and Tobago (382)(445); Turks and Caicos Islands (1); United Kingdom (861)(862); and Uruguay (7)(6).
We identified the median team member using earnings as set forth in Box 5 of W-2 for 2022.2023. We annualized earnings for permanent employees who worked less than the entire year. We selected the employee with earnings closest to the median after excluding seven employees closer to the median as they were either affiliated with a regional airline or had a pension, both of which we determined were not representative of the broader population. The median employee was a customer care representative. The annual total compensation of the median employee and the annual total compensation of the CEO were calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K.
Pay Ratio Comparisons
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
As one of the world’s largest airlines, some of our unique characteristics may make comparisons to the pay ratios at other airlines or companies difficult. We employ over 100,000 team members; our route network is vast and unique; and we insource more of our flying and services than our U.S. peers. For example, American operates three wholly-owned regional airlines, and approximately 21% of our total workforce is employed by those airlines. Additionally, our pay ratio includes approximately 15% part-time and temporary team members. We offer competitive compensation to our team members. In 2022, mainline and regional salaries, wages and benefits were our largest expense and represented approximately 32% of our total operating expenses. Approximately 87% of our employees as of December 31, 2022 were represented by various labor unions responsible for negotiating the collective bargaining agreements covering them.
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Value of Initial Fixed $100 Investment Based on: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Year | Summary Compensation Table Total: Mr. Isom ($) (1) | CAP: Mr. Isom ($) (2) | Summary Compensation Table Total: Mr. Parker ($) (1) | CAP: Mr. Parker ($) (2) | Average Summary Compensation Table Total for Non-CEO NEOs ($) (1) | Average CAP: Non-CEO NEOs ($) (2) | AAG Total Stockholder Return ($) | Peer Group Total Stockholder Return ($) (3) | Net Income (Loss) ($) (in millions) | Adjusted Pre-Tax Margin % (4) | ||||||||||||||||||||||||||||||||||||||||
2022 | 4,886,649 | 3,507,095 | 6,537,694 | 3,881,181 | 3,399,589 | 2,421,509 | 44.52 | 48.04 | 127 | 0.9 | % | |||||||||||||||||||||||||||||||||||||||
2021 | - | - | 7,238,011 | 8,128,613 | 3,892,813 | 4,197,060 | 62.85 | 74.23 | (1,993 | ) | (23.2 | %) | ||||||||||||||||||||||||||||||||||||||
2020 | - | - | 10,663,866 | (614,164 | ) | 4,245,970 | 736,998 | 55.19 | 75.55 | (8,885 | ) | (70.7 | %) | |||||||||||||||||||||||||||||||||||||
(1) | See Appendix B for details on the components of pre-tax net special items and for a reconciliation ofpre-tax income (loss) excluding net special items, anon-GAAP measure. |
Value of Initial Fixed $100 Investment Based on: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Year | Summary Compensation Table Total: Mr. Isom ($) (1) | CAP: Mr. Isom ($) (2) | Summary Compensation Table Total: Mr. Parker ($) (1) | CAP: Mr. Parker ($) (2) | Average Summary Compensation Table Total for Non-CEO NEOs ($) (1) | Average CAP: Non-CEO NEOs ($) (2) | AAG Total Stockholder Return ($) (3) | Peer Group Total Stockholder Return ($) (3) | Net Income (Loss) ($) (in millions) | Adjusted Pre-Tax Margin % (4) | ||||||||||||||||||||||||||||||||||||||||
2023 | 31,438,162 | 33,817,502 | - | - | 9,530,121 | 9,827,888 | 48.08 | 61.60 | 822 | 4.7 | % | |||||||||||||||||||||||||||||||||||||||
2022 | 4,886,649 | 3,507,095 | 6,537,694 | 3,881,181 | 3,400,714 | 2,422,634 | 44.52 | 48.04 | 127 | 0.9 | % | |||||||||||||||||||||||||||||||||||||||
2021 | - | - | 7,238,011 | 8,128,613 | 3,892,813 | 4,197,060 | 62.85 | 74.23 | (1,993 | ) | (23.2 | %) | ||||||||||||||||||||||||||||||||||||||
2020 | - | - | 10,663,866 | (614,164 | ) | 4,245,970 | 736,998 | 55.19 | 75.55 | (8,885 | ) | (70.7 | %) | |||||||||||||||||||||||||||||||||||||
| (1) | Amounts reported in these columns represent the total compensation as reported in the Summary Compensation Table for Messrs. Isom and Parker for each year where they served as CEO and the average of the total compensation as reported in the Summary Compensation Table for our remaining NEOs for the relevant fiscal year, which captures the individuals indicated in the table below for each fiscal year: |
Year | CEO | Non-CEO NEOs | |||
| 2023 | Robert Isom | Steve Johnson, Priya Aiyar, Devon May and Vasu Raja | |||
| 2022 | Robert Isom and Doug Parker | Derek Kerr, Steve Johnson, Maya Leibman and David Seymour | |||
| 2021 | Doug Parker | Robert Isom, Derek Kerr, Steve Johnson and Maya Leibman | |||
| 2020 | Doug Parker | Robert Isom, Derek Kerr, Steve Johnson and Maya Leibman |
| (2) | Compensation Actually Paid (“CAP”) to |
2022 | 2021 | 2020 | ||||||||||||||||||||||||||
Adjustments | Mr. Isom | Mr. Parker | Average Non-CEO NEOs | Mr. Parker | Average Non-CEO NEOs | Mr. Parker | Average Non-CEO NEOs | |||||||||||||||||||||
Deduction for amounts reported under the “Stock Awards” column of Summary Compensation Table for each Fiscal Year (“FY”) | (3,653,000 | ) | (6,000,000 | ) | (2,580,000 | ) | (7,200,000 | ) | (3,152,500 | ) | (10,624,000 | ) | (3,572,750 | ) | ||||||||||||||
Year end Fair Value of Equity Awards Granted in each FY | 3,196,752 | 4,988,123 | 2,270,065 | 7,256,558 | 3,177,268 | 4,577,049 | 1,539,374 | |||||||||||||||||||||
Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years | (1,001,134 | ) | (1,778,112 | ) | (628,247 | ) | 434,364 | 146,088 | (4,452,589 | ) | (1,259,093 | ) | ||||||||||||||||
Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the FY | 77,828 | 133,476 | (42,014 | ) | 380,105 | 126,933 | (927,638 | ) | (248,053 | ) | ||||||||||||||||||
Value of Dividends or other Earnings Paid Upon Vesting Date during FY | - | - | 2,116 | 19,574 | 6,459 | 155,509 | 44,992 | |||||||||||||||||||||
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2022 | 2021 | 2020 | 2023 | |||||||||||||||||||||||||||||||||
Adjustments | Mr. Isom | Mr. Parker | Average Non-CEO NEOs | Mr. Parker | Average Non-CEO NEOs | Mr. Parker | Average Non-CEO NEOs | Mr. Isom ($) | Average Non-CEO NEOs ($) | |||||||||||||||||||||||||||
Deduction for Change in the Actuarial Present Values Reported Under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” Column of Summary Compensation Table for each FY | - | - | - | - | - | (6,361 | ) | (13,442 | ) | |||||||||||||||||||||||||||
Deduction for amounts reported under the “Stock Awards” column of Summary Compensation Table for Fiscal Year 2023 (“FY23”) | (19,500,000 | ) | (3,895,000 | ) | ||||||||||||||||||||||||||||||||
Year-end Fair Value of Equity Awards Granted in FY23 | 20,515,276 | 3,842,580 | ||||||||||||||||||||||||||||||||||
Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years | 610,517 | 167,907 | ||||||||||||||||||||||||||||||||||
Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the FY23 based on change from Prior Year-end to Vesting Date | 753,546 | 182,279 | ||||||||||||||||||||||||||||||||||
Total Adjustments | (1,379,554 | ) | (2,656,513 | ) | (978,080 | ) | 890,602 | 304,247 | (11,278,030 | ) | (3,508,972 | ) | 2,379,339 | 297,766 | ||||||||||||||||||||||
Fair value or change in fair value, as applicable, of equity awards in the Compensation Actually Paid columns was determined by reference to (1) for time-based RSU awards, the closing price of a share of our Common Stock on the applicable year-end date(s) or, in the case of vesting dates, the closing price of a share of our Common Stock on the applicable vesting dates, and (2) for performance-based RSU awards, the same valuation methodology as time-based RSU awards exceptyear-end values are multiplied by a factor reflecting achievement of the probable outcome of the applicable performance conditions as of the measurement date |
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| (4) | Adjusted pre-tax margin is anon-GAAP measure and excludes net special items. See Appendix B for a reconciliation ofpre-tax margin excluding net special items, anon-GAAP measure. |
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EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about our Common Stock that may be issued under our only existing equity compensation planplans as of December 31, 2022,2023, which consists of the 2023 Incentive Award Plan (the “2023 Plan”) and the 2013 Plan.Incentive Award Plan (the “2013 Plan”).
| Plan Category | (i) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (ii) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights ($) | (iii) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (i)) | (i) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (ii) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights ($) | (iii) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (i)) | |||||||||||||||||||||
Equity Compensation Plans Approved by Security Holders(a) | 10,262,583 | - | 17,635,650 | ||||||||||||||||||||||||
Equity Compensation Plans Approved by Security Holders(a) | |||||||||||||||||||||||||||
Equity Compensation Plans Approved by Security Holders(a) | |||||||||||||||||||||||||||
Equity Compensation Plans Approved by Security Holders(a) | 14,234,700 | (b) | - | 9,501,204 | |||||||||||||||||||||||
Equity Compensation Plans Not Approved by Security Holders | |||||||||||||||||||||||||||
Equity Compensation Plans Not Approved by Security Holders | |||||||||||||||||||||||||||
Equity Compensation Plans Not Approved by Security Holders | |||||||||||||||||||||||||||
Equity Compensation Plans Not Approved by Security Holders | - | - | - | - | - | - | |||||||||||||||||||||
Total | 10,262,583 | - | 17,635,650 | ||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||
Total | 14,234,700 | - | 9,501,204 | ||||||||||||||||||||||||
| (a) | On May 10, 2023, our stockholders approved the 2023 Plan which replaced the 2013 Plan. The 2013 Plan was approved by the Bankruptcy Court in connection with |
| (b) | Consists of |
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2024 Proxy Statement
OTHER MATTERS
Stockholder Proposals
Rule 14a-8 of the Exchange Act provides that certain stockholder proposals must be included in the proxy statement for an annual meeting of stockholders. For a stockholder proposal to be considered for inclusion in the proxy statement for our 20242025 Annual Meeting of Stockholders, our Corporate Secretary (Grant B. McGee,(Priya Aiyar, Corporate Secretary, at American Airlines Group Inc., MD8B503, 1 Skyview Drive, Fort Worth, Texas 76155) must receive the proposal no later than December 1, 2023., 2024. The proposal must comply with the SEC regulations under Rule 14a-8 of the Exchange Act regarding the inclusion of stockholder proposals in our proxy materials.
Pursuant to the Bylaws, in order for a stockholder to present a proposal at an annual meeting of stockholders, other than proposals to be included in the proxy statement as described above, the stockholder must deliver proper notice to our Corporate Secretary at our principal executive offices (please see the address above) not more than 120 days and not less than 90 days prior to the anniversary date of the immediately preceding annual meeting or, if the date of the annual meeting is more than 30 days before or after such anniversary date, not later than the 90th day prior to such annual meeting or, if later, the tenth day following the day on which public disclosure of the date of such annual meeting was first made. For the 20242025 Annual Meeting of Stockholders, notice must be delivered no sooner than January 11, 2024February 5, 2025 and no later than February 10, 2024.March 7, 2025. Stockholders are advised to review the Bylaws, which contain additional requirements with respect to advance notice of stockholder proposals. Additional information with regard to director recommendations or nominations for director candidates can be found beginning on page 17 and we encourage stockholders to review the procedures and deadlines relating thereto before taking action.
In addition, our Bylaws permit certain of our stockholders who have beneficially owned 3% or more of our outstanding Common Stock continuously for at least three years to submit nominations to be included in the Company’s proxy materials for up to 20% of the total number of directors then serving. Notice of proxy access director nominations for the 20242025 Annual Meeting of Stockholders must be delivered to our Corporate Secretary at our principal executive offices (please see the address above) no earlier than November 1, 2023, 2024 and no later than the close of business on December 1, 2023., 2024. The notice must set forth the information required by our Bylaws with respect to each proxy access director nomination that eligible stockholder or stockholders intend to present at the 20242025 Annual Meeting of Stockholders and must otherwise be in compliance with our Bylaws.
Any notice of director nomination other than through proxy access must include the additional information required by Rule 14a-19(b) under the Exchange Act and otherwise comply with our Bylaws. In connection with our 2024 Annual Meetingthe 2025 annual meeting of Stockholders,stockholders, we intend to file a proxy statement and a WHITE proxy card with the SEC in connection with our solicitation of proxies for that meeting.
Annual Report and Available Information
Our Annual Report on Form 10-K for the year ended December 31, 20222023 accompanies this Proxy Statement but does not constitute a part of the proxy soliciting materials. A copy of our Annual Report on Form 10-K for the year ended December 31, 2022,2023, including financial statements and financial statement schedules but without exhibits, is available to any person whose vote is solicited by this proxy upon written request to the Corporate Secretary, American Airlines Group Inc., MD8B503, 1 Skyview Drive, Fort Worth, Texas 76155. Copies also may be obtained without charge through the SEC’s website at www.sec.gov.
Cautionary Statement Regarding Forward-Looking Statements
Certain of the statements contained in this Proxy Statement should be considered forward-looking statements within the meaning of the Securities Act, the Exchange Act, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “would,” “continue,” “seek,” “target,” “guidance,” “outlook,” “if current trends continue,” “optimistic,” “forecast” and other similar words. Such statements include, but are not limited to, statements about the Company’s plans, objectives, expectations, intentions, estimates and strategies for the future, and other statements that
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are not historical facts. These forward-looking statements are based on the Company’s current objectives, beliefs and expectations, and they are subject to significant risks and uncertainties that may cause actual results and financial position and timing of certain events to differ materially from the information in the forward-looking statements. These risks
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and uncertainties include, but are not limited to, those set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 20222023 (especially in Part I, Item 1A. Risk Factors and Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations), and other risks and uncertainties listed from time to time in the Company’s other filings with the SEC. There may be other factors of which the Company is not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ materially from those discussed. The Company does not assume any obligation to publicly update or supplement any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements other than as required by law. Any forward-looking statements speak only as of the date hereof or as of the dates indicated in the statement.
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2024 Proxy Statement
AppendixAPPENDIX A
AMERICAN AIRLINES GROUP INC.
2023 INCENTIVE AWARD PLANProposal 4: Bylaw Voting Threshold Amendment
ARTICLE I.X
PURPOSEAMENDMENT OF BYLAWS
The Plan’s purpose is to enhance the Company’s ability to attract, retainIn furtherance and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities.
ARTICLE II.
DEFINITIONS
As usednot in the Plan, the following words and phrases have the meanings specified below, unless the context clearly indicates otherwise:
2.1 “Administrator” means the Board or a Committee to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee. With reference to the Board’s or a Committee’s powers or authority under the Plan that have been delegated to one or more officers pursuant to Section 4.2, the term “Administrator” shall refer to such officer(s) unless and until such delegation has been revoked.
2.2 “Applicable Law” means any applicable law, including without limitation: (a) provisionslimitation of the Code, the Securities Act, the Exchange Act and any rules or regulations thereunder; (b) corporate, securities, tax or other laws, statutes, rules, requirements or regulations, whether U.S. or non-U.S. federal, state or local; and (c) rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.
2.3 “Automatic Exercise Date” means, with respect to an Option or a Stock Appreciation Right, the last business day of the applicable Option term or Stock Appreciation Right term that was initially establishedpowers conferred upon it by the Administrator for such Option or Stock Appreciation Right (e.g., the last business day prior to the tenth anniversary of the date of grant of such Option or Stock Appreciation Right if the Option or Stock Appreciation Right initially had a ten-year Option term or Stock Appreciation Right term, as applicable).
2.4 “Award” means an Option award, Stock Appreciation Right award, Restricted Stock award, Restricted Stock Unit award, Performance Bonus Award, Performance Stock Unit award, Dividend Equivalents award or Other Stock or Cash Based Award granted to a Participant under the Plan.
2.5 “Award Agreement” means an agreement evidencing an Award, which may be written or electronic, that contains such terms and conditions as the Administrator determines, consistent with and subject to the terms and conditions of the Plan.
2.6 “Board” means the Board of Directors of the Company.
2.7 “Change in Control” means the occurrence of any of the following:
(a) within any 12-month period, the individuals who constitute the Board at the beginning of such period (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; or
(b) any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, other than the Company, acquires (directly or indirectly) the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (“Voting Power”); or
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(c) the Company consummates a merger, consolidation or reorganization of the Company or any other similar transaction or series of related transactions (collectively, a “Transaction”) other than (A) a Transaction in which the voting securities of the Company outstanding immediately prior thereto become (by operation of law), or are converted into or exchanged for, voting securities of the surviving corporation or its parent corporation immediately after such Transaction that are owned by the same person or entity or persons or entities as immediately prior thereto and possess at least 50% of the Voting Power held by the voting securities of the surviving corporation or its parent corporation, or (B) a Transaction effected to implement a recapitalization of the Company (or similar transaction) in which no person (excluding the Company or any person who held more than 50% of the Voting Power immediately prior to such Transaction) acquires more than 50% of the Voting Power; or
(d) the Company sells or otherwise disposes of, or consummates a transaction or series of related transactions providing for the sale or other disposition of, all or substantially all of the stock or assets of the Company, or enters into a plan for the complete liquidation of the Company.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award which provides for the deferral of compensation and is subject to Section 409A of the Code, the transaction or event described in subsection (a), (b), (c) or (d) with respect to such Award must also constitute a “change in control event,” as defined in Treasury Regulation § 1.409A-3(i)(5) to the extent required by Section 409A.
The Administrator shall have full and final authority, which shall be exercised in its sole discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.
2.8 “Code” means the U.S. Internal Revenue Code of 1986, as amended, and all regulations, guidance, compliance programs and other interpretative authority issued thereunder.
2.9 “Committee” means one or more committees or subcommittees of the Board, which may include one or more Directors or executive officers of the Company, to the extent permitted by Applicable Law. To the extent required to comply with the provisions of Rule 16b-3, it is intended that each member of the Committee will be, at the time the Committee takes any action with respect to an Award that is subject to Rule 16b-3, a “non-employee director” within the meaning of Rule 16b-3; however, a Committee member’s failure to qualify as a “non-employee director” within the meaning of Rule 16b-3 will not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.
2.10 “Common Stock” means the common stock of the Company.
2.11 “Company” means American Airlines Group Inc., a Delaware corporation, or any successor.
2.12 “Consultant” means any person, including any adviser, engaged by the Company or a Subsidiary to render services to such entity if the consultant or adviser: (a) renders bona fide services to the Company or a Subsidiary; (b) renders services not in connection with the offer or sale of securities in a capital-raising transaction and does not directly or indirectly promote or maintain a market for the Company’s securities; and (c) is a natural person.
2.13 “Designated Beneficiary” means, if permitted by the Company, the beneficiary or beneficiaries the Participant designates, in a manner the Company determines, to receive amounts due or exercise the Participant’s rights if the Participant dies. Without a Participant’s effective designation, “Designated Beneficiary” will mean the Participant’s estate or legal heirs.
2.14 “Director” means a Board member.
2.15 “Disability” means a permanent and total disability under Section 22(e)(3) of the Code.
2.16 “Dividend Equivalents” means a right granted to a Participant to receive the equivalent value (in cash or Shares) of dividends paid on a specified number of Shares. Such Dividend Equivalent shall be converted to cash or additional Shares, or a combination of cash and Shares, by such formula and at such time and subject to such limitations as may be determined by the Administrator.
2.17 “DRO” means a “domestic relations order” as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder.
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2.18 “Effective Date” has the meaning set forth in Section 11.3.
2.19 “Employee” means any employee of the Company or any of its Subsidiaries.
2.20 “Equity Restructuring” means a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split (including a reverse stock split), spin-off or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other Company securities) or the share price of Common Stock (or other Company securities) and causes a change in the per share value of the Common Stock underlying outstanding Awards.
2.21 “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and all regulations, guidance and other interpretative authority issued thereunder.
2.22 “Fair Market Value” means, as of any date, the value of a Share determined as follows: (a) if the Common Stock is listed on any established stock exchange, the value of a Share will be the closing sales price for a Share as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (b) if the Common Stock is not listed on an established stock exchange but is quoted on a national market or other quotation system, the value of a Share will be the closing sales price for a Share on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (iii) if the Common Stock is not listed on any established stock exchange or quoted on a national market or other quotation system, the value established by the Administrator in its sole discretion.
2.23 “Greater Than 10% Stockholder” means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any parent corporation or subsidiary corporation of the Company, as determined in accordance with Section 424(e) and (f) of the Code, respectively.
2.24 “Incentive Stock Option” means an Option that meets the requirements to qualify as an “incentive stock option” as defined in Section 422 of the Code.
2.25 “Non-Employee Director” means a Director who is not an Employee.
2.26 “Nonqualified Stock Option” means an Option that is not an Incentive Stock Option.
2.27 “Option” means a right granted under Article VI to purchase a specified number of Shares at a specified price per Share during a specified time period. An Option may be either an Incentive Stock Option or a Nonqualified Stock Option.
2.28 “Other Stock or Cash Based Awards” means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or are otherwise based on, Shares or other property.
2.29 “Overall Share Limit” means the sum of (a) 17,200,000 Shares, plus (b) any Shares that are subject to Prior Plan Awards that become available for issuance under the Plan as Shares pursuant to Article V, minus (c) any Shares subject to awards under the Prior Plan that are granted after March 22, 2023 and before the Effective Date.
2.30 “Participant” means a Service Provider who has been granted an Award.
2.31 “Performance Bonus Award” has the meaning set forth in Section 8.3.
2.32 “Performance Stock Unit” means a right granted to a Participant pursuant to Section 8.1 and subject to Section 8.2, to receive Shares or an amount of cash or other consideration determined by the Administrator to be of equal value as of the settlement date, the payment of which is contingent upon achieving certain performance goals or other performance-based targets established by the Administrator.
2.33 “Permitted Transferee” means, with respect to a Participant, any “family member” of the Participant, as defined in the General Instructions to Form S-8 Registration Statement under the Securities Act (or any successor form thereto), or any other transferee specifically approved by the Administrator after taking into account Applicable Law.
2.34 “Plan” means this 2023 Incentive Award Plan.
2.35 “Prior Plan” means the Company’s 2013 Incentive Award Plan, as it may be amended from time to time.
2.36 “Prior Plan Award” means an award outstanding under the Prior Plan as of March 22, 2023 or granted under the Prior Plan following such date and prior to the Effective Date.
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2.37 “Restricted Stock” means Shares awarded to a Participant under Article VII, subject to certain vesting conditions and other restrictions.
2.38 “Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Administrator to be of equal value as of such settlement date, subject to certain vesting conditions and other restrictions.
2.39 “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act, including any amendments thereto.
2.40 “Section 409A” means Section 409A of the Code.
2.41 “Securities Act” means the Securities Act of 1933, as amended, and all regulations, guidance and other interpretative authority issued thereunder.
2.42 “Service Provider” means an Employee, Consultant or Director.
2.43 “Shares” means shares of Common Stock.
2.44 “Stock Appreciation Right” or “SAR” means a right granted under Article VI to receive a payment equal to the excess of the Fair Market Value of a specified number of Shares on the date the right is exercised over the exercise price set forth in the applicable Award Agreement.
2.45 “Subsidiary” means any entity (other than the Company), whether U.S. or non-U.S., in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least 50% of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
2.46 “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company or other entity acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
2.47 “Tax-Related Items” means any U.S. and non-U.S. federal, state and/or local taxes (including, without limitation, income tax, social insurance contributions, fringe benefit tax, employment tax, stamp tax and any employer tax liability which has been transferred to a Participant) for which a Participant is liable in connection with Awards and/or Shares.
2.48 “Termination of Service” means:
(a) As to a Consultant, the time when the engagement of a Participant as a Consultant to the Company or a Subsidiary is terminated for any reason, including, without limitation, by resignation, discharge, death or retirement, but excluding terminations where the Consultant simultaneously commences or remains in employment or service with the Company or any Subsidiary.
(b) As to a Non-Employee Director, the time when a Participant who is a Non-Employee Director ceases to be a Director for any reason, including, without limitation, a termination by resignation, failure to be elected, death or retirement, but excluding terminations where the Participant simultaneously commences employment or service or remains in service with the Company or any Subsidiary.
(c) As to an Employee, the time when the employee-employer relationship between a Participant and the Company or any Subsidiary is terminated for any reason, including, without limitation, a termination by resignation, discharge, death, disability or retirement; but excluding terminations where the Participant simultaneously commences or remains in employment or service with the Company or any Subsidiary.
The Company, in its sole discretion, shall determine the effect of all matters and questions relating to any Termination of Service, including, without limitation, whether a Termination of Service has occurred, whether a Termination of Service resulted from a discharge for cause and all questions of whether particular leaves of absence constitute a Termination of Service. For purposes of the Plan, a Participant’s employee-employer relationship or consultancy relationship shall be deemed to be terminated in the event that the Subsidiary employing or contracting with such Participant ceases to remain a Subsidiary following any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off), even though the Participant may subsequently continue to perform services for that entity.
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ARTICLE III.
ELIGIBILITY
Service Providers are eligible to be granted Awards under the Plan, subject to the limitations described herein. No Service Provider shall have any right to be granted an Award pursuant to the Plan and neither the Company nor the Administrator is obligated to treat Service Providers, Participants or any other persons uniformly.
ARTICLE IV.
ADMINISTRATION AND DELEGATION
4.1 Administration.
(a) The Plan is administered by the Administrator. The Administrator has authority to determine which Service Providers receive Awards, grant Awards and set Award terms and conditions, subject to the conditions and limitations in the Plan. The Administrator also has the authority to take all actions and make all determinations under the Plan, to interpret the Plan and Award Agreements and to adopt, amend and repeal Plan administrative rules, guidelines and practices as it deems advisable. The Administrator may correct defects and ambiguities, supply omissions, reconcile inconsistencies in the Plan or any Award and make all other determinations that it deems necessary or appropriate to administer the Plan and any Awards. The Administrator (and each member thereof) is entitled to, in good faith, rely or act upon any report or other information furnished to the Administrator or member thereof by any officer or other Employee, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan. The Administrator’s determinations under the Plan are in its sole discretion and will be final, binding and conclusive on all persons having or claiming any interest in the Plan or any Award.
(b) Without limiting the foregoing, the Administrator has the exclusive power, authority and sole discretion to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant; (iii) determine the number of Awards to be granted and the number of Shares to which an Award will relate; (iv) subject to the limitations in the Plan, determine the terms and conditions of any Award and related Award Agreement, including, but not limited to, the exercise price, grant price, purchase price, any performance criteria, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations, waivers or amendments thereof; (v) determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares, or other property, or an Award may be cancelled, forfeited, or surrendered; and (vi) make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan.
4.2 Delegation of Authority. To the extent permitted by Applicable Law, the Board or any Committee may delegate any or all of its powers under the Plan to one or more Committees or officers of the Company or any of its Subsidiaries; provided, however, that in no event shall an officer of the Company or any of its Subsidiaries be delegated the authority to grant Awards to, or amend Awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act, or (b) officers of the Company or any of its Subsidiaries or Directors to whom authority to grant or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation or that are otherwise included in the applicable organizational documents, and the Board or Committee, as applicable, may at any time rescind the authority so delegated or appoint a new delegate. At all times, the delegate appointed under this Section 4.2 shall serve in such capacity at the pleasure of the Board or the Committee, as applicable, and the Board or the Committee may abolish any committee at any time and re-vest in itself any previously delegated authority. Further, regardless of any delegation, the Board or a Committee may, in its discretion, exercise any and all rights and duties as the Administrator under the Plan delegated thereby, except with respect to Awards that are required to be determined in the sole discretion of the Board or Committee under the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.
ARTICLE V.
STOCK AVAILABLE FOR AWARDS
5.1 Number of Shares. Subject to adjustment under Article IX and the terms of this Article V, Awards may be made under the Plan covering up to the Overall Share Limit. As of the Effective Date, the Company will cease granting awards under the Prior Plan; however, Prior Plan Awards will remain subject to the terms of the Prior Plan. Shares issued or delivered under the Plan may consist of authorized but unissued Shares, Shares purchased on the open market or treasury Shares.
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5.2 Share Recycling.
(a) If all or any part of an Award or a Prior Plan Award expires, lapses or is terminated, converted into an award in respect of shares of another entity in connection with a spin-off or other similar event, exchanged or settled for cash, surrendered, repurchased, cancelled without having been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award or Prior Plan Award at a price not greater than the price (as adjusted to reflect any Equity Restructuring) paid by the Participant for such Shares or not issuing any Shares covered by the Award or Prior Plan Award, the unused Shares covered by the Award or Prior Plan Award will, as applicable, become or again be available for Awards under the Plan. The payment of dividends or Dividend Equivalents in cash in conjunction with any outstanding Awards or Prior Plan Awards and any Awards that are settled in cash rather than by issuance of Shares shall not count against the Overall Share Limit.
(b) Notwithstanding anything in the Plan to the contrary, the following Shares shall not be available for future grants of Awards: (i) Shares tendered by a Participant or withheld by the Company in payment of the exercise price of an Option or any stock option granted under the Prior Plan; (ii) Shares tendered by a Participant or withheld by the Company to satisfy any tax withholding obligation with respect to an Award or any Prior Plan Award; (iii) Shares subject to a Stock Appreciation Right or stock appreciation right granted under the Prior Plan that are not issued in connection with the stock settlement of the Stock Appreciation Right or stock appreciation right on exercise; and (iv) Shares purchased on the open market with the cash proceeds from the exercise of Options or stock options granted under the Prior Plan.
5.3 Incentive Stock Option Limitations. Notwithstanding anything to the contrary herein, no more than 17,200,000 Shares (as adjusted to reflect any Equity Restructuring) may be issued pursuant to the exercise of Incentive Stock Options.
5.4 Substitute Awards. In connection with an entity’s merger or consolidation with the Company or any Subsidiary or the Company’s or any Subsidiary’s acquisition of an entity’s property or stock, the Administrator may grant Substitute Awards in respect of any options or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate. Substitute Awards may be granted on such terms and conditions as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan. Substitute Awards will not count against the Overall Share Limit (nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided under Section 5.2 above), except that Shares acquired by exercise of substitute Incentive Stock Options will count against the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as appropriately adjusted to reflect the transaction) may be used for Awards under the Plan and shall not count against the Overall Share Limit (and Shares subject to such Awards may again become available for Awards under the Plan as provided under Section 5.2 above); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Service Providers prior to such acquisition or combination.
5.5 Non-Employee Director Award Limit. Notwithstanding any provision to the contrary in the Plan or in any policy of the Company regarding non-employee director compensation, the sum of the grant date fair value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of all equity-based Awards and the maximum amount that may become payable pursuant to all cash-based Awards that may be granted to a Service Provider as compensation for services as a Non-Employee Director during any calendar year shall not exceed $1,500,000.
5.6 Award Vesting Limitations. Notwithstanding any other provision of the Plan to the contrary, no Award Agreement shall provide for vesting of the Award thereunder earlier than the first anniversary of the applicable grant date or, with respect to any such Award subject to performance-based vesting, based on an applicable performance period that is shorter than one year; provided, however, that, notwithstanding the foregoing, Awards that result in the issuance of no more than 5% of the Shares reserved for issuance under the Plan pursuant to Section 5.1 above may be granted to any one or more Participants without respect to such minimum vesting requirements. For purposes of Awards granted to Non-Employee Directors, a vesting period will be deemed to be one year if it runs from the date of one annual meeting of the Company’s stockholders to the next annual meeting of the Company’s stockholder, provided that the period between such meetings is not less than 50 weeks. Notwithstanding the foregoing, an Award Agreement may provide for the accelerated vesting, exercisability and/or payment (as applicable) of any Award upon the termination of the applicable Participant’s status as
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Service Provider due to the Participant’s death, disability, retirement or any other specified Termination of Service and/or in connection with the consummation of a Change in Control.
ARTICLE VI.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.1 General. The Administrator may grant Options or Stock Appreciation Rights to one or more Service Providers, subject to such terms and conditions not inconsistent with the Plan as the Administrator shall determine. The Administrator will determine the number of Shares covered by each Option and Stock Appreciation Right, the exercise price of each Option and Stock Appreciation Right and the conditions and limitations applicable to the exercise of each Option and Stock Appreciation Right. A Stock Appreciation Right will entitle the Participant (or other person entitled to exercise the Stock Appreciation Right) to receive from the Company upon exercise of the exercisable portion of the Stock Appreciation Right an amount determined by multiplying (a) the excess, if any, of the Fair Market Value of one Share on the date of exercise over the exercise price per Share of the Stock Appreciation Right by (b) the number of Shares with respect to which the Stock Appreciation Right is exercised, subject to any limitations of the Plan or that the Administrator may impose, and payable in cash, Shares valued at Fair Market Value on the date of exercise or a combination of the two as the Administrator may determine or provide in the Award Agreement.
6.2 Exercise Price. The Administrator will establish each Option’s and Stock Appreciation Right’s exercise price and specify the exercise price in the Award Agreement. Subject to Section 6.7, the exercise price will not be less than 100% of the Fair Market Value on the grant date of the Option or Stock Appreciation Right. Notwithstanding the foregoing, in the case of an Option or Stock Appreciation Right that is a Substitute Award, the exercise price per share of the Shares subject to such Option or Stock Appreciation Right, as applicable, may be less than the Fair Market Value per share on the date of grant; provided that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Sections 424 and 409A of the Code.
6.3 Duration of Options. Subject to Section 6.7, each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, provided that the term of an Option or Stock Appreciation Right will not exceed ten years; provided, further, that, unless otherwise determined by the Administrator or specified in the Award Agreement, (a) no portion of an Option or Stock Appreciation Right which is unexercisable at a Participant’s Termination of Service shall thereafter become exercisable and (b) the portion of an Option or Stock Appreciation Right that is unexercisable at a Participant’s Termination of Service shall automatically expire on the date of such Termination of Service. In addition, in no event shall an Option or Stock Appreciation Right granted to an Employee who is a non-exempt employee for purposes of overtime pay under the U.S. Fair Labor Standards Act of 1938 be exercisable earlier than six months after its date of grant. Notwithstanding the foregoing, if the Participant, prior to the end of the term of an Option or Stock Appreciation Right, commits an act of cause (as determined by the Administrator), or violates any non-competition, non-solicitation or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company or any of its Subsidiaries, the right to exercise the Option or Stock Appreciation Right, as applicable, may be terminated by the Company and the Company may suspend the Participant’s right to exercise the Option or Stock Appreciation Right when it reasonably believes that the Participant may have participated in any such act or violation.
6.4 Exercise. Options and Stock Appreciation Rights may be exercised by delivering to the Company (or such other person or entity designated by the Administrator) a notice of exercise, in a form and manner the Company approves (which may be written, electronic or telephonic and may contain representations and warranties deemed advisable by the Administrator), signed or authenticated by the person authorized to exercise the Option or Stock Appreciation Right, together with, as applicable, (a) payment in full of the exercise price for the number of Shares for which the Option is exercised in a manner specified in Section 6.5 and (b) satisfaction in full of any withholding obligation for Tax-Related Items in a manner specified in Section 10.5. The Administrator may, in its discretion, limit exercise with respect to fractional Shares and require that any partial exercise of an Option or Stock Appreciation Right be with respect to a minimum number of Shares.
6.5 Payment Upon Exercise. The Administrator shall determine the methods by which payment of the exercise price of an Option shall be made, including, without limitation:
(a) Cash, check or wire transfer of immediately available funds; provided that the Company may limit the use of one of the foregoing methods if one or more of the methods below is permitted;
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(b) If there is a public market for Shares at the time of exercise, unless the Company otherwise determines, (A) delivery (including electronically or telephonically to the extent permitted by the Company) of a notice that the Participant has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable upon exercise of the Option and that the broker has been directed to deliver promptly to the Company funds sufficient to pay the exercise price, or (B) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company an amount sufficient to pay the exercise price by cash, wire transfer of immediately available funds or check; provided that such amount is paid to the Company at such time as may be required by the Company;
(c) To the extent permitted by the Administrator, delivery (either by actual delivery or attestation) of Shares owned by the Participant valued at their Fair Market Value on the date of delivery;
(d) To the extent permitted by the Administrator, surrendering Shares then issuable upon the Option’s exercise valued at their Fair Market Value on the exercise date;
(e) To the extent permitted by the Administrator, delivery of a promissory note or any other lawful consideration; or
(f) To the extent permitted by the Administrator, any combination of the above payment forms.
6.6 Expiration of Option Term or Stock Appreciation Right Term: Automatic Exercise of In-The-Money Options and Stock Appreciation Rights. Unless otherwise provided by the Administrator in an Award Agreement or otherwise or as otherwise directed by a holder of an Option or a Stock Appreciation Right in writing to the Company, each vested and exercisable Option and Stock Appreciation Right outstanding on the Automatic Exercise Date with an exercise price per Share that is less than the sum of the Fair Market Value and any related broker’s fees (as described in Section 11.19(c)) per Share as of such date shall automatically and without further action by the holder of the Option or Stock Appreciation Right or the Company be exercised on the Automatic Exercise Date. In the sole discretion of the Administrator, payment of the exercise price of any such Option shall be made pursuant to Section 6.5(b) or 6.5(d) and the Company or any Subsidiary shall be entitled to deduct or withhold an amount sufficient to satisfy any withholding obligation for Tax-Related Items associated with such exercise in accordance with Section 10.5. Unless otherwise determined by the Administrator, this Section 6.6 shall not apply to an Option or Stock Appreciation Right if the holder of such Option or Stock Appreciation Right incurs a Termination of Service on or before the Automatic Exercise Date. For the avoidance of doubt, no Option or Stock Appreciation Right with an exercise price per Share that is equal to or greater than the Fair Market Value per Share on the Automatic Exercise Date shall be exercised pursuant to this Section 6.6.
6.7 Additional Terms of Incentive Stock Options. The Administrator may grant Incentive Stock Options only to employees of the Company, any of its present or future parent or subsidiary corporations, as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code. If an Incentive Stock Option is granted to a Greater Than 10% Stockholder, the exercise price will not be less than 110% of the Fair Market Value on the Option’s grant date, and the term of the Option will not exceed five years. All Incentive Stock Options (and Award Agreements related thereto) will be subject to and construed consistently with Section 422 of the Code. By accepting an Incentive Stock Option, the Participant agrees to give prompt notice to the Company of dispositions or other transfers (other than in connection with a Change in Control) of Shares acquired under the Option made within the later of (a) two years from the grant date of the Option or (b) one year after the transfer of such Shares to the Participant, specifying the date of the disposition or other transfer and the amount the Participant realized, in cash, other property, assumption of indebtedness or other consideration, in such disposition or other transfer. Neither the Company nor the Administrator will be liable to a Participant, or any other party, if an Incentive Stock Option fails or ceases to qualify as an “incentive stock option” under Section 422 of the Code. Any Incentive Stock Option or portion thereof that fails to qualify as an “incentive stock option” under Section 422 of the Code for any reason, including becoming exercisable with respect to Shares having a fair market value exceeding the $100,000 limitation under Treasury Regulation Section 1.422-4, will be a Nonqualified Stock Option.
ARTICLE VII.
RESTRICTED STOCK; RESTRICTED STOCK UNITS
7.1 General. The Administrator may grant Restricted Stock, or the right to purchase Restricted Stock, to any Service Provider, subject to forfeiture or the Company’s right to repurchase all or part of the underlying Shares at their issue price or other stated or formula price from the Participant if conditions the Administrator specifies in the Award Agreement are not satisfied before the end of the applicable restriction period or periods that the Administrator establishes for such Award. In addition, the Administrator may grant Restricted Stock Units, which may be subject to vesting and forfeiture
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conditions during the applicable restriction period or periods, as set forth in an Award Agreement, to Service Providers. The Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock and Restricted Stock Units; provided, however, that if a purchase price is charged, such purchase price shall be no less than the par value, if any, of the Shares to be purchased, unless otherwise permitted by Applicable Law. In all cases, legal consideration shall be required for each issuance of Restricted Stock and Restricted Stock Units to the extent required by Applicable Law. The Award Agreement for each Award of Restricted Stock and Restricted Stock Units shall set forth the terms and conditions not inconsistent with the Plan as the Administrator shall determine.
7.2 Restricted Stock.
(a) Stockholder Rights. Unless otherwise determined by the Administrator, each Participant holding Shares of Restricted Stock will be entitled to all the rights of a stockholder with respect to such Shares, subject to the restrictions in the Plan and the applicable Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the Shares to the extent such dividends and other distributions have a record date that is on or after the date on which such Participant becomes the record holder of such Shares; provided, however, that with respect to a share of Restricted Stock subject to restrictions or vesting conditions, except in connection with a spin-off or other similar event as otherwise permitted under Section 9.2, dividends which are paid to Company stockholders prior to the removal of restrictions and satisfaction of vesting conditions shall only be paid to the Participant to the extent that the restrictions are subsequently removed and the vesting conditions are subsequently satisfied and the share of Restricted Stock vests.
(b) Stock Certificates. The Company may require that the Participant deposit in escrow with the Company (or its designee) any stock certificates issued in respect of Shares of Restricted Stock, together with a stock power endorsed in blank.
(c) Section 83(b) Election. If a Participant makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which such Participant would otherwise be taxable under Section 83(a) of the Code, such Participant shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service along with proof of the timely filing thereof.
7.3 Restricted Stock Units. The Administrator may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’s election, subject to compliance with Applicable Law. A Participant holding Restricted Stock Units will have only the rights of a general unsecured creditor of the Company (solely to the extent of any rights then applicable to Participant with respect to such Restricted Stock Units) until delivery of Shares, cash or other securities or property is made as specified in the applicable Award Agreement.
ARTICLE VIII.
OTHER TYPES OF AWARDS
8.1 General. The Administrator may grant Performance Stock Unit awards, Performance Bonus Awards, Dividend Equivalents or Other Stock or Cash Based Awards, to one or more Service Providers, in such amounts and subject to such terms and conditions not inconsistent with the Plan as the Administrator shall determine.
8.2 Performance Stock Unit Awards. Each Performance Stock Unit award shall be denominated in a number of Shares or in unit equivalents of Shares or units of value (including a dollar value of Shares) and may be linked to any one or more of performance or other specific criteria, including service to the Company or Subsidiaries, determined to be appropriate by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. In making such determinations, the Administrator may consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.
8.3 Performance Bonus Awards. Each right to receive a bonus granted under this Section 8.3 shall be denominated in the form of cash (but may be payable in cash, stock or a combination thereof) (a “Performance Bonus Award”) and shall be payable upon the attainment of performance goals that are established by the Administrator and relate to one or more of performance or other specific criteria, including service to the Company or Subsidiaries, in each case on a specified date or dates or over any period or periods determined by the Administrator.
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8.4 Dividends and Dividend Equivalents. If the Administrator provides, an Award (other than an Option or Stock Appreciation Right) may provide a Participant with the right to receive dividends or Dividend Equivalents. Dividends and Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to the same restrictions on transferability and forfeitability as the Award with respect to which the dividends or Dividend Equivalents are granted and subject to other terms and conditions as set forth in the Award Agreement. Notwithstanding anything to the contrary herein, dividends and Dividend Equivalents with respect to an Award subject to vesting shall either (a) to the extent permitted by Applicable Law, not be paid or credited or (b) be accumulated and subject to vesting to the same extent as the related Award. Any such dividends or Dividend Equivalents shall be paid at such time as the Administrator shall specify in the applicable Award Agreement or as determined by the Administrator in the event not specified in such Award Agreement. In no event shall dividends or Dividend Equivalents be paid with respect to Options or Stock Appreciation Rights.
8.5 Other Stock or Cash Based Awards. Other Stock or Cash Based Awards may be granted to Participants, including Awards entitling Participants to receive cash or Shares to be delivered in the future and annual or other periodic or long-term cash bonus awards (whether based on specified performance criteria or otherwise), in each case subject to any conditions and limitations in the Plan. Such Other Stock or Cash Based Awards will also be available as a payment form in the settlement of other Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled, subject to compliance with Section 409A. Other Stock or Cash Based Awards may be paid in Shares, cash or other property, as the Administrator determines. Subject to the provisions of the Plan, the Administrator will determine the terms and conditions of each Other Stock or Cash Based Award, including any purchase price, performance goal(s), transfer restrictions, and vesting conditions, which will be set forth in the applicable Award Agreement. Except in connection with a spin-off or other similar event as otherwise permitted under Article IX, dividends that are scheduled to be paid prior to vesting of any Other Stock or Cash Based Award shall only be paid to the applicable Participant to the extent that the vesting conditions are subsequently satisfied and the Other Stock or Cash Based Award vests.
ARTICLE IX.
ADJUSTMENTS FOR CHANGES IN COMMON STOCK
AND CERTAIN OTHER EVENTS
9.1 Equity Restructuring. In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Article IX, the Administrator will equitably adjust the terms of the Plan and each outstanding Award as it deems appropriate to reflect the Equity Restructuring, which may include (a) adjusting the number and type of securities subject to each outstanding Award or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article V hereof on the maximum number and kind of shares that may be issued); (b) adjusting the terms and conditions of (including the grant or exercise price), and the performance goals or other criteria included in, outstanding Awards; and (c) granting new Awards or making cash payments to Participants. The adjustments provided under this Section 9.1 will be nondiscretionary and final and binding on all interested parties, including the affected Participant and the Company; provided that the Administrator will determine whether an adjustment is equitable.
9.2 Corporate Transactions. In the event of any extraordinary dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), reorganization, merger, consolidation, split-up, spin off, combination, amalgamation, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, Change in Control, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, other similar corporate transaction or event, other unusual or nonrecurring transaction or event affecting the Company or its financial statements or any change in any Applicable Law or accounting principles, the Administrator, on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change in Applicable Law or accounting principles may be made within a reasonable period of time after such change) and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to (i) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan, (ii) to facilitate such transaction or event or (iii) give effect to such changes in Applicable Law or accounting principles:
(a) To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of such
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Award or realization of the Participant’s rights under the vested portion of such Award, as applicable, in each case as of the date of such cancellation; provided that, if the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then the Award may be terminated without payment;
(b) To provide that such Award shall vest and, to the extent applicable, be exercisable as to all Shares (or other property) covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;
(c) To provide that such Award be assumed by the successor or survivor corporation or entity, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation or entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and applicable exercise or purchase price, in all cases, as determined by the Administrator;
(d) To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding Awards or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article V hereof on the maximum number and kind of shares which may be issued) or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards;
(e) To replace such Award with other rights or property selected by the Administrator; or
(f) To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.
9.3 Change in Control. Notwithstanding any other provision of the Plan, in the event of a Change in Control, the Administrator may take any actions with respect to outstanding Awards as it deems appropriate, consistent with applicable provisions of the Code and any applicable federal or state securities laws.
9.4 Administrative Stand Still. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other extraordinary transaction or change affecting the Shares or the share price of Common Stock (including any Equity Restructuring or any securities offering or other similar transaction) or for reasons of administrative convenience or to facilitate compliance with any Applicable Law, the Company may refuse to permit the exercise or settlement of one or more Awards for such period of time as the Company may determine to be reasonably appropriate under the circumstances.
9.5 General. Except as expressly provided in the Plan or the Administrator’s action under the Plan, no Participant will have any rights due to any subdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation, merger, or consolidation of the Company or other corporation. Except as expressly provided with respect to an Equity Restructuring under Section 9.1 above or the Administrator’s action under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, will affect, and no adjustment will be made regarding, the number of Shares subject to an Award or the Award’s grant price or exercise price. The existence of the Plan, any Award Agreements and the Awards granted hereunder will not affect or restrict in any way the Company’s right or power to make or authorize (a) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (b) any merger, consolidation, spinoff, dissolution or liquidation of the Company or sale of Company assets or (c) any sale or issuance of securities, including securities with rights superior to those of the Shares or securities convertible into or exchangeable for Shares.
ARTICLE X.
PROVISIONS APPLICABLE TO AWARDS
10.1 Transferability.
(a) No Award may be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except by will or the laws of descent and distribution, or, subject to the Administrator’s consent, pursuant to a DRO, unless and until such Award has been exercised or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed. During the life of a Participant, Awards will be exercisable only by the Participant, unless it has been disposed of pursuant to a DRO. After the death of a Participant, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Award Agreement, be exercised by the Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then-Applicable Law of descent and distribution. References to a Participant, to the extent relevant in the context, will include references to a transferee approved by the Administrator.
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(b) Notwithstanding Section 10.1(a), the Administrator, in its sole discretion, may determine to permit a Participant or a Permitted Transferee of such Participant to transfer an Award other than an Incentive Stock Option (unless such Incentive Stock Option is intended to become a Nonqualified Stock Option) to any one or more Permitted Transferees of such Participant, subject to the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than (A) to another Permitted Transferee of the applicable Participant or (B) by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Award as applicable to the original Participant (other than the ability to further transfer the Award to any person other than another Permitted Transferee of the applicable Participant); (iii) the Participant (or transferring Permitted Transferee) and the receiving Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation, documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under Applicable Law and (C) evidence the transfer; and (iv) any transfer of an Award to a Permitted Transferee shall be without consideration, except as required by Applicable Law. In addition, and further notwithstanding Section 10.1(a), the Administrator, in its sole discretion, may determine to permit a Participant to transfer Incentive Stock Options to a trust that constitutes a Permitted Transferee if, under Section 671 of the Code and other Applicable Law, the Participant is considered the sole beneficial owner of the Incentive Stock Option while it is held in the trust.
(c) Notwithstanding Section 10.1(a), if permitted by the Administrator, a Participant may, in the manner determined by the Administrator, designate a Designated Beneficiary. A Designated Beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant and any additional restrictions deemed necessary or appropriate by the Administrator. If the Participant is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a community property state, a designation of a person other than the Participant’s spouse or domestic partner, as applicable, as the Participant’s Designated Beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written or electronic consent of the Participant’s spouse or domestic partner. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time; provided that the change or revocation is delivered in writing to the Administrator prior to the Participant’s death. For clarity, no Award may be transferred to a third party for monetary consideration.
10.2 Documentation. Each Award will be evidenced in an Award Agreement in such form as the Administrator determines in its discretion. Each Award may contain such terms and conditions as are determined by the Administrator in its sole discretion, to the extent not inconsistent with those set forth in the Plan.
10.3 Discretion. Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.
10.4 Changes in Participant’s Status. The Administrator will determine how the disability, death, retirement, authorized leave of absence or any other change or purported change in a Participant’s Service Provider status affects an Award and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award, if applicable. Except to the extent otherwise required by Applicable Law or expressly authorized by the Company or by the Company’s written policy on leaves of absence, no service credit shall be given for vesting purposes for any period the Participant is on a leave of absence.
10.5 Withholding. Each Participant must pay the Company or a Subsidiary, as applicable, or make provision satisfactory to the Administrator for payment of, any Tax-Related Items to be withheld in connection with such Participant’s Awards and/or Shares. At the Company’s discretion and subject to any Company insider trading policy (including black-out periods), any withholding obligation for Tax-Related Items may be satisfied by (a) deducting an amount sufficient to satisfy such withholding obligation from any payment of any kind otherwise due to a Participant; (b) accepting a payment from the Participant in cash, by wire transfer of immediately available funds, or by check made payable to the order of the Company or a Subsidiary, as applicable; (c) accepting the delivery of Shares, including Shares delivered by attestation; (d) retaining Shares from an Award; (e) if there is a public market for Shares at the time the withholding obligation for Tax-Related Items is to be satisfied, selling Shares issued pursuant to an Award, either voluntarily by the Participant or mandatorily by the Company; (f) accepting delivery of a promissory note or any other lawful consideration; (g) any other method of withholding determined by the Company and, to the extent required by Applicable Law or the Plan, approved by the Administrator; or (h) any combination of the foregoing payment forms. The amount withheld pursuant to any of the
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foregoing payment forms shall be determined by the Company and may be up to, but no greater than, the aggregate amount of such obligations based on the maximum statutory withholding rates in the applicable Participant’s jurisdiction for all Tax-Related Items.
10.6 Amendment of Award. The Administrator may amend, modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, changing the exercise or settlement date, and converting an Incentive Stock Option to a Nonqualified Stock Option. The Participant’s consent to such action will be required unless (a) the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Award, or (b) the change is permitted under Article IX or pursuant to Section 11.6.
10.7 Prohibition on Repricing. Except pursuant to Article IX, the Administrator shall not, without the approval of the Company’s stockholders, (a) amend any outstanding Option or Stock Appreciation Right to reduce its exercise price per Share or (b) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the exercise price of such Option or Stock Appreciation Right exceeds the Fair Market Value of the underlying Shares.
10.8 Conditions on Delivery of Stock. The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (a) all Award conditions have been met or removed to the Company’s satisfaction, (b) as determined by the Company, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including, without limitation, any applicable securities laws and stock exchange or stock market rules and regulations, (c) any approvals from governmental agencies that the Company determines are necessary or advisable have been obtained, and (d) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems necessary or appropriate to satisfy Applicable Law. The inability or impracticability of the Company to obtain or maintain authority to issue or sell any securities from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained, and shall constitute circumstances in which the Administrator may determine to amend or cancel Awards pertaining to such Shares, with or without consideration to the Participant.
10.9 Acceleration. The Administrator may at any time provide that any Award will become immediately vested and fully or partially exercisable, free of some or all restrictions or conditions, or otherwise fully or partially realizable.
ARTICLE XI.
MISCELLANEOUS
11.1 No Right to Employment or Other Status. No person will have any claim or right to be granted an Award, and the grant of an Award will not be construed as giving a Participant the right to commence or continue employment or any other relationship with the Company or a Subsidiary. The Company and its Subsidiaries expressly reserve the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an Award Agreement or other written agreement between the Participant and the Company or any Subsidiary.
11.2 No Rights as Stockholder; Certificates. Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as a stockholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares. Notwithstanding any other provision of the Plan, unless the Administrator otherwise determines or Applicable Law requires, the Company will not be required to deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). The Company may place legends on any share certificate or book entry to reference restrictions applicable to the Shares (including, without limitation, restrictions applicable to Restricted Stock).
11.3 Effective Date. The Board approved the Plan on March 22, 2023, subject to the approval of the Company’s stockholders. The Plan will become effective on the date it is approved by the Company’s stockholders (the “Effective Date”). If the Plan is not approved by the Company’s stockholders on or before March 22, 2024, the Plan will not become effective. No Incentive Stock Option may be granted pursuant to the Plan after the tenth anniversary of the date the Plan was approved by the Board.
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11.4 Amendment of Plan. The Administrator may amend, suspend or terminate the Plan at any time and from time to time; provided that (a) no amendment requiring stockholder approval to comply with Applicable Law shall be effective unless approved by the stockholders, and (b) no amendment, other than an increase to the Overall Share Limit or pursuant to Article IX or Section 11.6, may materially and adversely affect any Award outstanding at the time of such amendment without the affected Participant’s consent. No Awards may be granted under the Plan during any suspension period or after Plan termination. Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the Award Agreement, as each in effect before such suspension or termination. The Administrator will obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Law.
11.5 Provisions for Non-U.S. Participants. The Administrator may modify Awards granted to Participants who are nationals of a country other than the United States or employed or residing outside the United States, establish subplans or procedures under the Plan or take any other necessary or appropriate action to address Applicable Law, including (a) differences in laws, rules, regulations or customs of such jurisdictions with respect to tax, securities, currency, employee benefit or other matters, (b) listing and other requirements of any non-U.S. securities exchange, and (c) any necessary local governmental or regulatory exemptions or approvals.
11.6 Section 409A.
(a) General. The Company intends that all Awards be structured to comply with, or be exempt from, Section 409A, such that no adverse tax consequences, interest, or penalties under Section 409A apply. Notwithstanding anything in the Plan or any Award Agreement to the contrary, the Administrator may, without a Participant’s consent, amend this Plan or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards, including any such actions intended to (i) exempt this Plan or any Award from Section 409A, or (ii) comply with Section 409A, including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Award’s grant date. The Company makes no representations or warranties as to an Award’s tax treatment under Section 409A or otherwise. The Company will have no obligation under this Section 11.6 or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant “nonqualified deferred compensation” subject to taxes, penalties or interest under Section 409A.
(b) Separation from Service. If an Award constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of such Award upon a Participant’s Termination of Service will, to the extent necessary to avoid taxes under Section 409A, be made only upon the Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or after the Participant’s Termination of Service. For purposes of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms means a “separation from service.”
(c) Payments to Specified Employees. Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” required to be made under an Award to a “specified employee” (as defined under Section 409A and as the Administrator determines) due to such employee’s “separation from service” will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of the Code, be delayed for the six-month period immediately following such “separation from service” (or, if earlier, until the specified employee’s death) and will instead be paid (as set forth in the Award Agreement) on the day immediately following such six-month period or as soon as administratively practicable thereafter (without interest). Any payments of “nonqualified deferred compensation” under such Award payable more than six months following the Participant’s “separation from service” will be paid at the time or times the payments are otherwise scheduled to be made.
(d) Separate Payments. If an Award includes a “series of installment payments” within the meaning of Section 1.409A-2(b)(2)(iii) of Section 409A, the Participant’s right to the series of installment payments will be treated as a right to a series of separate payments and not as a right to a single payment and, if an Award includes “dividend equivalents” within the meaning of Section 1.409A-3(e) of Section 409A, the Participant’s right to receive the dividend equivalents will be treated separately from the right to other amounts under the Award.
11.7 Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as an Administrator, Director, officer or other Employee will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan or any Award, and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed in such person’s capacity as an Administrator, Director, officer or other Employee. The Company will indemnify and hold harmless each
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Director, officer or other Employee that has been or will be granted or delegated any duty or power relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Administrator’s approval) arising from any act or omission concerning this Plan unless arising from such person’s own fraud or bad faith; provided that such person gives the Company an opportunity, at its own expense, to handle and defend the same before undertaking to handle and defend it on such person’s own behalf.
11.8 Data Privacy. As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this Section 11.8 by and among the Company and its Subsidiaries and affiliates exclusively for implementing, administering and managing the Participant’s participation in the Plan. The Company and its Subsidiaries and affiliates may hold certain personal information about a Participant, including the Participant’s name, address and telephone number; birthdate; social security, insurance number or other identification number; salary; nationality; job title(s); any Shares held in the Company or its Subsidiaries and affiliates; and Award details, to implement, manage and administer the Plan and Awards (the “Data”). The Company and its Subsidiaries and affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a Participant’s participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than a recipient’s country. By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participant’s participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares. The Data related to a Participant will be held only as long as necessary to implement, administer, and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data that the Company holds regarding such Participant, request additional information about the storage and processing of the Data regarding such Participant, recommend any necessary corrections to the Data regarding the Participant or refuse or withdraw the consents in this Section 11.8 in writing, without cost, by contacting the local human resources representative. The Company may cancel Participant’s ability to participate in the Plan and, in the Administrator’s sole discretion, the Participant may forfeit any outstanding Awards if the Participant refuses or withdraws the consents in this Section 11.8. For more information on the consequences of refusing or withdrawing consent, Participants may contact their local human resources representative.
11.9 Severability. If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal or invalid action will be null and void.
11.10 Governing Documents. If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participant and the Company (or any Subsidiary), the Plan will govern, unless such Award Agreement or other written agreement was approved by the Administrator and expressly provides that a specific provision of the Plan will not apply.
11.11 Governing Law. The Plan and all Awards will be governed by and interpreted in accordance with the laws of the State of Delaware, without regardthe Board of Directors shall have the power to adopt, amend, alter or repeal the conflict of law rules thereofBylaws as provided for therein. The Bylaws also may be adopted, amended, altered or of any other jurisdiction. By accepting an Award, each Participant irrevocably and unconditionally consents to submit, atrepealed by the Company’s discretion, to the exclusive jurisdictionaffirmative vote of the courtsholders of at least 80%a majority of the State of Delaware andvoting power of the United Statesoutstanding shares entitled to vote for the election of America,Directors.
Proposal 5: Supermajority Elimination Amendment
ARTICLE XIII
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal any provision contained in each case locatedthis Certificate of Incorporation in the Statemanner now or hereafter prescribed in this Certificate of Delaware, for any action arising out of or relating to the Plan (and agrees not to commence any litigation relating thereto except in such courts), and further agrees that service of any process, summons, notice or document by U.S. registered mail to the address contained in the records of the Company shall be effective service of process for any litigation brought against it in any such court. By accepting an Award, each Participant irrevocably and unconditionally waives any objection to the laying of venue of any litigation arising out of the Plan or Award hereunder in the courts of the State of DelawareIncorporation or the United States of America, in each case located in the State of Delaware, and further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such litigation brought in any such court has been brought in an inconvenient forum. By accepting an Award, each Participant irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Law, anyDGCL, and all rights to trial by jury in connection with any litigation arising out of or relating to the Plan or any Award hereunder.
11.12 Clawback Provisions. All Awards (including the gross amount of any proceeds, gains or other economic benefit the Participant actually or constructively receivesherein conferred upon receipt or exercise of any Award or the receipt or resale of any Shares
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underlying the Award) will bestockholders are granted subject to recoupment by the Company to the extent required to comply with Applicable Law or any policy of the Company providing for the reimbursement of incentive compensation, whether or not such policy was in place at the time of grant of an Award.
11.13 Titles and Headings. The titles and headings in the Plan are for convenience of reference only and, if any conflict, the Plan’s text, rather than such titles or headings, will control.
11.14 Conformity to Applicable Law. Participant acknowledgesreservation; provided, however, that, the Plan is intended to conform to the extent necessary with Applicable Law. Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in a manner intended to conform with Applicable Law. To the extent Applicable Law permits, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Law.
11.15 Relationship to Other Benefits. No payment under the Plan will be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary, except as expressly provided in writing in such other plan or an agreement thereunder.
11.16 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.
11.17 Limitations Applicable to Section 16 Persons. Notwithstandingnotwithstanding any other provision of the Plan, the Plan and any Award granted or awardedthis Certificate of Incorporation (but in addition to any individual who is then subject to Section 16other vote that may be required by applicable law or this Certificate of Incorporation), the affirmative vote of the Exchange Actholders of at least two-thirdsa majority of the voting power of the outstanding shares entitled to vote for the election of Directors shall be subjectrequired to amend, alter, change or repeal, or to adopt any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
11.18 Prohibition on Executive Officer and Director Loans. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
11.19 Broker-Assisted Sales. In the event of a broker-assisted sale of Shares in connection with the payment of amounts owed by a Participant under or with respect to the Plan or Awards, including amounts to be paid under the final sentence of Section 10.5: (a) any Shares to be sold through the broker-assisted sale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block tradethis Certificate of Incorporation inconsistent with other Participants in the Plan in which all Participants receive an average price; (c) the applicable Participant will be responsible for all broker’s feespurpose and other costsintent of sale,Section 6 of Article IV, Article V, Article VIII and by accepting an Award, each Participant agrees to indemnify and hold the Company and its Directors, officers and other Employees harmless from any losses, costs, damages,Article X of this Certificate of Incorporation or expenses relating to any such sale; (d) to the extent the Company or its designee receives proceeds of such sale that exceed the amount owed, the Company will pay such excess in cash to the applicable Participant as soon as reasonably practicable; (e) the Company and its designees are under no obligation to arrange for such sale at any particular price; and (f) in the event the proceeds of such sale are insufficient to satisfy the Participant’s applicable obligation, the Participant may be required to pay immediately upon demand to the Company or its designee an amount in cash sufficient to satisfy any remaining portion of the Participant’s obligation.this Article XIII.
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2024 Proxy Statement
AppendixAPPENDIX B
Reconciliation of Certain GAAP to non-GAAPNon-GAAP Financial Information
We sometimes use financial measures that are derived from the condensed consolidated financial statements but that are not presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”) to understand and evaluate our current operating performance and to allow for period-to-period comparisons. We believe these non-GAAP financial measures may also provide useful information to investors and others. These non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies, and should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. We are providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis. Management uses these non-GAAP financial measures to evaluate the Company’s current operating performance and to allow for period-to-period comparison. As net special items may vary from period-to-period in nature and amount, the adjustment to exclude net special items allows management an additional tool to understand our core operating performance.
The tables below present the reconciliations of the following GAAP measures to their non-GAAP measures:
| • | Pre-Tax Income (Loss) (GAAP measure) to Pre-Tax Income (Loss) Excluding Net Special Items (non-GAAP measure); |
| • | Pre-Tax Margin (GAAP measure) to Pre-Tax Margin Excluding Net Special Items (non-GAAP measure); |
| • | Net Income (GAAP measure) to Net Income Excluding Net Special Items (non-GAAP measure); and |
| • | Basic and Diluted Earnings Per Share (GAAP measure) to Basic and Diluted Earnings (Loss) Per Share Excluding Net Special Items (Non-GAAP measure). |
| 12 Months Ended December 31, | 12 Months Ended December 31, | |||||||||||||||||||||||
| Reconciliation of Pre-Tax Income (Loss) Excluding Net Special Items | 2022 | 2021 | 2020 | 2023 | 2022 | 2021 | ||||||||||||||||||
| (in millions) | (in millions, other than percentages) | |||||||||||||||||||||||
Pre-tax income (loss) as reported | $ | 186 | $ | (2,548) | $ | (11,453) | ||||||||||||||||||
Pre-tax income (loss) as reported | ||||||||||||||||||||||||
Pre-tax income (loss) as reported | ||||||||||||||||||||||||
Pre-tax income (loss) as reported | $ | 1,121 | $ | 186 | $ | (2,548 | ) | |||||||||||||||||
Pre-tax net special items: | ||||||||||||||||||||||||
Pre-tax net special items: | ||||||||||||||||||||||||
Pre-tax net special items: | ||||||||||||||||||||||||
Pre-tax net special items: |
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Mainline operating special items, net(1) | 193 | (4,006) | (657) | |||||||||||||||||||||
Mainline operating special items, net (1) | ||||||||||||||||||||||||
Mainline operating special items, net (1) | ||||||||||||||||||||||||
Mainline operating special items, net (1) | 971 | 193 | (4,006 | ) | ||||||||||||||||||||
Regional operating special items, net (2) | ||||||||||||||||||||||||
Regional operating special items, net (2) | ||||||||||||||||||||||||
Regional operating special items, net (2) | ||||||||||||||||||||||||
Regional operating special items, net(2) | 5 | (449) | (309) | 8 | 5 | (449 | ) | |||||||||||||||||
Nonoperating special items, net(3) | 74 | 60 | 170 | |||||||||||||||||||||
Nonoperating special items, net (3) | ||||||||||||||||||||||||
Nonoperating special items, net (3) | ||||||||||||||||||||||||
Nonoperating special items, net (3) | 362 | 74 | 60 | |||||||||||||||||||||
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Total pre-tax net special items | ||||||||||||||||||||||||
Total pre-tax net special items | ||||||||||||||||||||||||
Total pre-tax net special items | ||||||||||||||||||||||||
Total pre-tax net special items | 272 | (4,395) | (796) | 1,341 | 272 | (4,395 | ) | |||||||||||||||||
Pre-tax income (loss) excluding net special items | $ | 458 | $ | (6,943) | $ | (12,249) | ||||||||||||||||||
Pre-tax income (loss) excluding net special items | ||||||||||||||||||||||||
Pre-tax income (loss) excluding net special items | ||||||||||||||||||||||||
Pre-tax income (loss) excluding net special items | $ | 2,462 | $ | 458 | $ | (6,943 | ) | |||||||||||||||||
Calculation of Pre-Tax Margin | ||||||||||||||||||||||||
Calculation of Pre-Tax Margin | ||||||||||||||||||||||||
Calculation of Pre-Tax Margin | ||||||||||||||||||||||||
Calculation of Pre-Tax Margin |
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Pre-tax income (loss) as reported | $ | 186 | $ | (2,548) | $ | (11,453) | ||||||||||||||||||
Pre-tax income (loss) as reported | ||||||||||||||||||||||||
Pre-tax income (loss) as reported | ||||||||||||||||||||||||
Pre-tax income (loss) as reported | $ | 1,121 | $ | 186 | $ | (2,548 | ) | |||||||||||||||||
Total operating revenues as reported | ||||||||||||||||||||||||
Total operating revenues as reported | ||||||||||||||||||||||||
Total operating revenues as reported | ||||||||||||||||||||||||
Total operating revenues as reported | $ | 48,971 | $ | 29,882 | $ | 17,337 | $ | 52,788 | $ | 48,971 | $ | 29,882 | ||||||||||||
Pre-tax margin | 0.4% | (8.5%) | (66.1%) | |||||||||||||||||||||
Pre-tax margin | ||||||||||||||||||||||||
Pre-tax margin | ||||||||||||||||||||||||
Pre-tax margin | 2.1 | % | 0.4 | % | (8.5 | %) | ||||||||||||||||||
Calculation of Pre-Tax Margin Excluding Net Special Items | ||||||||||||||||||||||||
Calculation of Pre-Tax Margin Excluding Net Special Items | ||||||||||||||||||||||||
Calculation of Pre-Tax Margin Excluding Net Special Items | ||||||||||||||||||||||||
Calculation of Pre-Tax Margin Excluding Net Special Items |
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| ||||||||||||||||||
Pre-tax income (loss) excluding net special items | $ | 458 | $ | (6,943) | $ | (12,249) | ||||||||||||||||||
Pre-tax income (loss) excluding net special items | ||||||||||||||||||||||||
Pre-tax income (loss) excluding net special items | ||||||||||||||||||||||||
Pre-tax income (loss) excluding net special items | $ | 2,462 | $ | 458 | $ | (6,943 | ) | |||||||||||||||||
Total operating revenues as reported | ||||||||||||||||||||||||
Total operating revenues as reported | ||||||||||||||||||||||||
Total operating revenues as reported | ||||||||||||||||||||||||
Total operating revenues as reported | $ | 48,971 | $ | 29,882 | $ | 17,337 | $ | 52,788 | $ | 48,971 | $ | 29,882 | ||||||||||||
Pre-tax margin excluding net special items | 0.9% | (23.2%) | (70.7%) | |||||||||||||||||||||
Pre-tax margin excluding net special items | ||||||||||||||||||||||||
Pre-tax margin excluding net special items | ||||||||||||||||||||||||
Pre-tax margin excluding net special items | 4.7 | % | 0.9 | % | (23.2 | %) | ||||||||||||||||||
| B-1 |
2024 Proxy Statement
| 12 Months Ended December 31, 2023 | ||||
Reconciliation of Net Income Excluding Net Special Items | (in millions, except share and per share amounts) | |||
Net income as reported | $ | 822 | ||
Net special items: | ||||
Total pre-tax net special items (1), (3) | 1,341 | |||
Net tax effect of net special items | (304 | ) | ||
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| |||
Net income excluding net special items | $ | 1,859 | ||
Reconciliation of Basic and Diluted Earnings Per Share Excluding Net Special Items | ||||
Net income excluding net special items | $ | 1,859 | ||
Shares used for computation (in thousands): | ||||
Basic | 653,612 | |||
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Diluted | 719,669 | |||
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Earnings per share excluding net special items: | ||||
Basic | $ | 2.84 | ||
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Diluted (4) | $ | 2.65 | ||
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| Three Months Ended March 31, 2022 | ||||
Reconciliation of Pre-Tax Loss Excluding Net Special Items | (in millions) | |||
Pre-tax loss as reported | $ | (2,086 | ) | |
Pre-tax net special items: | ||||
Mainline operating special items, net (1) | 157 | |||
Nonoperating special items, net (3) | 3 | |||
|
| |||
Total pre-tax net special items | 160 | |||
Pre-tax loss excluding net special items | $ | (1,926 | ) | |
Note: Amounts may not recalculate due to rounding.
FOOTNOTES:
| (1) | Mainline operating special items |
The twelve months ended December 31, 2023 mainline operating special items, net principally included $989 million of one-time charges resulting from the ratification of a new collective bargaining agreement with our mainline pilots, including a one-time payment of $754 million as well as adjustments to other benefit-related items of $235 million.
The three months ended March 31, 2022 and twelve month periodmonths ended December 31, 2022 mainline operating special items, net principally included a non-cash impairment charge to write down the carrying value of the Company’s retired Airbus A330 fleet to the estimated fair value due to the market conditions for certain used aircraft. The Company retired its Airbus A330 fleet in 2020 as discussed below.
The 2021 twelve month periodmonths ended December 31, 2021 mainline operating special items, net principally included $4.2 billion of Payroll Support Program (“PSP”) financial assistance, offset in part by $168 million of salary and medical costs associated with certain team members who opted into voluntary early retirement programs offered as a result of reductions to the Company’s operation due to the COVID-19 pandemic.
The 2020 twelve month period mainline operating special items, net principally included $3.7 billion of PSP financial assistance, offset in part by $1.5 billion of fleet impairment charges, $1.4 billion of salary and medical costs primarily associated with certain team members who opted into the voluntary early retirement programs discussed above and $228 million of one-time labor contract expenses due to the ratification of a new contract with the Company’s maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.
Fleet impairment charges resulted from the retirement of certain aircraft earlier than planned driven by the severe decline in air travel due to the COVID-19 pandemic. Mainline aircraft retired in 2020 included the Company’s entire Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets. The 2020 twelve month period fleet impairment charges included a $1.4 billion non-cash write-down of mainline aircraft and spare parts and $102 million in cash charges primarily for impairment of right-of-use assets and lease return costs.
| |
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| (2) | Regional operating special items |
The 2021 twelve month periodmonths ended December 31, 2021 regional operating special items, net principally included $539 million of PSP financial assistance, offset in part by a $61 million charge associated with the regional pilot retention program which provides for, among other things, a cash retention bonus paid in the fourth quarter of 2021 to eligible captains at the wholly-owned regional airlines included on the pilot seniority list as of September 1, 2021 and a $27 million non-cash impairment charge to write down regional aircraft resulting from the retirement of the remaining Embraer 140 fleet earlier than planned.
The 2020 twelve month period regional operating special items, net included $444 million of PSP financial assistance, offset in part by a $117 million non-cash
B-2 | |
2024 Proxy Statement
| (3) | Nonoperating special items |
Principally included charges associated with debt refinancings and extinguishments as well as mark-to-market net unrealized gains and losses associated with certain equity investments.
(4) The twelve months ended December 31, 2023 diluted earnings per share gives effect to, among other things, the Company’s outstanding 6.5% senior convertible notes by (a) adding back to earnings $47 million of interest expense related to such convertible notes, net of estimated profit sharing, short-term incentive and tax effects and (b) including in the diluted shares outstanding, 61.7 million shares issuable in respect to such convertible notes.
Free Cash Flow
Our free cash flow summary is presented in the table below, which is a non-GAAP measure that management believes is useful information to investors and others in evaluating our ability to generate cash from our core operating performance that is available for use to reinvest in the business or to reduce debt. We define free cash flows as net cash provided by operating activities less net cash used in investing activities, adjusted for (1) net sales of short-term investments and (2) change in restricted cash. We believe that calculating free cash flow as adjusted for these items is more useful for investors because short-term investment activity and restricted cash are not representative of activity core to our operations. This non-GAAP measure may not be comparable to similarly titled non-GAAP measures of other investmentscompanies, and should be considered in addition to, and not as well asa substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. Our calculation of free cash flow is not intended, and should not be used, to measure the residual cash flow available for discretionary expenditures because, among other things, it excludes mandatory debt service requirements and certain other non-cashnon-discretionary charges associated with debt refinancings and extinguishments.expenditures.
| Year Ended December 31, 2023 | ||||
| (in millions) | ||||
Net cash provided by operating activities | $ | 3,803 | ||
Adjusted net cash used in investing activities (1) | (1,997 | ) | ||
|
| |||
Free cash flow | $ | 1,806 | ||
|
| |||
(1) The following table provides a reconciliation of adjusted net cash used in investing activities for the year ended December 31, 2023 (in millions): |
| |||
Net cash used in investing activities | $ | (502 | ) | |
Adjustments: | ||||
Net sales of short-term investments | (1,538 | ) | ||
Decrease in restricted cash | 43 | |||
|
| |||
Adjusted net cash used in investing activities | $ | (1,997 | ) | |
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|
2024 Proxy Statement
P.O. BOX 8016, CARY, NC 27512-9903
PRELIMINARY – SUBJECT TO COMPLETION
YOUR VOTE IS IMPORTANT! PLEASE VOTE BY:
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American Airlines Group Inc.
For Stockholders of record as of April 9, 2024 |
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• Cast your vote online | ||||
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• Follow the simple instructions to record your vote | ||||
Wednesday, June 5, 2024 9:00 AM, Central Time Annual Meeting to be held live via the internet - please visit www.proxydocs.com/AAL for more details. | ||||
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Phone: 1-866-570-3320 • Use any touch-tone telephone | |||
• Have your Proxy Card ready | ||||
• Follow the simple recorded instructions | ||||
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Mail: • Mark, sign and date your Proxy Card | |||
• Fold and return your Proxy Card in the postage-paid envelope provided | ||||
YOUR VOTE IS IMPORTANT! PLEASE VOTE BY: 9:00 AM, Central Time, June 5, 2024. | ||||
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 | Virtual: You must register to attend the meeting online and/or participate at www.proxydocs.com/AAL | |||
Annual Meeting of Stockholders
For Stockholders of record as of March 13, 2023
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This proxy is being solicited on behalf of the Board of Directors
The undersigned hereby appoints Robert D. Isom and Stephen L. Johnson (the “Named Proxies”), and each or either of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and authorizes them, and each of them, to vote all the shares of capital stock of American Airlines Group Inc. which the undersigned is entitled to vote at said meeting and any adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BOARD OF DIRECTORSDIRECTORS’ RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the Named Proxies are authorized to vote upon such other matters that may properly come before the meeting or any adjournment or postponement thereof.
You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The Named Proxies cannot vote your shares unless you sign (on the reverse side) and return this card.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE
Copyright © 2024 BetaNXT, Inc. or its affiliates. All Rights Reserved
American Airlines Group Inc.
Annual Meeting of Stockholders
| American Airlines Group Inc. Annual Meeting of Stockholders |
Please make your marks like this: |   |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE:
FORON PROPOSALS 1, 2, 3, 54 AND 65
THE BOARD RECOMMENDS THAT AN ADVISORY VOTE AGAINST ON THE COMPENSATION FOR NAMED EXECUTIVE OFFICERS BE HELD EVERY PROPOSAL 6ONE YEAR.
PROPOSAL | YOUR VOTE | BOARD OF | ||||||||||||||||||
DIRECTORS | ||||||||||||||||||||
RECOMMENDS | ||||||||||||||||||||
1. |
Election of |
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| FOR | AGAINST | ABSTAIN | ||||||||||||||||||
| ☐ | ☐ | ☐ | FOR | ||||||||||||||||
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| FOR | AGAINST | ABSTAIN | ||||||||||||||||||
| 2. | ||||||||||||||||||||
| Ratification of the appointment of KPMG LLP as the independent registered public accounting firm of American Airlines Group Inc. for the fiscal year ending December 31, | ||||||||||||||||||||
| ☐ | ☐ | ☐ | FOR | |||||||||||||||||
| Advisory | ☐ | ☐ | ☐ | FOR | ||||||||||||||||
| 4. | ||||||||||||||||||||
| Approve and adopt an amendment of the | ☐ | ☐ | ☐ | FOR | ||||||||||||||||
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| 6. | ☐ | ☐ | ☐ | AGAINST | ||||||||||||||||
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You must register to attend the meeting online and/or participate at www.proxydocs.com/AAL | ||||||||||||||
Authorized Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form. | ||||||||||||||
| Signature (and Title if applicable) | Date | Signature (if held jointly) | Date | |||||
