UNITED STATES
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March 23, 2018
To our Stockholders:
On behalf of the Board of Directors, we invite you to attend Alaska Air Group’s 2018 Annual Meeting of Stockholders, which will be held on Thursday, May 3, 2018, beginning at 1:30 p.m.. Pacific Daylight Time. This year’s annual meeting will once again be a completely virtual meeting, which will be conducted via live webcast. You can attend via the Internet at www.proxyvote.com, where you will be able to vote and submit questions electronically prior to and during the meeting. You will also be able todial-in via telephone to ask questions during the meeting. Specific instructions for accessing the meeting are provided in the notice, proxy card or voting instruction form you received.
In addition to the EDGAR version of the 2018 Proxy Statement, we have produced an interactive proxy statement that is organized to make our governance provisions, executive compensation disclosures, proposals, and other key information easy to find and evaluate. The interactive proxy statement can be accessed atwww.alaskaair.comunder About Alaska/Investor Relations. This past year, we furthered our commitment to carrying out our duties as directors by adopting certain guiding principles that reflect our expectations for our own performance, including a focus on diversity and excellent governance. We believe these principles, which are culturally aligned with the values embodied by the employees and management of Alaska Air Group and its subsidiaries, not only contribute to our success as a Board, but also help us to ensure the continued success of the company, its employees, guests, communities and investors, such as yourself. These principles and values provide a foundation that enables us to reach our goal of being a great company and drives our purpose of Creating an Airline People Love. We hope you will join us on May 3 as we discuss Alaska Air Group’s 2017
Sincerely,
NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT
The Board of Directors of Alaska Air Group, Inc. (Air Group or the Company) is soliciting proxies for the
The Board of Directors set Friday, March Internet Availability of Proxy Materials.On or Attending the Annual Meeting. We will host the Submit Your Questions. We invite you to submit any questions of general stockholder interest you may have to the Assistant Corporate Secretary via email at ALASKA AIR GROUP, INC. NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT
2017 was a great year for Alaska Air Group – we invested in our route network, our fleet, our product, and laid the foundation for our future. We made great progress in 2017 combining Alaska and Virgin America.
The overall integration timeline is tracking well against other recent airline mergers.
*Status match for Elevate members into Mileage Plan at 1 month; AS elites recognized on Virgin metal at 8 months; full elite benefits reciprocity at PSS (~16 months); all figures +/- 1 month due to rounding. 85% of
. . . Our transition approach minimizes customer Sabre to Sabre migration Lessons learned from other airlines’ successes and challenges Engaging experts (external and internal) Minimizing data migration (“bleed down” approach to data transfer) Leveraging codeshare to bridge to new Alaska PSS transition will unlock the majority of the expected revenue synergies. Annual revenue synergies expected from Virgin America integration
. . . and
The Virgin America network gave us expanded reach, and we added 44 additional routes to that foundation last year. Heading into 2018, Alaska operates a North American network serving 115+ destinations from seven focus cities along the West Coast. Led by our California-focused expansion, our network now offers the highest relevance in the industry for West Coast passengers.
*Data reflectsmid-year 2017 schedules. Relevance is percent of North American O&D passengers in markets that each carrier serves with nonstop service. While funding our growth, we also reduced balance sheet leverage by 8 points in 2018, with adebt-to-cap target consistent with other high-quality industrials.
Our 2017 performance has positioned us well to achieve our purpose: Creating an Airline People Love.
Highlighted below is a summary of
Matters To Be Voted On
Governance Highlights As part of Alaska Air Group’s commitment to high ethical standards, our
Our Board All nominees meet the New York Stock Exchange governance standards for director independence, except for Mr. Tilden, who is not independent due to his position as an executive officer.
Executive Compensation Practices Our executive compensation program is aligned with our business strategy and is designed to attract and retain top talent and reward the achievement of key business goals. The following practices ensure alignment of interests between stockholders and executives and are considered good governance by our Compensation and Leadership Development Committee (the Committee) and by the majority of our stockholders.
The Company’s board leadership generally includes a combined chairman and CEO role with a strong, independent lead In choosing to combine the roles of chairman and CEO, the Board takes into consideration the highly technical nature of the airline business and the importance of deep, industry-specific knowledge By creating an independent lead director role with specific authority, the Board is able to ensure objective evaluation of management decisions and performance and to provide independent leadership for director and management succession planning and other governance issues. The lead director’s responsibilities
performing such other duties as may be described in the Company’s Corporate Governance Guidelines, including serving as liaison between the chairman and independent directors and calling meetings of the independent directors, if appropriate. Notwithstanding the Board’s preference for combining the roles of chairman and CEO, the Board may separate the CEO and chairman roles from time to time at its discretion, and has done so previously on a temporary basis in connection with the transition to a new CEO. In deciding whether to separate the roles, the Board considers, among other things, the experience and capacity of the sitting CEO, the rigor of independent director oversight of financial, operational and safety regulatory issues, the current climate of openness between management and the Board, and the existence of other checks and balances that help ensure independent thinking and decision-making by directors. Executive Sessions and Lead Director The
identify the various risks faced by the assign responsibility for managing those risks to individual management executives who report directly to the applicable Committee; and
The structure and reporting relationships and key areas of responsibility are shown below.
Under the program, The risk matrix is
The Company believes that its leadership structure, discussed in detail in the Board Leadership section The Company has adopted a Code of Conduct and Ethics that applies to all company employees, Environmental and Social Highlights One of the Company’s core values, “Do the right thing” – for employees, communities, and the environment – helps the Company achieve its strategic goals, including employee engagement, high customer satisfaction and loyalty, and operational efficiency, all of which contribute to a successful bottom line, and in turn increase stockholder value. Environmental and social highlights from 2017 include: Alaska was ranked as the top U.S. airline in the Dow Jones Sustainability Index (DJSI), receiving perfect scores for “efficiency” and “reliability”. Alaska was recognized as No. 1 in fuel efficiency for U.S. airlines by the International Council on Clean Transportation for the seventh consecutive year. The Company donated over $14 million and contributed more than 32,000 volunteer hours to support nonprofits in our local communities, focusing on youth and education, medical (research/transportation) and community outreach. Alaska was ranked among Forbes’ 2017 “America’s Best Employers” for a third year in a row. Alaska received a perfect score of 100% and Virgin America received a score of 95% for workplace equality on the 2018 Corporate Equality Index (CEI). The Company maintains a Supplier Code of Conduct, holding suppliers accountable for complying with certain labor practices, safety and health standards, ethical business practices and social responsibility commitments. The Company has reached more than 69,000 youth and members of the workforce since 2014 with educational initiatives to enhance opportunity and expand career choices. Collected 1,963 tons of recyclables; recycling 82% of all recyclable materials used on board and reducing inflight waste to landfills by 36% since 2010. Additional information on the Company’s environmental, social and sustainability initiatives may be found in the Company’s Sustainability Report accessible online atwww.alaskaair.com at About us. Information on the Company’s website, however, does not form a part of this Proxy Statement. Stockholder Any stockholder or interested party who wishes to communicate with the Alaska Air Group Board of Directors or any specific director, including the lead director (who presides over executive sessions of the independent directors) or with the independent directors as a group, may write to: Board of Directors Alaska Air Group, Inc. PO Box 68947 Seattle, WA 98168 Depending on the subject matter, management will: forward the communication to the director or directors to whom it is addressed or the applicable director with oversight of the topic (for example, if the communication received deals with questions, concerns or complaints regarding accounting, internal accounting controls and auditing matters, it will be forwarded by management to the chair of the Audit Committee for review); or attempt to handle the inquiry directly (for example, where it is a request for information about the Company’s operations or it is a stock-related matter that does not appear to require direct attention by the Board or any individual director); or not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. At each meeting of the Governance and Nominating Committee, the Corporate Secretary presents a summary of all communications received since the last meeting of the Governance and Nominating Committee and will make those communications available to any director on request. The Board has also implemented a protocol for stockholder-director engagement that provides long-term holders of a significant percentage of the Company’s stock a process for communicating directly with the Board. Investors may request information regarding engagement with stockholders by contacting the Assistant Corporate Secretary at (206) Each year, in the summer and fall months, the Company reaches out to stockholders that have requested such engagement or that have demonstrated a long-term, significant investment in the Company. In 2017, the Company sought feedback from stockholders representing approximately 60% of the Company’s common stock on relevant matters related to corporate governance and stockholder value and spoke with every stockholder who expressed an interest in engaging. In addition, the Chairman, Lead Director and Chair of the Governance and Nominating Committee met by telephone with one of the Company’s largest and longest-term stockholder, the only stockholder that had requested engagement pursuant to the protocol above, to discuss relevant matters directly. The feedback from these discussions was reviewed with the Governance and Nominating Committee and has provided a framework for certain disclosures in this Proxy Statement. In 2016, the Company began holding its annual meeting of stockholders as a virtual meeting webcast via the Internet. At the 2017 virtual annual meeting of stockholders, the Company also offered stockholders the option to ask questions live via telephone. The Board believes that holding the annual meeting of stockholders in a virtual format provides the opportunity for participation by a broader group of stockholders, while reducing the costs associated with planning, holding and arranging logistics forin-person meeting proceedings. This balance allows the meetings to remain focused on matters directly relevant to the interests of stockholders in a way that recognizes the value to stockholders of an efficient use of Company resources. The Board intends that the virtual meeting format provide stockholders a similar level of transparency to the traditionalin-person meeting format and takes the following steps to ensure such an experience: providing stockholders with the ability to submit appropriate questions in advance of the meeting to ensure thoughtful responses from management and the Board; providing stockholders with the ability to submit appropriate questions real-time either via telephone or the meeting website, limiting questions to one per stockholder unless time otherwise permits; answering as many questions submitted in accordance with the meeting rules of conduct as possible in the time allotted for the meeting without discrimination; publishing all questions submitted in accordance with the meeting rules of conduct with answers following the meeting, including those not addressed directly during the meeting; and offering separate engagement opportunities with stockholders on appropriate matters of governance or other relevant topics as outlined under the Stockholder Communications section in this Proxy Statement.
Proposal 1: Election of Directors toOne-Year Terms The Company’s Bylaws provide that directors shall serve aone-year term. Directors are elected to hold office until their successors are elected and qualified, or until resignation or removal in the manner provided in the Company’s Bylaws.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTEFOR THE ELECTION OF THE UNLESS OTHERWISE INDICATED ON YOUR PROXY, THE SHARES WILL BE VOTED FOR THE ELECTION OF THESE Structure of the In accordance with the Delaware General Corporation Law and the Company’s Certificate of Incorporation and Bylaws, the Company’s business affairs are managed under the direction of the Board of Directors. Directors meet their responsibilities by, among other things, participating in meetings of the Board and board committees on which they serve, discussing matters with the chairman and CEO and other executives, reviewing materials provided to them, and visiting the Company’s facilities. Pursuant to the Bylaws, the Board of Directors has established four standing committees, which are the Audit Committee, the Compensation and Leadership Development Committee, the Governance and Nominating Committee, and the Safety Committee. Only independent directors serve on these committees. The Board has adopted a written charter for each committee. These charters are posted on and can be accessed free of charge atwww.alaskaair.com
The table below shows the current members and chairs of the standing board committees. Board Committee Memberships
Board Committee Functions The principal functions of the standing board committees, pursuant to their respective charters, are as follows:
Board and Committee Meetings In Audit Committee - Compensation and Leadership Development Committee - 5 Governance and Nominating Committee - 4 Safety Committee - 4
Each director attended at least 75% of all board and applicable committee meetings during The Board of Directors of the Company has determined that all of the directors, except Mr. Tilden, and including each member of the Audit Committee, Governance and Nominating Committee, and Compensation and Leadership Development Committee, are independent under the NYSE listing standards and the Company’s independent director standards that are set forth in the Company’s Corporate Governance Guidelines. In making its determination, the Board considered the contributions made by the Company to charitable organizations with which any of its directors are affiliated. In this regard, the Board considered the value of charitable contributions made to an organization with which Ms. Bedient is affiliated as a member of its advisory board. After consideration of these matters and in accordance with the Board’s independent director criteria, the Board affirmatively determined that the matters did not represent material relationships with the Company because the amounts of the contributions were immaterial with respect to the Company’s and the outside organization’s annual revenues. Each member of the Company’s Audit Committee meets the additional independence, financial literacy and experience requirements contained in the corporate governance listing standards of the NYSE relating to audit committees or as required by the SEC. The Board has determined that Ms. Bedient and Mr. Yeaman are audit committee financial experts as defined in SEC rules. The Corporate Governance Guidelines are available on the Company’s website atwww.alaskaair.com Specifically, the Board has determined that independent directors must have no material relationship with the Company, based on all material facts and circumstances. At a minimum, an independent director must meet each of the standards listed below.
For the purposes of these standards, “Company” includes all Alaska Air Group subsidiaries and other affiliates. “Immediate family member” includes the director’s spouse, domestic partner, parents, children, siblings, mothers- andfathers-in-law, sons- anddaughters-in-law, and anyone sharing the director’s home. The independence standards for the members of the Audit Committee provide that, in addition to the foregoing standards, they may not receive any compensation other than director’s fees for board and audit committee service and permitted retirement pay, or be an “affiliate” of the Company apart from their capacity as a member of the Board as defined by applicable SEC rules. Identification and Evaluation of Candidates
The Governance and Nominating Committee (the Committee) has two primary methods for identifying candidates (other than those proposed by the Company’s stockholders, as discussed below): On a periodic basis, by soliciting ideas for possible candidates from a number of sources including, but not limited to, members of the Board, senior-level Company executives, individuals personally known to the members of the Board, and research; and From time to time, using its authority under its charter to retain at the Company’s expense one or more search firms to identify candidates (and to approve any such firms’ fees and other retention terms). If the Committee retains one or more search firms, those firms may be asked to identify possible candidates who meet the minimum and desired qualifications established by the Committee and to undertake such other duties as the Committee may direct.
Stockholders who meet the qualifications outlined below may nominate up to two director candidates for inclusion in the Company’s proxy statement (seeProxy Access Right of Company’s Bylaws and as generally described below underGeneral Nomination Right of All Stockholders. For more information, seeHow can I submit a proposal for next year’s annual meeting?in the Questions and Answers About the Annual Meeting section of this Proxy Statement for further information about the deadlines applicable to the submission of director nominations for next year’s annual meeting of stockholders. Stockholders who wish to propose director candidates for board consideration may do so according to the process outlined in this section underConsideration of Director Candidates Recommended by Stockholders. The Corporate Secretary will send a copy of the Company’s Bylaws to any interested stockholder upon request. The Company’s Bylaws are also available on the Company’s website atwww.alaskaair.com.
In December 2015, the Board amended the Company’s Bylaws to provide a “proxy access” right to stockholders. Under this proxy access right, a stockholder or a group of up to 20 stockholders owning at least 3% of the Company’s shares continuously for three years may nominate directors constituting up to 20% of the Board, or two nominees, whichever is greater, for inclusion in the Company’s proxy materials. This right is subject to certain conditions, including complying with the notice, information and consent provisions contained in Article II, Section 10 of the Company’s Bylaws. The provisions generally require that written notice of a stockholder’s nomination of one or more persons for election to the Board and inclusion in the Company’s proxy materials be received by the Corporate Secretary of the Company no later than the close of business on the 120th day, and no earlier than the close of business on the 150th day, prior to the anniversary of the date the Company’s proxy statement was released to stockholders for the previous year’s annual meeting. Other specifics regarding the foregoing proxy access right, including the required content of the notice and certain other eligibility and procedural requirements, are set forth in Article II, Section 10 of the Company’s Bylaws.
Any stockholder of the Company may nominate one or more persons for election as a director of the Company at an annual meeting of stockholders if the stockholder complies with the notice, information and consent provisions contained in Article II, Section 9 of the Company’s Bylaws. The provisions generally require that written notice of a stockholder’s intent to make a nomination for the election of directors be received by the Corporate Secretary of the Company no later than the close of business on the 90th day, and no earlier than the close of business on the 120thday, prior to the first anniversary of the prior year’s annual meeting. The written notice submitted by a stockholder must also satisfy the additional informational requirements set forth in Article II, Section 9 of the Bylaws
The Committee will evaluate candidates recommended by a single stockholder, or group of stockholders, that have beneficially owned more than 5% of the Company’s outstanding common stock for at least one year and that satisfies the notice, information and consent provisions set forth below (such individual or group is referred to as the Qualified Stockholder). The Committee’s policy on the evaluation of candidates recommended by stockholders who are not Qualified Stockholders is to evaluate such recommendations, and establish procedures for such evaluations, on acase-by-case basis. This policy allows the Committee to devote an appropriate amount of its own and the Company’s resources to each such recommendation, depending on the nature of the recommendation itself and any supporting materials provided. All candidates (whether identified internally or by a stockholder) who, after evaluation, are then recommended by the Committee and approved by the Board, will be included in the Company’s recommended slate of director nominees in its proxy statement. Initial Consideration of Candidates Recommended by Qualified Stockholders The Committee will evaluate candidates recommended by Qualified Stockholders in accordance with the procedures described below. Qualified Stockholders may propose a candidate for evaluation by the Committee by delivering a written notice to the Committee satisfying each of the requirements described below (the Notice). The Notice must be received by the Committee not less than 120 calendar days before the anniversary of the date that the Company’s proxy statement was released to stockholders in connection with the previous year’s annual meeting. No such notice was received in connection with the 2017 Annual Meeting. Any candidate recommended by a Qualified Stockholder must be independent of the Qualified Stockholder in all respects (i.e., free of any material relationship of a personal, professional, financial or business nature from the nominating stockholder), as determined by the Committee or by applicable law. Any candidate submitted by a Qualified Stockholder must also meet the definition of an “independent director” under applicable NYSE rules. The Notice shall also contain or be accompanied by the information or documentation described below.
Board of Directors Alaska Air Group, Inc. PO Box 68947 Seattle, WA 98168 The Corporate Secretary will promptly forward the Notice to the Lead Director and to the Chair of the Governance and Nominating Committee. If, based on the Committee’s initial screening of a candidate recommended by a Qualified Stockholder, a candidate continues to be of interest to the Committee, the Chair of the Committee will request that the CEO interview the candidate, and the candidate will be interviewed by one or more of the other Committee members. If the results of these interviews are favorable, the candidate recommended by a Qualified Stockholder will be evaluated as set forth below. Except as may be required by applicable law, rule or regulation, the Committee will have no obligation to discuss the outcome of the evaluation process or the reasons for the Committee’s recommendations with any Qualified Stockholder who made a proposal.
As to each recommended candidate that the Committee believes merits consideration, the Committee will cause to be assembled information concerning the background, qualifications and appropriate references of the candidate, including information concerning the candidate required to be disclosed in the Company’s proxy statement under the rules of the SEC and any relationship between the candidate and the person or persons recommending the candidate. The Committee will then (i) determine if the candidate satisfies the qualifications set forth below under the captionPolicy on Minimum Qualifications for All Directors; (ii) conduct interviews with the candidate as it deems necessary and appropriate; and (iii) consider the contribution that the candidate can be expected to make to the overall functioning of the Board. The Committee will then meet to consider and finalize its list of recommended candidates for the Board’s consideration. The Governance and Nominating Committee will consider incumbent candidates based on the same criteria used for candidates recommended by Qualified Stockholders, provided that incumbents will also be considered on the basis of the Committee’s annual evaluations of the effectiveness of the Board, its committees and their members. Policy on Minimum Qualifications for All Directors While there is no formal list of qualifications, the Governance and Nominating Committee considers, among other things, the prospective nominee’s relevant experience, intelligence, independence, commitment, ability to work with the CEO and within the Board culture, prominence, diversity, and age. The Governance and Nominating Committee may also consider a nominee’s CEO experience, senior-level international experience, senior-level regulatory or legal experience, and relevant senior-level expertise in one or more of the following areas: finance, accounting, sales and marketing, safety, organizational development, information technology, and government and public relations. Different substantive areas may assume greater or lesser significance at particular times, in light of the Board’s present composition and the Committee’s (or the Board’s) perceptions about future issues and needs. For a candidate to serve as an independent director, an independent and questioning mindset is critical. The Committee also considers a prospective candidate’s workload and whether he or she would be able to attend the vast majority of Board meetings, be willing and available to serve on Board committees, and be able to devote the additional time and effort necessary to keep up with Board matters and the rapidly changing environment in which the Company operates. Board diversity is considered broadly, not merely with regard to race, gender, or national origin, but also with regard to general background, geographical location, and other factors. The consideration of diversity is implemented through discussions at the Governance and Nominating Committee. In addition, on an annual basis, as part of the Board’s self-evaluation, the Board assesses whether the mix and diversity of board members is appropriate for the Company. Certain Relationships and Related Person Transactions Policies and Procedures for Approval of Related Person Transactions The Board of Directors has adopted a written policy for review, approval or ratification of any transaction, arrangement or relationship in which the Company was, is or will be a participant, the aggregate amount involved exceeds $120,000 in any calendar year, and a related person has or will have a direct or indirect material interest (other than solely as a result of being a director or the beneficial owner of less than 10% of another entity). For purposes of the policy, a related person is any person who is, or at any time since the beginning of the last fiscal year was, (i) one of the directors or executive officers or a nominee to become a director; or (ii) any beneficial owner of more than 5% of the Company’s common stock, or any immediate family member of any of these persons. Under the policy, once such a transaction by a related person has been identified, the Audit Committee (or, for transactions that involve less than $1 million in the aggregate, the chair of the Audit Committee) must review the transaction for approval or ratification. Members of the Audit Committee or the chair of the Audit Committee, as applicable, will review all relevant facts regarding the transaction in determining whether to approve or ratify it, including the extent of the related person’s interest in the transaction, whether the terms are comparable to those generally available inarm’s-length transactions, and whether the transaction is consistent with the best interests of the Company. The related person involved in the transaction will not participate in the approval or ratification process except to provide additional information as requested for the review. Once initially approved or ratified, all transactions with related persons will be reviewed at least annually. The policy does not require review or approval of the following transactions: employment by the Company of an executive officer unless he or she is an immediate family member of another related person; any compensation paid by the Company to a director; and a transaction in which a related person’s interest arises solely from the ownership of equity securities and all holders of the securities receive the same benefit on apro-rata basis. Certain Transactions with Related Persons The Company and its subsidiaries have transactions in the ordinary course of business with other corporations of which the Company’s executive officers or directors or members of their immediate families are directors, executive officers, or stockholders.
2017 Director The following table presents information regarding the compensation paid for
an annual retainer of $20,000 to the Lead Director; an annual retainer of $18,000 to the Audit Committee chair, $10,000 each to the Compensation and Leadership Development and Safety Committee chairs and $8,000 to the Governance and Nominating and Committee chair; and reimbursement of expenses in connection with attending board and committee meetings as well as expenses in connection with director education. Following a market review in late 2017, effective May 3, 2018, the directors’ annual stock retainers will increase to $100,000, the annual cash retainers will increase to $75,000, and each of the following committee chair retainers will be increased to the following amounts: Lead Director - $27,500; Audit Committee - $25,000; Compensation and Leadership Development Committee - $20,000; and Governance and Nominating and Safety Committees - $15,000.
In Alaska Air Group directors do not participate in anynon-equity incentive compensation plans, nor do they participate in a nonqualified deferred compensation plan. Directors do not receive pension benefits for their service.
Director Stock Ownership Policy The Company expects directors to act in the Company’s best interests regardless of the number of shares they own. Eachnon-employee director is expected to hold shares of Company stock having a value equal to at least three times the director’s annual cash retainer, such ownership to be achieved within five years of joining the Board. Deferred stock units held by directors, which are 100% vested at grant, will count toward the holding requirement even though they will not be issued until the director resigns from the Board. NAMED EXECUTIVE OFFICER COMPENSATION
Proposal 2: Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers The Company is providing its stockholders with the opportunity to cast anon-binding, advisory vote on the compensation of the Company’s Named Executive Officers as disclosed pursuant to the SEC’s executive compensation disclosure rules and set forth in this Proxy Statement (including the compensation tables and the narrative discussion accompanying those tables as well as in the Compensation Discussion and Analysis). As described more fully in the Compensation Discussion and Analysis (CD&A) section of this Proxy Statement, the structure of the Company’s executive compensation program is designed to compensate executives appropriately and competitively and to drive superior performance. For the Named Executive Officers, a high percentage of total direct compensation (defined as base salary, actual short-term incentive pay and the grant date fair value of equity awards as determined for accounting purposes) is variable and tied to the success of the Company because they are the senior leaders primarily responsible for the overall execution of the Company’s strategy. The Company’s strategic goals are reflected in its incentive-based executive compensation programs so that the interests of executives are aligned with stockholder interests. Executive compensation is The CD&A section of this Proxy Statement describes in more detail the Company’s executive compensation programs and the decisions made by the Compensation and Leadership Development Committee during Base Salary In general, for the Named Executive Officers excluding the CEO, the Committee targets base salary levels at or about the 50th percentile relative to the Company’s airline peer group with the opportunity to earn market-level or above compensation through short- and long-term incentive plans that pay when performance objectives are met. In Annual Incentive Pay The Company’s Named Executive Officers are eligible to earn annual incentive pay under the broad-based Performance-Based Pay Plan, in which all employees participate and which is intended to motivate the executives to achieve Long-term Incentive Pay Equity-based incentive awards that link executive pay to stockholder value are an important element of the Company’s executive compensation program. Long-term equity incentives that vest over three- or four-year periods are awarded annually, In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act) and the related rules of the SEC, the Board of Directors will request your advisory vote on the following resolution at the RESOLVED, that the compensation paid to the Named Executive Officers, as disclosed in this Proxy Statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved. This proposal regarding the compensation paid to the Named Executive Officers is advisory only and will not be binding on the Company or the Board, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTEFOR THE APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE SEC’S EXECUTIVE COMPENSATION DISCLOSURE RULES. Compensation Discussion and Analysis Executive Summary This CD&A contains a discussion of the material elements of compensation earned during
Alaska Air Group had numerous financial and operational achievements in
posted full-year
repurchased paid a total of shared Alaska Airlines ranked “Highest in Customer Satisfaction Among Traditional Network Carriers” by J.D. Power for the
grew Mileage Plan membership by 20% and credit card holder membership by 12%; launched various newin-flight amenities, including Free Chat, upgraded food and beverage options and Premium Class Service, and selected Gogo to provide next-generation satellite-basedWi-Fi across the entire Boeing and Airbus fleets;
received “Single Carrier Determination” by
Governance Highlights Compensation decisions are made by a committee of directors who the Board has determined meet SEC and NYSE independence standards. The Compensation and Leadership Development Committee retains an independent consultant that provides no other services to the Company. The Compensation and Leadership Development Committee regularly meets in executive session without the presence of management. There is no provision for thegross-up of excise taxes in connection withchange-in-control severance payments. Change-in-control severance payments require a double-trigger event in order to become effective. The Company maintains a recoupment policy to recover compensation from executives under certain circumstances. The Company has executive and independent director stock ownership requirements. An anti-pledging and anti-hedging policy is in place. The Company has no executive employment agreements with the Named Executive The Company’s Bylaws allow The Company holds virtual
Consideration ofSay-on-Pay Advisory Vote Stockholders have an opportunity annually to cast an advisory vote in connection with our executive compensation program. At the May
The Company’s executive compensation program is designed to compensate executives appropriately and competitively and to drive superior performance. Because the Named Executive Officers are primarily responsible for the overall execution of the Company’s strategy, a high percentage of their total direct compensation is variable and tied to For Executives’ bonuses under the Company’s annual incentive pay program, in which all Company employees participate, are based on the achievement of specific performance objectives that are
Executives’ equity incentive awards generally consist of a combination of stock options, service-based restricted stock unit awards, and performance stock unit awards that vest only if specified performance levels of relative total shareholder return (TSR) and return on invested capital are achieved. The performance stock units have a three-year performance period Objectives of the Company’s Executive Compensation Program The objectives of the executive compensation program are as follows: to attract and retain highly qualified executives who share the Company’s values and are committed to its strategic plan by designing the total compensation package to be competitive with an appropriate peer group; to motivate executives to provide excellent leadership and achieve Company goals by linking incentive pay to the achievement of specific targets that are reflected in the short-term incentive Performance-Based Pay Plan and the Company’s strategic plan; to align the interests of executives, employees, and stockholders by tying a large portion of executives’ total direct compensation (defined as base salary, actual short-term incentive pay and the grant date fair value of equity awards) to the achievement of objective goals related to the Company’s financial performance, safety record, cost structure, and customer satisfaction; and to provide executives with reasonable security to motivate them to continue employment with the Company and achieve goalsthat will help the Company remain competitive and thrive for the long term. Compensation Philosophy The Compensation and Leadership Development Committee generally targets CEO base salary at or about the 25th percentile of the Company’s airline peer group. However, the Committee may decide to set the CEO’s salary above or below the 25th percentile after taking into consideration other factors. The CEO has the opportunity to earn total direct compensation between the 25th and 50th percentiles if annual and long-term incentive targets are reached, and to surpass the 50th percentile if those targets are exceeded. For the other Named Executive Officers, as well as for other elected officers of the Company, the Committee generally targets base salary at or about the 50th percentile of airline peers and provides executives an opportunity to achieve total direct compensation at the 50th percentile if annual and long-term incentive targets are reached, and to surpass the 50th percentile if those targets are exceeded. Other factors, How Executive Compensation is Determined The Executive Compensation. The Committee determines and approves the Named Executive Officers’ himself. The Committee determines the CEO’s compensation with the assistance of its independent compensation consultant. The Committee also reviews
Independent Consultants. The Committee retained Meridian Compensation Partners, LLC (Meridian), to assist the Committee with its responsibilities related to the Company’s executive and board of directors’ compensation programs. The Committee considered the following facts in concluding that Meridian is an independent advisor: Meridian does not provide other services to Alaska Air Group or its subsidiaries. Meridian’s services are limited to providing the Committee with advice and information solely on executive and director compensation and related corporate governance matters. The amount of fees paid by the Company during the12-month period ended December 31, Meridian maintains policies designed to prevent conflicts of interest, which policies were detailed to the Committee. No Meridian partner, consultant or employee who serves the Committee has any business or personal relationship with any member of the Committee. No Meridian partner, consultant or employee who serves the Committee, or any of their immediate family, owns any shares of stock of the Company. No Meridian partner, consultant or employee who serves the Committee, or any of their immediate family, has any business or personal relationship with any executive officer of the Company. How the Elements of the Company’s Executive Compensation Program Were Selected The Compensation and Leadership Development Committee conducts periodic reviews of the Company’s executive compensation to assess its alignment with the Committee’s objectives. The Committee considers how each component of compensation motivates executives to help the Company achieve its performance goals and execute its strategic plan and how it promotes retention of executives who share the Company’s values. The compensation structure is designed to promote initiative, resourcefulness and teamwork by key employees whose performance and responsibilities directly affect the performance of the business. The Committee uses both fixed compensation and variable performance-based compensation to achieve a program that we believe is balanced, competitive and provides appropriate incentives. Base salaries, benefits, perquisites, retirement benefits, andchange-in-control benefits are intended to attract and retain highly qualified executives and are paid out on a short-term or current basis. Annual incentives and long-term equity-based incentives are intended to motivate executives to achieve specific performance objectives. The Committee believes that this mix of short-term and long-term compensation allows it to achieve dual goals of attracting and retaining highly qualified executives and providing meaningful performance incentives for those executives. Deterrents to Excessive Risk-Taking The Compensation and Leadership Development Committee believes it has designed the overall compensation program in such a way as to deter excessive risk-taking, to encourage executives to focus on the long-term success of the Company and to align the interests of executives with those of stockholders by: encompassing several different financial and operational goals; setting financial and operational goals that are reviewed and approved by the independent members of the Committee; overlapping the performance periods of awards; incorporating short-term and long-term performance periods of varying lengths; maintaining executive stock ownership requirements; capping short-term cash incentives; allowing the Committee discretion to reduce amounts otherwise payable under certain awards; scaling compensation to the airline industry; considering internal equity among reflecting the current business challenges and opportunities facing the Company. Executive Pay Mix and the Emphasis on Variable Pay The Compensation and Leadership Development Committee believes that emphasis on variable, performance-based compensation at the senior executive
Total direct compensation for the Company’s Named Executive Officers is tailored to place a substantial emphasis on variable pay, that is, pay linked to the achievement of specific, measurable performance objectives and subject to variation depending on the degree to which such objectives are achieved. For value creation. With respect to the other Named Executive Officers, the Committee approved target compensation that is on average The Use of Benchmarking Against a Peer Group The Committee reviews and analyzes total direct compensation for the Named Executive Officers annually. In analyzing the information for The following companies represent the airline peer group selected by the Committee as a comparator for determining appropriate compensation levels for Air Canada Allegiant Travel Co. American Airlines Group Delta Air Lines Hawaiian Holdings JetBlue Airways Republic Airways Holdings SkyWest
Southwest Airlines Spirit Airlines United Continental Holdings
WestJet Airlines The Committee chose to include the companies named above in its peer group for the following reasons: they represent a group of sufficient size to present a reasonable indicator of executive compensation levels; they are in the airline industry and their businesses are similar to the Company’s business; the median annual revenue of this group approximates the Company’s annual revenue; and the Company competes with these peer companies for talent to fill certain key, industry-related executive positions. In the aggregate, base salary, target annual cash In setting In the aggregate, target total cash compensation for the Company’s Named Executive Officers other than the CEO fell The Application of Internal Equity Considerations In addition to benchmarking against airline and industry peer groups, the Committee and the CEO believe it is appropriate to consider other principles of compensation, and not accept benchmarking data as the sole basis for setting compensation. Thus, while the Committee has considered peer group data as described above, it has also applied other compensation principles, most notably internal equity, when determining executive compensation. Currently, Mr. Tilden’s total direct compensation represents approximately two times the average total direct compensation at the executive vice president level, and approximately The Use of Tally Sheets Annually, the Committee reviews tally sheets that show each element of compensation for the Named Executive Officers. Base salaries, incentive plan payments, equity awards, equity exercises, perquisites, and health and retirement benefits are included on tally sheets, which are prepared by the Company’s corporate affairs and human resources departments. The Committee uses the compensation tally sheets to verify that executive compensation is internally equitable and proportioned according to the Committee’s expectations. Current Executive Pay Elements Base Pay The Committee assesses each executive’s duties and scope of responsibilities, past performance and expected future contributions to the Company, the market demand for the individual’s skills, the individual’s influence on long-term In February CEO Base Salary Comparisons (Airline Peer Group)
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(1) | Amounts are |
(2) | Base salary is provided in Canadian dollars. |
(3) |
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(4) | Publicly-disclosed compensation data is no longer available. |
Performance-Based Annual Pay
The Company’s Named Executive Officers are eligible to earn annual incentive pay under the Performance-Based Pay Plan (the PBP Plan), in which all eligible company employees participated in 2016.2017. The PBP Plan is intended to motivate executives and other employees to achieve specific company goals. The Committee aligns executive compensation with the Company’s strategic plan by choosing a target performance level for each operational or financial goal (outlined in the 20162017 Performance-Based Pay Metrics table below) that is consistent with the Company’s strategic plan goals.
The long-term success of the Company is highly dependent on running a safe and reliable operation, meeting or exceeding the expectations of customers, keeping unit costs in check, and earning profitsgenerating financial returns well above our cost of capital. With the acquisition of Virgin America, loyalty of both Mileage Plan members and Visa Signature credit card holders has become increasingly important to the Company’s strategy and led to the Committee to adding additional metrics to the PBP Plan for the 2017 plan year. Each of these key strategic objectives is reflected in the goals of the Performance-Based PayPBP Plan.
For the Named Executive Officers, the 20162017 target participation levels are as follows:
20162017 Performance-Based Pay Plan Participation Rates
| Name | Target Participation
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| Bradley D. Tilden |
| 125% | |
Benito Minicucci |
| 90% | ||
| Brandon S. Pedersen | 85% | ||
| Andrew R. Harrison | 85% | ||
Peter D. Hunt |
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| 65% |
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Incentive award payments may range from zero to 200% of the Named Executive Officer’s target based on the achievement of performance goals set by the Committee at the beginning of each year. For each performance metric, performance at the target level will generally result in a 100% payout of the target amount for that metric, while the payout is generallypercentage would be 200% for performance at or above the maximum level and 25% for performance at the threshold level. The payout percentages are interpolated for performance between the levels identified below, but if performance for a particular metric is below the threshold level, no payment will be made as to that metric. The Committee retains discretion to reduce bonus amounts below the level that would otherwise be paid.
For 2016,2017, the Performance-Based Pay Plan metrics were set as follows:
20162017 Performance-Based Pay Metrics
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| Threshold |
| Target |
| Maximum |
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| Goal |
| Weight |
| Alaska |
| Horizon |
| Alaska |
| Horizon |
| Alaska |
| Horizon |
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| Operational Performance |
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| Safety |
| 10% |
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| Risk Level 3+ Events* |
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| ≤4 |
| ≤4 |
| ≤3 |
| ≤3 |
| ≤1 |
| ≤1 |
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| Employee Engagement/Customer Satisfaction |
| 10% |
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| The number of months we meet or exceed the monthly customer satisfaction goal |
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| 6 |
| 6 |
| 8 |
| 8 |
| 11 |
| 11 |
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| CASM |
| 10% |
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| Cost per available seat mile excluding fuel and special items |
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| 7.45¢ |
| 13.15¢ |
| 7.35¢ |
| 12.95¢ |
| 7.25¢ |
| 12.75¢ |
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| Threshold |
| Target |
| Maximum |
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| Alaska Air Group Profitability |
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| Adjusted Pretax Profit** |
| 70% |
| $450 million |
| $775 million |
| $1.7 billion |
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Threshold | Target | Maximum | ||||||||||||||||||||||||||||||||||||||
Goal | Weight | Alaska | Horizon | Virgin | Alaska | Horizon | Virgin | Alaska | Horizon | Virgin | ||||||||||||||||||||||||||||||
Operational Performance | ||||||||||||||||||||||||||||||||||||||||
Safety | 10 | % | ||||||||||||||||||||||||||||||||||||||
The number of safety goals met. (1) | 1 | 1 | 1 | 2 | 2 | 2 | 3 | 3 | 3 | |||||||||||||||||||||||||||||||
Guest Satisfaction | 10 | % | ||||||||||||||||||||||||||||||||||||||
The number of months we meet or exceed the monthly customer satisfaction goal | 6 mos. | 6 mos. | 6 mos. | 8 mos. | 8 mos. | 8 mos. | 11 mos. | 11 mos. | 11 mos. | |||||||||||||||||||||||||||||||
CASM | 10 | % | ||||||||||||||||||||||||||||||||||||||
Cost per available seat mile excluding fuel and special items | 7.45 | ¢ | 12.80 | ¢ | 7.65 | ¢ | 7.35 | ¢ | 12.60 | ¢ | 7.55 | ¢ | 7.25 | ¢ | 12.40 | ¢ | 7.45 | ¢ | ||||||||||||||||||||||
Loyalty - Mileage Plan Growth | 10 | % | ||||||||||||||||||||||||||||||||||||||
Growth in active accounts calculated as a percentage of base consisting of Alaska and Virgin America accounts | 7 | % | 7 | % | 7 | % | 10 | % | 10 | % | 10 | % | 13 | % | 13 | % | 13 | % | ||||||||||||||||||||||
Loyalty - Credit Card Growth (Alaska and Virgin America Only) | 10 | % | ||||||||||||||||||||||||||||||||||||||
Growth in net new accounts as a percentage of the base consisting of Alaska and Virgin America accounts | 9 | % | N/A | 9 | % | 12 | % | N/A | 12 | % | 15 | % | N/A | 15 | % | |||||||||||||||||||||||||
D0On-Time Departures (Horizon Only) | 10 | % | ||||||||||||||||||||||||||||||||||||||
Percentage of Horizon Air flights departing with 0 minutes delay | N/A | 65 | % | N/A | N/A | 68 | % | N/A | N/A | 71 | % | N/A | ||||||||||||||||||||||||||||
Threshold | Target | Maximum | ||||||||||||||||||||||||||||||||||||||
Alaska Air Group Profitability | ||||||||||||||||||||||||||||||||||||||||
Adjusted Pretax Profit(2) | 50 | % | $650 million | $775 million | $1.6 billion |
(1) | Goals set for each of Alaska, Horizon and Virgin America are related to events that present risk to that airline’s operation, including such things as inadvertent slide deployments, runway and taxiway incursions, introduction of a new aircraft type, integration of Safety Management Systems and employee reporting tools and frequency. |
* These are events that elevate risk to the operation and include such things as significant damage to aircraft or other assets, injuries to employees or customers, or a significant reduction in safety.
(2) | Adjustedpre-tax profit means the net income of Alaska Air Group as computed by Generally Accepted Accounting Principles (GAAP) and adjusted for “Excluded Items” and “Alternative Accounting Treatments.” “Excluded Items” means (a) income taxes, (b) pretax expense under any Alaska Air Group (or subsidiary) profit sharing, performance-based pay, operational performance rewards, variable pay, or similar programs as determined in the discretion of the Compensation and Leadership Development Committee, and (c) special income or expense items that, in the discretion of the Committee, should be excluded because recognizing them would not appropriately serve the goals of the Plan. These special items may include, without limitation, merger-related costs, gain or loss on disposition of capital assets, impairments or other fleet exit costs, expenses from voluntary or involuntary severance programs, government refunds or assistance, and the cumulative effect of accounting changes. “Alternative Accounting Treatments” means expense or income items that, for purposes of calculating adjustedpre-tax profit, the Company (or any subsidiary) will account for based onnon-GAAP methods |
**Adjusted pre-tax profit means the net income of Alaska Air Group as computed by Generally Accepted Accounting Principles (GAAP) and adjusted for “Excluded Items” and “Alternative Accounting Treatments.” “Excluded Items” means (a) income taxes, (b) pretax expense under any Alaska Air Group (or subsidiary) profit sharing, performance-based pay, operational performance rewards, variable pay, or similar programs as determined in the discretion of the Compensation and Leadership Development Committee, and (c) special income or expense items that, in the discretion of the Committee, should be excluded because recognizing them would not appropriately serve the goals of the Plan. These may include, without limitation, gain or loss on disposition of capital assets, impairments or other fleet exit costs, expenses from voluntary or involuntary severance programs, government refunds or assistance, and the cumulative effect of accounting changes. “Alternative Accounting Treatments” means expense or income items that, for purposes of calculating adjusted pre-tax profit, the Company (or any subsidiary) will account for based on non-GAAP methods because, in the discretion of the Committee, using GAAP accounting methods would not appropriately serve the goals of the Plan. These may include, without limitation, fuel hedge accounting on an
because, in the discretion of the Committee, using GAAP accounting methods would not appropriately serve the goals of the Plan. These may include, without limitation, fuel hedge accounting on anas-settled basis. |
Annual target performance measures reflect financial and operational goals that are consistent with the strategic plan. Maximum goals correlate to superior performance, while threshold goals generally correlate to what the Committee believes is an acceptable, but minimal, level of improvement over the prior year’s performance. The 20162017 Alaska Air Group profitability target of $775 million corresponded to a forecasted 2016 return on invested capital (ROIC)achievement of 13%.the Company’s weighted average cost of capital. The safety and employee engagement measures were set at levels the Committee believed would drive continuous improvement and maintain the Company’s reputation as a leader in the industry in these areas. The cost per available seat mile excluding fuel and special items (CASM) metric was similarly chosen to support the Company’s achievement of its strategic plan. The loyalty mileage plan growth and loyalty credit card growth metrics were chosen to support achievement of revenue synergies anticipated from the Virgin America acquisition.
The Committee believes that using adjustednon-GAAP measures, such as CASM (excluding fuel and special items) and adjustedpre-tax profit, rather than GAAP measures, more closely ties results to elements of
performance that can be controlled by the decisions and actions of employees, thereby providing a more direct link between performance and reward. In addition, by removing the short-term impact of certain business decisions (such as the gain or loss on disposition of capital assets), the use of adjusted measures encourages executives to make decisions that are in the best interest of the Company over the long term.
Following is a summary of our performance versus the established goals and an example of the calculation of the 2016 Performance-Based Pay2017 PBP Plan payout for one of the Named Executive Officers:Officers based on actual results:
20162017 Performance-Based Pay Calculation*(1)
| Metrics |
| Actual |
| % of Target Achieved |
| Weight |
| Payout % |
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| Safety Risk Level 3+ Events(2) |
| 1 |
| 200.0 | % | 10.0 | % | 20.0 | % |
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| Employee Engagement/Customer Satisfaction |
| 10 months |
| 166.7 | % | 10.0 | % | 16.7 | % |
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| CASM (3) |
| 7.34¢ |
| 106.1 | % | 10.0 | % | 10.6 | % |
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| Alaska Air Group Profitability |
| $1.36 billion |
| 181.7 | % | 70.0 | % | 127.2 | % |
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| 174.5 | % |
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| x | 85.0 | % |
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| = | 139.7 | % |
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Metrics | Actual | % of Target Achieved | Weight | Payout % | ||||||||||||
Safety | 3 out of 3 | 200.0% | 10.0% | 20.0% | ||||||||||||
Employee Engagement/Customer Satisfaction | 4 months | 40.0% | 10.0% | —% | ||||||||||||
CASM(2) | 7.43¢ | —% | 10.0% | 4.0% | ||||||||||||
Loyalty - Mileage Plan Growth | 13% | 200.0% | 10.0% | 20.0% | ||||||||||||
Loyalty - Credit Card Growth | 12.2% | 105.0% | 10.0% | 10.5% | ||||||||||||
Alaska Air Group Profitability | $ | 1.5 billion | 190.0% | 50.0% | 94.9% | |||||||||||
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Total Payout % | 149.4% | |||||||||||||||
Participation Rate | x | 85.0% | ||||||||||||||
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Payout as a % of Base Salary | = | 127.0% | ||||||||||||||
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(1) |
| Based on the results that apply to an Alaska Airlines named executive officer. |
(2) |
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| 2017 PBP Plan, CASM calculations exclude fuel costs and |
Participation rates vary by position and the participation rates for the Named Executive Officers are described in the 20162017 Performance-Based Plan Participant Rates table above.The Performance-Based Pay Plan has paid out as follows for the last 10 years:
History of Performance-Based Pay
In addition, all of the Company’s employees, including the Named Executive Officers, participate in a separate annual incentive plan called Operational Performance Rewards, which pays a monthly incentive of up to $100 to all employees when certain operational performance targets are met. Awards are based on the achievement ofon-time performance and customer satisfaction goals, and the maximum annual payout for each employee is $1,200. In 2016,2017, each Alaska Airlines employee, including the Named Executive Officers (other than Mr. Hunt), received $1,050$350 under the Operational Performance
Rewards program, each Virgin America employee (including Mr. Hunt) received $100, and each Horizon Air employee received $800.$250.
Long-Term Equity-Based Pay
Long-term equity incentive awards that link executive pay to stockholder value are an important element of the Company’s executive compensation program. Long-term equity incentives that vest over three- or four-year periods are awarded annually, resulting in overlapping vesting periods. The awards are designed to align Named Executive Officers’ interests with those of stockholders. In addition, equity awards help attract and retaintop-performing executives who fit a team-oriented and performance-driven culture.
Stock Options. The Company grants a portion of its long-term incentive awards to the Named Executive Officers in the form of stock options with an exercise price that is equal to the fair market value of the Company’s common stock on the grant date. Thus, theThe Named Executive Officers will realize value from their stock options only to the degree that Alaska Air Group’s stockholders realize value, provided the stockholder had purchased shares and held them for the same period as the executive.option remains outstanding. The stock options also function as a retention incentive for executives, as they generally vest ratably over a four-year period on each anniversary of the grant date and have aten-year term. term that may be shortened if the executive’s employment terminates.
Restricted Stock Units. The Company also grants long-term incentive awards to the Named Executive Officers in the form of restricted stock units. Subject to the executive’s continued employment with the Company, the restricted stock units generally vest on the third anniversary of the date they are granted and, upon vesting, are paid in shares of Alaska Air Group common stock. The units provide a long-term retention incentive through the vesting period that requires continued service to the Company. The units are designed to further link
executives’ interests with those of Alaska Air Group’s stockholders, as the value of the units is based on the value of Alaska Air Group common stock. The Company does not issue dividend equivalents on unvested restricted stock units.
Performance Stock Units. The Company also annually grants the Named Executive Officers performance stock units annually as part of the long-term equity-based incentive program.units. The performance stock units vest only if the Company achieves performance goals established by the Committee for the three-year performance period covered by the award. (The table below outlines the benchmarking process by which payouts are calculated.) Performance stock units also provide a retention incentive as the value of the award received is prorated based on both the executive’s status as an employee during the performance period and the achievement of performance goals.
Grants were made for the three-year performance periods beginning in each of January 2014, 2015, 2016 and 2016.2017. The performance stock unit awards granted in 20142015 and 2016 were based 50% on the Company’s TSR performance relative to S&P 500 companies and 50% relative to the following industryairline peer group:group, excluding any companies that ceased reporting compensation data during the period because they were no longer public: Air Canada, Allegiant Travel Co., American Airlines Group, Delta Air Lines, Hawaiian Holdings, JetBlue Airways, Republic Airways Holdings, SkyWest, Southwest Airlines, Spirit Airlines, United Continental Holdings, Virgin America, and WestJet Airlines. The performance stock unit awards granted in 2015 and 2016 were also based 50% on the Company’s TSRROIC goals set by the Committee.
Following the grant of performance relativestock unit awards in 2016, the Committee modified the original ROIC goal. The modification was made to preserve the intended benefits of the awards after a material change in the Company’s capitalization due to the industry peer group shown above, with the additionacquisition of Virgin America, as permitted by and in compliance with the terms of the 2008 Performance Incentive Plan and related award agreements. No modifications were considered necessary or advisable with respect to the performance stock unit awards granted in 2015 based on the timing of the Virgin America acquisition. This goal, as modified, was disclosed in the Company’s 2017 proxy statement filed March 24, 2017.
For the performance awards granted to the Named Executive Officers (other than Mr. Hunt) in February 2017 with a January 1, 2017 through December 31, 2019 performance period, the vesting of 25% of
the stock units subject to the award will be determined in accordance with the chart below based on the Company’s TSR rank versus the same airline peer group as that used for the 2015 and 2016 awards, with the exception of Virgin America. The vesting of 25% of the stock units subject to the award will be determined in accordance with the chart below based on the Company’s TSR rank relative to S&P 500 companies. The vesting of 50% of the stock units subject to the award will be determined based on the Company’s ROIC goals.performance for the three-year period as measured against goals set by the Committee.
After discussion with management and with its independent compensation consultant, theThe Committee chose relative TSR as thea performance measure for these awards to provide additional incentive for executives to help createsupport and drive long-term stockholder value. Given the nature of the airline business, the Committee believes that measuring TSR on a relative basis rather than on an absolute basis provides a more relevant reflection of the Company’s performance by mitigating the impact of various macro-economic factors that tend to affect the entire industry and that are largely beyond the control of executives.industry. The Committee believes that also measuring the Company’s performance relative to the broad market and to appropriate ROIC goals encourages executives to manage the Company in such a way as to maintain sustainable growth and to attract a broader range of investors.
The percentage of the performance stock units that vest may range from 0%zero to 200% of the target number of units subject to the award, depending on the results of the Company’s goals for the performance period. The payout percentages are interpolated for performance results falling between the levels identified below. The Committee retains discretion to reduce bonus amounts below the level that would otherwise be paid. The Company does not issue dividend equivalents on unvested performance stock units.
For the January 1, 2016 through December 31, 2018 performance period, the vesting of 50% of the stock units subject to the award will be determined in accordance with the chart below based on the Company’s TSR rank versus the companies in the airline peer group, and the vesting of 50% of the stock units subject to the award will be determined in accordance with ROIC performance as measured against goals set by the Committee.
20162017 Performance Stock Unit Award Metrics (2017-2019 Performance Period)
| Airline Peer Group |
| Alaska Air Group ROIC(1) |
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| TSR Rank Among the Airline Peer Group |
| Percentage of Peer Group Stock Units that Vest |
| Average ROIC |
| Percentage of ROIC Stock Units that Vest |
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| 1st or 2nd |
| 200% |
| 15% and above |
| 200% |
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| 3rd |
| 175% |
| 10% |
| 100% |
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| 4th |
| 150% |
| 7.75% and below |
| 0% |
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| 5th |
| 125% |
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| 6th |
| 100% |
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| 7th |
| 80% |
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| 8th |
| 60% |
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| 9th |
| 40% |
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| 10th |
| 20% |
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| 11th, 12th, 13th or 14th |
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Airline Peer Group | S&P 500 Companies | Alaska Air Group ROIC(1) | ||||||||
TSR Rank Among the Airline Peer Group | Percentage of Peer Group Stock Units that Vest | TSR Percentile Rank Among the S&P 500 Index | Percentage of Peer Group Stock Units that Vest | Average ROIC | Percentage of ROIC Stock Units that Vest | |||||
1st or 2nd | 200% | 90th and Above | 200% | 15% and above | 200% | |||||
3rd | 175% | 80th | 175% | 10% | 100% | |||||
4th | 150% | 70th | 150% | 7.75% and below | 0% | |||||
5th | 125% | 60th | 125% | |||||||
6th | 100% | 50th | 100% | |||||||
7th | 80% | 40th | 60% | |||||||
8th | 60% | 30th | 20% | |||||||
9th | 40% | Below 30th | 0% | |||||||
10th | 20% | |||||||||
11th, 12th or 13th | 0% |
(1) | Payout percentages will be linearly interpolated for performance between the levels identified above. |
For the January 1, 2013 through December 31, 2015 performance period, the Company ranked 6th in TSR among its airline peer group and above the 90th percentile versus entities in the S&P 500 Index. The Committee therefore approved payouts in 2016 to the Named Executive Officers at 150% of target.
Equity Award Guidelines. The Committee considers and generally follows equity grant guidelines that are based on the target total direct compensation levels and pay mix described above. Target equity grants, when combined with the base salary and annual target incentive opportunity described above, are designed to achieve total direct compensation at or about the 50th percentile of the peer group data for the Named Executive Officers, with the exception of the CEO. The Committee may adjust equity
grants to the Named Executive Officers above or below these target levels based on the Committee’s general assessment of:
the individual’s contribution to the success of the Company’s financial performance;
internal pay equity;
the individual’s performance of job responsibilities; and
the accounting impact to the Company and potential dilution effects of the grant.
The Committee believes that stock options, time-based restricted stock units and performance stock units each provide incentives that are important to the Company’s executive compensation program as a whole. Therefore, the Committee generally allocates the grant-date value (based on the principles used in the Company’s financial reporting) of each executive’s total equity incentive award among these three types of awards.
20162017 Equity Awards. For 2016,2017, the guidelines as applied to the Named Executive Officers are noted in the table below:
Equity Award Guidelines
|
|
| Equity Target as a |
| Equity Mix |
| ||||
| Name |
| % of Base Pay |
| Stock Options |
| Restricted Stock Units |
| Performance Stock Units |
|
| Bradley D. Tilden |
| 375% |
| 25% |
| 25% |
| 50% |
|
| Benito Minicucci |
| 275% |
| 25% |
| 25% |
| 50% |
|
| Brandon S. Pedersen |
| 225% |
| 25% |
| 25% |
| 50% |
|
| Andrew R. Harrison |
| 225% |
| 25% |
| 25% |
| 50% |
|
| David L. Campbell |
| 125% |
| 25% |
| 25% |
| 50% |
|
Equity Target as a % of Base Pay | Equity Mix | |||||||||||||||
Name | Stock Options | Restricted Stock Units | Performance Stock Units | |||||||||||||
Bradley D. Tilden | 375 | % | 25 | % | 25 | % | 50 | % | ||||||||
Benito Minicucci | 275 | % | 25 | % | 25 | % | 50 | % | ||||||||
Brandon S. Pedersen | 225 | % | 25 | % | 25 | % | 50 | % | ||||||||
Andrew R. Harrison | 225 | % | 25 | % | 25 | % | 50 | % | ||||||||
Peter D. Hunt(1) | N/A | — | — | — |
(1) | Mr. Hunt received an RSU grant as described below in lieu of the annual equity target under the grant guidelines applicable to other Named Executive Officers. |
Special Equity Awards. The Committee retains discretion to make other equity awards at such times and on such terms as it considers appropriate to help achieve the goals of the Company’s executive compensation program. In May 2016,2017, in light of his promotion toconnection with Mr. Hunt’s role as president and chief executiveoperating officer of Virgin America during the continued integration efforts, the Committee made aone-time equity award to Mr. Campbellhim composed of restricted stock units in an amount calculated by deductingvalued at approximately $900,000. The restricted stock units are scheduled to vest 50% on June 14, 2018, the equitydate that is six months following the grant value he received at the annual grant madedate, and 50% in February from the equity grant value he would have received at the increased equity award target (and the increased base salary) for the portion of the year he would serve in the more responsible role. six substantially equal monthly installments thereafter (subject to Mr. Hunt’s continued employment).
In addition, in March 2016,2017, the Committee madealso granted aone-time equity award to Mr. Campbell composed of performance stock units to the Named Executive Officers, with goalsthe exception of the Mr. Tilden and Mr. Hunt. The performance stock units are subject to a three-year performance period with annualpro-rated vesting based on cash flow targets that were designed to motivate achievement of superior financial results and operational performancesuccessful integration of Horizon Air over the three-year period ending December 31, 2018. Virgin America.
Perquisites and Personal Benefits
In 2016,2017, an amount equal to 1% of base salary was paid to each Named Executive Officer in lieu of all perquisites except for travel, life insurance, health exams, and accidental death and dismemberment
insurance. TheOfficers as a perquisite allowance, as the Committee decided to phase out thisthe prior perquisite allowance over a three-year period that beganended in 2014.2017.
Retirement Benefits/Deferred Compensation
The Company provides retirement benefits to the Named Executive Officers under the terms of qualified andnon-qualified defined-benefit and defined-contribution retirement plans. The Retirement Plan for
Salaried Employees (the Salaried Retirement Plan) and the Company’s 401(k) plans aretax-qualified retirement plans in which Mr. Tilden participates on substantially the same terms as other participating employees. The Salaried Retirement Plan was frozen on January 1, 2014 at its then-current benefit levels. Due to maximum limitations imposed by the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code on the annual amount of a pension that may be paid under a qualified defined-benefit plan, the benefits that would otherwise be provided to these executives under the Salaried Retirement Plan are required to be limited. An unfunded defined-benefit plan in which Mr. Tilden also participants, the 1995 Elected Officers Supplementary Retirement Plan (the Supplementary Retirement Plan), providesmake-up benefits plus supplemental retirement benefits.
In light of the freeze on the Company’s Salaried Retirement Plan effective January 1, 2014, all Named Executive Officers (with the exception of Mr. Hunt) participate in a defined-contribution plan under the Company’s Nonqualified Deferred Compensation Plan and Defined Contribution Officers Supplementary Retirement Plan.Plan (DC Supplemental Retirement Plan).
Through the end of 2017, Mr. Hunt participated on substantially the same terms as other Virgin America employees in Virgin America’s 401(k) Plan, atax-qualified defined contribution plan.
The Named Executive Officers are also permitted to elect to defer up to 100% of their annual Performance-Based Pay payments under the Company’s Nonqualified Deferred Compensation Plan. The Company believes that providing deferred compensation opportunities is a cost-effective way to permit executives to receive the tax benefits associated with delaying the income tax event on the compensation deferred. The interest earned on this deferred compensation is similar to what an ordinary investor could earn in the market.
Please see the tables under Pension and Other Retirement Plans and 20162017 Nonqualified Deferred Compensation and the information following the tables for a description of these plans.
Stock Ownership Policy
The Compensation and Leadership Development Committee believes that requiring significant stock ownership by executives further aligns their interests with those of long-term stockholders. Within five years of election or promotion to a position with a greater holding requirement, each executive officer must beneficially own a number of shares of the Company’s common stock with a fair market value equal to or in excess of a specified multiple of the individual’s base salary as follows:
five times base salary for the CEO;
up to three times base salary depending on their respective levels of responsibilities, for the other Named Executive Officers.
Executives are required to retain 50% of any shares of common stock acquired in connection with the vesting of restricted stock units and performance stock units until the holding target is reached. Unexercised stock options, unvested restricted stock units and unvested performance stock units do not count toward satisfaction of the ownership requirements. The Committee reviews compliance with this requirement annually.
Prohibition of Speculative Transactions in Company Securities
The Company’s insider trading policy prohibits executive officers, including the Named Executive Officers, from engaging in certain speculative transactions in the Company’s securities, including short-term trading, short sales, publicly traded options (such as puts, calls or other derivative securities), margin accounts, pledges or hedging transactions.
Recoupment of Certain Compensation Payments
The Compensation and Leadership Development Committee has adopted a recoupment policy that applies to individuals who qualify as executive officers of the Company for purposes of Section 16 of
the Securities Exchange Act of 1934. Under the policy, in such circumstances as it, in its sole discretion, determines to be appropriate, the Committee will obtain reimbursement or effect cancellation of all or a portion of any short- or long-term cash or equity incentive payments or awards where: (1) such payment or award of cash or shares was made on or after the effective date of this policy; (2) the amount of or number of shares included in any such payment or award that was determined based on the achievement of financial results that were subsequently the subject of an accounting restatement due to the individual’s fraudulent or grossly negligent act or omission; (3) a lesser payment or award of cash or shares would have been made to the individual based upon the restated financial results; and (4) the payment or award of cash or shares was received by the individual prior to or during the12-month period following the first public issuance or filing of the financial results that were subsequently restated.
Agreements Regarding Change in Control and Termination
The Company haschange-in-control agreements with the Named Executive Officers (other than Mr. Hunt) that provide for severance benefits if the executive’s employment terminates under certain circumstances in connection with a change in control.
The Company has entered intochange-in-control agreements with these executives because it believes that the occurrence, or potential occurrence, of achange-in-control transaction would create uncertainty and disruption during a critical time for the Company. The payment of cash severance benefits under the agreements is triggered if two conditions are met: (1) actual or constructive termination of employment and (2) the consummation of achange-in-control transaction. The Committee believes that the Named Executive Officers should be entitled to receive cash severance benefits only if both conditions are met. Once thechange-in-control event occurs, the Named Executive Officer’s severance and other benefits payable under the contract begin to diminish with time so long as the executive’s employment continues, until ultimate expiration of the agreement 36 months later. None of the Company’schange-in-control agreements provide for reimbursement of excise taxes.
Policy with Respect to Section 162(m)
Section 162(m)Federal income tax law generally prohibits a publicly-held company from deducting compensation paid to a current or former named executive officer that exceeds $1 million during the tax year. Certain awards granted before November 2, 2017 that were based upon attainingpre-established performance measures that were set by the company’s compensation committee under a plan approved by the company’s stockholders, as well as amounts payable to former executives pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the $1 million deductibility limit. As one of the Internal Revenue Code generally prohibits the Company from deducting certain compensation over $1 million paid tofactors in its CEO and certain other executive officers unless such compensation is based on performance objectives meeting certain criteria or is otherwise excluded from the limitation. The Committee strives whenever possible to structure its compensation plans such that they are tax-deductible, and it believes that a substantial portionconsideration of compensation paid under its current program (includingmatters, the annual incentives, performance stock units and stock option grants described above) satisfies the requirements under Section 162(m).Committee notes this deductibility limitation. However, the Committee reserveshas the rightflexibility to design programstake any compensation-related actions that recognize a full rangeit determines are in the best interests of performance criteria important tothe Company and its success, even where thestockholders, including awarding compensation paid under such programsthat may not be deductible. For 2016, the Company believesdeductible for tax purposes. There can be no assurance that no portion of its tax deduction for qualifiedany compensation paid to its Named Executive Officers will in fact be disallowed under Section 162(m).deductible.
Compensation and Leadership Development Committee Report
The Compensation and Leadership Development Committee has certain duties and powers as described in its charter. The Committee is currently composed of fournon-employee directors who are named at the end of this report, each of whom the Board has determined is independent as defined by NYSE listing standards.
The Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this Proxy Statement. Based upon this review and discussion, the Committee recommended to the Board of Directors that thethis Compensation Discussion
and Analysis section be included in the Company’s 20162017 Annual Report onForm 10-K on file with the SEC and the Company’s 20172018 Proxy StatementStatement.(1)
Compensation and Leadership Development Committee of the Board of Directors
J. Kenneth Thompson, Chair
James A. Beer, Member
Marion C. Blakey, Member
Dennis F. Madsen, Member
Katherine J. Savitt, Member (until May 2017)
Compensation and Leadership Development Committee Interlocks
and Insider Participation
Mr. Thompson, Mr. Madsen and Ms. Blakey were members of the Compensation and Leadership Development Committee during all of 2017. Ms. Savitt was a member of the Committee until May 2017. Mr. Beer has been a member of the Committee since August 2017. No director who served on the Committee for all or part of 2017 is or has been an executive officer or employee of the Company or has had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. During 2017, none of the Company’s executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity where the entity’s executive officers also served as a director or member of the Company’s Compensation and Leadership Development Committee.
(1) | SEC filings sometimes incorporate information by reference. This means the Company is referring you to information that has previously been filed with the SEC and that this information should be considered as part of the filing you are reading. Unless the Company specifically states otherwise, this report shall not be deemed to be incorporated by reference and shall not constitute soliciting material or otherwise be considered filed under the Securities Act or the Exchange Act. |
Compensation and Leadership Development Committee Interlocks
and Insider Participation
Mr. Thompson, Mr. Madsen and Ms. Savitt were members of the Compensation and Leadership Development Committee during all of 2016. Ms. Blakey has been a member of the Committee since May 2016. No member of the Committee serving all or part of 2016 is or has been an executive officer or employee of the Company or has had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. During 2016, none of the Company’s executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity where the entity’s executive officers also served as a director or member of the Company’s Compensation and Leadership Development Committee.
The following table presents information regarding compensation for services rendered during 20162017 of the CEO, the CFO, and the three other most highly compensated executive officers. These individuals are referred to as the Named Executive Officers in this Proxy Statement.
Name and Principal Position (a) |
| Year (b) |
| Salary ($) (c) |
| Bonus ($) (d) |
| Stock Awards(1)(2) ($) (e) |
| Option Awards(1) ($) (f) |
| Non-Equity Compen- sation(3) ($) (g) |
| Change in Pension Value and Nonqualified Deferred Compensation Earnings(4) ($) (h) |
| All Other Compen- sation(5) ($) (i) |
| Total ($) (j) |
| |
| Bradley D. Tilden |
| 2016 |
| 487,600 |
| — |
| 1,817,951 |
| 412,499 |
| 962,334 |
| 359,901 |
| 206,027 |
| 4,246,312 |
|
| President & CEO |
| 2015 |
| 454,254 |
| — |
| 1,621,307 |
| 391,295 |
| 932,002 |
| 1,136 |
| 202,895 |
| 3,602,889 |
|
| Alaska |
| 2014 |
| 436,769 |
| — |
| 975,541 |
| 460,480 |
| 874,538 |
| 521,440 |
| 199,954 |
| 3,468,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Benito Minicucci |
| 2016 |
| 426,923 |
| — |
| 1,452,245 |
| 325,657 |
| 612,189 |
| 9,612 |
| 116,811 |
| 2,943,437 |
|
| President & COO |
| 2015 |
| 390,769 |
| — |
| 1,357,016 |
| 327,710 |
| 547,102 |
| 1,732 |
| 124,963 |
| 2,749,292 |
|
| Alaska |
| 2014 |
| 359,231 |
| — |
| 661,027 |
| 375,187 |
| 539,846 |
| 2,691 |
| 124,164 |
| 2,062,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Brandon S. Pedersen |
| 2016 |
| 390,769 |
| — |
| 873,733 |
| 198,380 |
| 580,659 |
| 22,516 |
| 122,036 |
| 2,188,093 |
|
| EVP Finance & CFO |
| 2015 |
| 360,769 |
| — |
| 1,004,541 |
| 242,545 |
| 505,185 |
| 1 |
| 135,222 |
| 2,248,263 |
|
| Alaska |
| 2014 |
| 327,692 |
| — |
| 506,126 |
| 276,653 |
| 492,538 |
| 7,779 |
| 116,880 |
| 1,727,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Andrew R. Harrison |
| 2016 |
| 383,077 |
| — |
| 873,733 |
| 198,380 |
| 569,249 |
| 22,819 |
| 113,478 |
| 2,160,736 |
|
| Exec VP & CCO |
| 2015 |
| 339,077 |
| — |
| 748,879 |
| 180,974 |
| 469,179 |
| — |
| 119,720 |
| 1,857,829 |
|
| Alaska |
| 2014 |
| 282,500 |
| — |
| 229,980 |
| 150,000 |
| 386,712 |
| 7,654 |
| 96,606 |
| 1,153,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| David L. Campbell6) |
| 2016 |
| 331,981 |
| — |
| 1,088,286 |
| 90,913 |
| 368,744 |
| 1,421 |
| 43,321 |
| 1,924,666 |
|
| President & CEO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Horizon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position (a) | Year (b) | Salary ($) (c) | Bonus ($) (d) | Stock Awards(1)(2) ($) (e) | Option Awards(1) ($) (f) | Non-Equity Compen- sation(3) ($) (g) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(4) ($) (h) | All Compen- sation(5) ($) (i) | Total ($) (j) | |||||||||||||||||||||||||||
Bradley D. Tilden | 2017 | 534,616 | — | 2,762,366 | 673,440 | 998,744 | 480,102 | 268,898 | 5,718,166 | |||||||||||||||||||||||||||
CEO | 2016 | 487,600 | — | 1,817,951 | 412,499 | 962,334 | 359,901 | 206,027 | 4,246,312 | |||||||||||||||||||||||||||
Alaska
|
| 2015
|
|
| 454,254
|
|
| —
|
|
| 1,621,307
|
|
| 391,295
|
|
| 932,002
|
|
| 1,136
|
|
| 202,895
|
|
| 3,602,889
|
| |||||||||
Benito Minicucci | 2017 | 464,231 | — | 1,911,541 | 426,372 | 624,555 | — | 251,859 | 3,678,558 | |||||||||||||||||||||||||||
President & COO | 2016 | 426,923 | — | 1,452,245 | 325,657 | 612,189 | 9,612 | 116,811 | 2,943,437 | |||||||||||||||||||||||||||
Alaska
|
| 2015
|
|
| 390,769
|
|
| —
|
|
| 1,357,016
|
|
| 327,710
|
|
| 547,102
|
|
| 1,732
|
|
| 124,963
|
|
| 2,749,292
|
| |||||||||
Brandon S. Pedersen | 2017 | 417,308 | — | 1,485,671 | 311,887 | 530,289 | — | 161,616 | 2,906,771 | |||||||||||||||||||||||||||
EVP Finance & CFO | 2016 | 390,769 | — | 873,733 | 198,380 | 580,659 | 22,516 | 122,036 | 2,188,093 | |||||||||||||||||||||||||||
Alaska
|
| 2015
|
|
| 360,769
|
|
| —
|
|
| 1,004,541
|
|
| 242,545
|
|
| 505,185
|
|
| 1
|
|
| 135,222
|
|
| 2,248,263
|
| |||||||||
Andrew R. Harrison | 2017 | 417,308 | — | 1,485,671 | 311,887 | 530,289 | — | 162,183 | 2,907,338 | |||||||||||||||||||||||||||
EVP & CCO | 2016 | 383,077 | — | 873,733 | 198,380 | 569,249 | 22,819 | 113,478 | 2,160,736 | |||||||||||||||||||||||||||
Alaska
|
| 2015
|
|
| 339,077
|
|
| —
|
|
| 748,879
|
|
| 180,974
|
|
| 469,179
|
|
| —
|
|
| 119,720
|
|
| 1,857,829
|
| |||||||||
Peter D. Hunt(6) | 2017 | 450,000 | — | 946,618 | — | 450,450 | — | 22,845 | 1,869,913 | |||||||||||||||||||||||||||
President & COO | ||||||||||||||||||||||||||||||||||||
Virgin America |
(1) | The amounts reported in Columns (e) and (f) of the Summary Compensation Table above reflect the fair value of these awards on the grant date as determined under the principles used to calculate the value of equity awards for purposes of the Company’s financial |
statements (disregarding any estimate of forfeitures related to service-based vesting conditions). For a discussion of the assumptions and methodologies used to value the awards reported in Column (e) and Column (f), please see the discussion of stock awards and option awards contained in Note |
(2) | The amounts reported in Column (e) of the table above also include the grant date fair value of performance-based stock unit awards granted in |
|
| 2014 Performance Awards |
| 2015 Performance Awards |
| 2016 Performance Awards |
| |||||||
|
|
| Aggregate Grant Date Fair Value (Based on Probable Outcome) |
| Aggregate Grant Date Fair Value (Based on Maximum Performance) |
| Aggregate Grant Date Fair Value (Based on Probable Outcome) |
| Aggregate Grant Date Fair Value (Based on Maximum Performance) |
| Aggregate Grant Date Fair Value (Based on Probable Outcome) |
| Aggregate Grant Date Fair Value (Based on Maximum Performance) |
|
| Name |
| ($) |
| ($) |
| ($) |
| ($) |
| ($) |
| ($) |
|
| Bradley D. Tilden |
| 525,983 |
| 1,052,966 |
| 1,229,087 |
| 1,555,806 |
| 1,404,482 |
| 1,667,002 |
|
| Benito Minicucci |
| 292,019 |
| 584,038 |
| 1,030,820 |
| 1,304,785 |
| 1,107,047 |
| 1,313,913 |
|
| Brandon S. Pedersen |
| 234,894 |
| 469,788 |
| 763,325 |
| 966,169 |
| 673,561 |
| 799,373 |
|
| Andrew R. Harrison |
| 80,727 |
| 161,454 |
| 569,111 |
| 720,377 |
| 673,561 |
| 799,373 |
|
| David L. Campbell(6) |
|
|
|
|
|
|
|
|
| 984,601 |
| 1,772,412 |
|
2015 Performance Awards | 2016 Performance Awards | 2017 Performance Awards | ||||||||||||||||||||||
Name | Aggregate Grant Date Fair Value (Based on Probable Outcome) ($) | Aggregate Grant Date Fair Value (Based on Maximum Performance) ($) | Aggregate Grant Date Fair Value (Based on Probable Outcome) ($) | Aggregate Grant Date Fair Value (Based on Maximum Performance) ($) | Aggregate Grant Date Fair Value (Based on Probable Outcome) ($) | Aggregate Grant Date Fair Value (Based on Maximum Performance) ($) | ||||||||||||||||||
Bradley D. Tilden | 1,229,087 | 1,555,806 | 1,404,482 | 1,667,002 | 2,088,266 | 2,677,140 | ||||||||||||||||||
Benito Minicucci | 1,030,820 | 1,304,785 | 1,107,047 | 1,313,913 | 1,487,821 | 1,893,324 | ||||||||||||||||||
Brandon S. Pedersen | 763,325 | 966,169 | 673,561 | 799,373 | 1,174,622 | 1,488,250 | ||||||||||||||||||
Andrew R. Harrison | 569,111 | 720,377 | 673,561 | 799,373 | 1,174,622 | 1,488,250 | ||||||||||||||||||
Peter D. Hunt(6) | — | — |
In 2016,2017, the Committee awarded a one-time grant grants of an additional 8,540 performance stock units to the Named Executive Officers (excluding Mr. Campbell.Tilden and Mr. Hunt). The award, which was in addition to Mr. Campbell’s annual grant, has a three-year performance period and is tied to Horizon Air operational and financial goals. The awardawards can range from 0% if the threshold performance is not reached to 200% of target if maximum performance is achieved. Mr. Campbell was not a Named Executive Officer prior to 2016, therefore, only 2016 performance stock unit awards are included.
(3) | Non-Equity Compensation in Column (g) of the Summary Compensation Table above includes Performance-Based Pay compensation and Operational Performance Rewards, further described in the Compensation Discussion and Analysis. |
(4) | The amount reported in Column (h) of the Summary Compensation Table above reflects the year-over-year change in present value of accumulated benefits determined as of December 31 of each year for the Retirement Plan for Salaried Employees and the Officers Supplementary Retirement Plan (defined-benefit plan) as well as any above-market earnings on each Named Executive Officer’s account under the Nonqualified Deferred Compensation Plan. The number included in Column (h) is an estimate of the value of future payments and does not represent value received. For the Named Executive Officers, company contributions to the Defined-Contribution Officers Supplementary Retirement Plan(DC-OSRP) in lieu of the defined-benefit plan are reported in Column (i) and detailed in the table in Footnote (5) below. |
(5) | The following table presents detailed information on the types and amounts of compensation reported for the Named Executive Officers in Column (i) of the Summary Compensation Table. For Column (i), each perquisite and other personal benefit is included in the total and identified and, if it exceeds the greater of $25,000 or 10% of the total amount of perquisites and other benefits for that officer, is quantified in the table below. All reimbursements of taxes with respect to perquisites and other benefits are identified and quantified. Tax reimbursements are provided for travel privileges unique to the airline industry. Also included in the total for Column (i) is the Company’s incremental cost of providing flight benefits, annual physical, and accidental death and dismemberment insurance premiums. By providing positive-space travel without tax consequences to the Named Executive Officers, we are able to deliver a highly valued benefit at a low cost to the Company. In addition, we believe that this benefit provides the opportunity for the Named Executive Officers to connect with the Company’s front-line employees. As noted in the Compensation Discussion and Analysis section, in |
Itemization of All Other Compensation (Column i) |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Term Life Insurance |
|
|
|
|
| ||
| Name |
| Company Contribution to 401(k) Account ($) |
| Company Contribution to DC-OSRP Account ($) |
| Executive Allowance ($) |
| Life Insurance ($) |
| Premium ($) |
| Tax on Premium ($) |
| Other* ($) |
| Total “All Other Compensation” ($) |
|
| Bradley D. Tilden |
| 31,800 |
| 145,930 |
| 5,658 |
| 6,192 |
| 330 |
| 238 |
| 15,879 |
| 206,027 |
|
| Benito Minicucci |
| 15,900 |
| 81,393 |
| 4,923 |
| 3,269 |
| 385 |
| 278 |
| 10,663 |
| 116,811 |
|
| Brandon S. Pedersen |
| 15,900 |
| 73,585 |
| 4,554 |
| 3,098 |
| 387 |
| 280 |
| 24,232 |
| 122,036 |
|
| Andrew R. Harrison |
| 15,900 |
| 69,216 |
| 4,246 |
| 1,979 |
| 380 |
| 274 |
| 21,483 |
| 113,478 |
|
| David L. Campbell(6) |
| 13,550 |
| 9,336 |
| 3,778 |
| 2,258 |
| 161 |
| 116 |
| 14,122 |
| 43,321 |
|
Itemization of All Other Compensation (Column i) | ||||||||||||||||||||||||||||||||
Personal Travel | ||||||||||||||||||||||||||||||||
Name | Company Contribution to 401(k) Account ($) | Company Contribution toDC-OSRP Account ($) | Life Insurance Premium ($) | State Business Travel Tax Reimburse- ment | Personal Travel ($) | Taxes Paid on Personal Travel ($) | Other* ($) | Total “All Other Compensation” ($) | ||||||||||||||||||||||||
Bradley D. Tilden | 32,400 | 155,046 | 6,192 | 65,561 | 4,519 | 3,321 | 1,859 | 268,898 | ||||||||||||||||||||||||
Benito Minicucci | 16,200 | 97,164 | 3,312 | 107,148 | 8,427 | 6,090 | 13,518 | 251,859 | ||||||||||||||||||||||||
Brandon S. Pedersen | 16,200 | 87,911 | 3,264 | 25,314 | 10,563 | 7,766 | 10,598 | 161,616 | ||||||||||||||||||||||||
Andrew R. Harrison | 16,200 | 90,451 | 2,129 | 20,057 | 15,904 | 11,494 | 5,948 | 162,183 | ||||||||||||||||||||||||
Peter D. Hunt | 20,709 | — | — | — | 119 | 111 | 1,906 | 22,845 |
*Includes the Company’s incremental cost of providing a flight benefit, annual physical, and the above-market amount paid for accidental death and dismemberment insurance premiums.
(6) | Mr. |
20162017 Grants of Plan-BasedPlan-Based Awards
The following table presents information regarding the incentive awards granted to the Named Executive Officers in 2016.2017. Please see the Performance-Based Annual Pay section in the CD&A for a description of the material terms of thenon-equity incentive plan awards reported and the Long-Term Equity-Based Pay section for a description of the material terms of the equity-based awards reported. Each of the equity-based awards reported below was granted under the Company’s 20082016 Performance Incentive Plan (2008(2016 Plan).
|
|
|
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
| Estimated Future Payouts Under Equity Incentive Plan Awards |
| All Other Stock |
| All Other Option Awards: |
|
|
| Grant Date Fair |
| |||||||||
| Name (a) |
| Grant Date (b) |
| Threshold ($) (c) |
| Target ($) (d) |
| Maximum ($) (e) |
| Thres- hold (#) (f) |
| Target (#) (g) |
| Maximum (#) (h) |
| Awards: Number of Shares of Stock or Units (#) (i) |
| Number of Securities Under- lying Options (#) (j) |
| Exercise or Base Price of Option Awards ($/Sh) (k) |
| Value of Stock and Option Awards(1) ($) (l) |
|
| Bradley D. Tilden |
| ||||||||||||||||||||||
| Stock Options |
| 2/9/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,200 |
| 65.630 |
| 412,499 |
|
| RSUs |
| 2/9/16 |
|
|
|
|
|
|
|
|
|
|
|
|
| 6,300 |
|
|
|
|
| 413,469 |
|
| PSUs |
| 2/9/16 |
|
|
|
|
|
|
| — |
| 12,700 |
| 25,400 |
|
|
|
|
|
|
| 1,404,482 |
|
| PBP Plan |
| N/A |
| 146,978 |
| 587,910 |
| 1,175,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Benito Minicucci |
| ||||||||||||||||||||||
| Stock Options |
| 2/9/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,000 |
| 65.630 |
| 325,657 |
|
| RSUs |
| 2/9/16 |
|
|
|
|
|
|
|
|
|
|
|
|
| 5,000 |
|
|
|
|
| 328,150 |
|
| RSUs |
| 5/12/16 |
|
|
|
|
|
|
|
|
|
|
|
|
| 260 |
|
|
|
|
| 17,048 |
|
| PSUs |
| 2/9/16 |
|
|
|
|
|
|
| — |
| 10,010 |
| 20,020 |
|
|
|
|
|
|
| 1,107,047 |
|
| PBP Plan |
| N/A |
| 95,940 |
| 383,760 |
| 767,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Brandon S. Pedersen |
| ||||||||||||||||||||||
| Stock Options |
| 2/9/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,310 |
| 65.630 |
| 198,380 |
|
| RSUs |
| 2/9/16 |
|
|
|
|
|
|
|
|
|
|
|
|
| 3,050 |
|
|
|
|
| 200,172 |
|
| PSUs |
| 2/9/16 |
|
|
|
|
|
|
| — |
| 6,090 |
| 12,180 |
|
|
|
|
|
|
| 673,561 |
|
| PBP Plan |
| N/A |
| 83,406 |
| 333,625 |
| 667,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Andrew R. Harrison |
| ||||||||||||||||||||||
| Stock Options |
| 2/9/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,310 |
| 65.630 |
| 198,380 |
|
| RSUs |
| 2/9/16 |
|
|
|
|
|
|
|
|
|
|
|
|
| 3,050 |
|
|
|
|
| 200,172 |
|
| PSUs |
| 2/9/16 |
|
|
|
|
|
|
| — |
| 6,090 |
| 12,180 |
|
|
|
|
|
|
| 673,561 |
|
| PBP Plan |
| N/A |
| 82,078 |
| 328,313 |
| 656,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| David L. Campbell |
| ||||||||||||||||||||||
| Stock Options |
| 2/9/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,350 |
| 65.630 |
| 90,913 |
|
| RSUs |
| 2/9/16 |
|
|
|
|
|
|
|
|
|
|
|
|
| 1,400 |
|
|
|
|
| 91,882 |
|
| RSUs |
| 5/12/16 |
|
|
|
|
|
|
|
|
|
|
|
|
| 180 |
|
|
|
|
| 11,803 |
|
| PSUs |
| 2/9/16 |
|
|
|
|
|
|
| — |
| 2,790 |
| 5,580 |
|
|
|
|
|
|
| 308,592 |
|
| PSUs |
| 3/30/16 |
|
|
|
|
|
|
| — |
| 8,540 |
| 17,080 |
|
|
|
|
|
|
| 676,009 |
|
| PBP Plan |
| N/A |
| 62,653 |
| 250,613 |
| 501,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name (a) | Grant Date (b) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) (i) | All Other Option Awards: Number of Securities Under- lying Options (#) (j) | Exercise or Base Price of Option Awards ($/Sh) (k) | Grant Date Fair Value of Stock and Option Awards(1) ($) (l) | |||||||||||||||||||||||||||||||||||||
Threshold ($) (c) | Target ($) (d) | Maximum ($) (e) |
Thres- hold | Target (#) (g) | Maximum (#) (h) | |||||||||||||||||||||||||||||||||||||||
Bradley D. Tilden |
| |||||||||||||||||||||||||||||||||||||||||||
Stock Options | 2/14/17 | 16,000 | 96.30 | 673,440 | ||||||||||||||||||||||||||||||||||||||||
RSUs | 2/14/17 | 7,000 | 674,100 | |||||||||||||||||||||||||||||||||||||||||
PSUs | 2/14/17 | — | 13,900 | 27,800 | 2,088,266 | |||||||||||||||||||||||||||||||||||||||
PBP Plan | N/A | 167,969 | 671,875 | 1,343,750 | ||||||||||||||||||||||||||||||||||||||||
Benito Minicucci |
| |||||||||||||||||||||||||||||||||||||||||||
Stock Options | 2/14/17 | 10,130 | 96.30 | 426,372 | ||||||||||||||||||||||||||||||||||||||||
RSUs | 2/14/17 | 4,400 | 423,720 | |||||||||||||||||||||||||||||||||||||||||
PSUs | 2/14/17 | — | 8,810 | 17,620 | 1,323,644 | |||||||||||||||||||||||||||||||||||||||
PSUs | 3/7/17 | — | 1,550 | 3,100 | 164,177 | |||||||||||||||||||||||||||||||||||||||
PBP Plan | N/A | 104,906 | 419,625 | 839,250 | ||||||||||||||||||||||||||||||||||||||||
Brandon S. Pedersen |
| |||||||||||||||||||||||||||||||||||||||||||
Stock Options | 2/14/17 | 7,410 | 96.30 | 311,887 | ||||||||||||||||||||||||||||||||||||||||
RSUs | 2/14/17 | 3,230 | 311,049 | |||||||||||||||||||||||||||||||||||||||||
PSUs | 2/14/17 | — | 6,450 | 12,900 | 969,163 | |||||||||||||||||||||||||||||||||||||||
PSUs | 3/7/17 | — | 1,940 | 3,880 | 205,459 | |||||||||||||||||||||||||||||||||||||||
PBP Plan | N/A | 88,984 | 355,938 | 711,875 | ||||||||||||||||||||||||||||||||||||||||
Andrew R. Harrison |
| |||||||||||||||||||||||||||||||||||||||||||
Stock Options | 2/14/17 | 7,410 | 96.30 | 311,887 | ||||||||||||||||||||||||||||||||||||||||
RSUs | 2/14/17 | 3,230 | 311,049 | |||||||||||||||||||||||||||||||||||||||||
PSUs | 2/14/17 | — | 6,450 | 12,900 | 969,163 | |||||||||||||||||||||||||||||||||||||||
PSUs | 3/7/17 | — | 1,940 | 3,880 | 205,459 | |||||||||||||||||||||||||||||||||||||||
PBP Plan | N/A | 88,984 | 355,938 | 711,875 | ||||||||||||||||||||||||||||||||||||||||
Peter D. Hunt |
| |||||||||||||||||||||||||||||||||||||||||||
RSUs | 12/14/17 | 13,642 | 946,618 | |||||||||||||||||||||||||||||||||||||||||
PBP Plan | N/A | 81,563 | 326,250 | 652,500 |
Key: RSUs – Restricted Stock Units; PSUs – Performance Stock Units; PBP Plan – Performance-Based Pay Plan
|
|
| The amounts reported in Column (l) reflect the fair value of these awards on the grant date as determined under the principles used to calculate the value of equity awards for purposes of the Company’s financial statements and may or may not be representative of the value eventually realized by the executive. For a discussion of the assumptions and methodologies used to value the awards reported in Column (l), please see the discussion of stock awards and option awards contained in Note |
Outstanding Equity Awards at 20162017 Fiscal Year End
The following table presents information regarding the outstanding equity awards held by each of the Named Executive Officers as of December 31, 2016,2017, including the vesting dates for the portions of these awards that had not vested as of that date.
|
| Option Awards |
| Stock Awards |
| ||||||||||||||||||
| Name (a) |
| Award Date (b) |
| Number of Securities Underlying Unexer- cised Options Exercisable (#) (c) |
| Number of Securities Underlying Unexercised Options Unexercisable (#) (d) |
| Option Exercise Price ($) (e) |
| Option Expir- ation Date (f) |
| Number of Shares or Units of Stock That Have Not Vested (#) (g) |
| Market Value of Shares or Units of Stock That Have Not Vested(1) ($) (h) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) (i) |
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested(1) ($) (j) |
| |||
| Bradley D. Tilden |
| |||||||||||||||||||||
|
|
| 2/3/10 |
| 25,600 |
| — |
|
| 8.315 |
| 2/3/20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2/7/11 |
| 40,800 |
| — |
|
| 15.325 |
| 2/7/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2/14/12 |
| 23,360 |
| — |
|
| 19.00 |
| 2/14/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2/11/13 |
| 28,424 |
| 9,476 | (2) |
| 24.40 |
| 2/11/23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2/11/14 |
| 10,900 |
| 10,900 | (3) |
| 38.76 |
| 2/11/24 |
| 11,600 | (3) |
| 1,029,268 |
| 11,600 | (9) |
| 1,029,268 |
|
|
|
| 2/10/15 |
| 3,400 |
| 10,200 | (6) |
| 65.370 |
| 2/10/25 |
| 6,000 | (6) |
| 532,380 |
| 11,900 | (9) |
| 1,055,887 |
|
|
|
| 2/9/16 |
| — |
| 15,200 | (7) |
| 65.630 |
| 2/9/26 |
| 6,300 | (7) |
| 558,999 |
| 12,700 | (9) |
| 1,126,870 |
|
| Benito Minicucci |
| |||||||||||||||||||||
|
|
| 2/11/13 |
| 6 |
| 4,980 | (2) |
| 24.40 |
| 2/11/23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2/11/14 |
| — |
| 6,100 | (3) |
| 38.755 |
| 2/11/24 |
| 6,440 | (3) |
| 571,421 |
| 6,440 | (9) |
| 571,421 |
|
|
|
| 5/12/14 |
| — |
| 2,230 | (4) |
| 48.945 |
| 5/12/24 |
| 2,440 | (4) |
| 216,501 |
|
|
|
|
|
|
|
|
| 2/10/15 |
| 2,847 |
| 8,543 | (6) |
| 65.370 |
| 2/10/25 |
| 4,990 | (6) |
| 442,763 |
| 9,980 | (9) |
| 885,525 |
|
|
|
| 2/9/16 |
| — |
| 12,000 | (7) |
| 65.630 |
| 2/9/26 |
| 5,000 | (7) |
| 443,650 |
| 10,010 | (9) |
| 888,187 |
|
|
|
| 5/12/16 |
|
|
|
|
|
|
|
|
|
| 260 | (8) |
| 23,070 |
|
|
|
|
|
|
| Brandon S. Pedersen |
| |||||||||||||||||||||
|
|
| 2/11/13 |
| — |
| 3,346 | (2) |
| 24.40 |
| 2/11/23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2/11/14 |
| — |
| 4,890 | (3) |
| 38.755 |
| 2/11/24 |
| 5,180 | (3) |
| 746,840 |
| 5,180 | (9) |
| 459,621 |
|
|
|
| 5/12/14 |
| — |
| 1,330 | (4) |
| 48.945 |
| 5/12/24 |
| 1,440 | (4) |
| 127,771 |
|
|
|
|
|
|
|
|
| 2/10/15 |
| 2,107 |
| 6,323 | (6) |
| 65.370 |
| 2/10/25 |
| 3,690 | (6) |
| 327,414 |
| 7,390 | (9) |
| 655,715 |
|
|
|
| 2/9/16 |
| — |
| 7,310 | (7) |
| 65.630 |
| 2/9/26 |
| 3,050 | (7) |
| 270,627 |
| 6,090 | (9) |
| 540,366 |
|
| Andrew R. Harrison |
| |||||||||||||||||||||
|
|
| 2/11/13 |
| — |
| 1,396 | (2) |
| 24.40 |
| 2/11/23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2/11/14 |
| 180 |
| 1,680 | (3) |
| 38.755 |
| 2/11/24 |
| 1,780 | (3) |
| 157,939 |
| 1,780 | (9) |
| 157,939 |
|
|
|
| 5/12/14 |
| — |
| 1,500 | (4) |
| 48.945 |
| 5/12/24 |
| 1,640 | (4) |
| 145,517 |
|
|
|
|
|
|
|
|
| 2/10/15 |
| — |
| 4,718 | (6) |
| 65.370 |
| 2/10/25 |
| 2,750 | (6) |
| 244,008 |
| 5,510 | (9) |
| 488,902 |
|
|
|
| 2/9/16 |
| — |
| 7,310 | (7) |
| 65.630 |
| 2/9/26 |
| 3,050 | (7) |
| 270,627 |
| 6,090 | (9) |
| 540,366 |
|
| David L. Campbell |
| |||||||||||||||||||||
|
|
| 8/11/14 |
| 1,855 |
| 1,855 | (5) |
| 43.880 |
| 8/11/24 |
| 2,210 | (5) |
| 196,093 |
|
|
|
|
|
|
|
|
| 2/10/15 |
| 657 |
| 1,973 | (6) |
| 65.370 |
| 2/10/25 |
| 1,150 | (6) |
| 102,040 |
| 2,300 | (9) |
| 204,079 |
|
|
|
| 2/9/16 |
| — |
| 3,350 | (7) |
| 65.630 |
| 2/9/26 |
| 1,400 | (7) |
| 124,222 |
| 2,790 | (9) |
| 247,557 |
|
|
|
| 3/30/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,540 | (9) |
| 757,754 |
|
|
|
| 5/12/16 |
|
|
|
|
|
|
|
|
|
| 180 | (8) |
| 15,971 |
|
|
|
|
|
|
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name (a) | Award Date (b) | Number of Securities Underlying Unexer- cised Options Exercisable (#) (c) | Number of Securities Underlying Unexercised Options Unexercisable (#) (d) | Option Exercise Price ($) (e) | Option Expir- ation Date (f) | Number of Shares or Units of Stock That Have Not Vested (#) (g) | Market Value of Shares or Units of Stock That Have Not Vested(1) ($) (h) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) (i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested(1) ($) (j) | |||||||||||||||||||||||||||
Bradley D. Tilden |
| |||||||||||||||||||||||||||||||||||
2/7/11 | 40,800 | — | 15.325 | 2/7/21 | ||||||||||||||||||||||||||||||||
2/14/12 | 23,360 | — | 19.00 | 2/14/22 | ||||||||||||||||||||||||||||||||
2/11/13 | 37,900 | — | 24.40 | 2/11/23 | ||||||||||||||||||||||||||||||||
2/11/14 | 16,350 | 5,450 | (2) | 38.755 | 2/11/24 | |||||||||||||||||||||||||||||||
2/10/15 | 6,800 | 6,800 | (4) | 65.370 | 2/10/25 | 6,000(4) | 441,060 | |||||||||||||||||||||||||||||
2/9/16 | 3,800 | 11,400 | (7) | 65.630 | 2/9/26 | 6,300(7) | 463,113 | 12,700(10) | 933,577 | |||||||||||||||||||||||||||
2/14/17 | — | 16,000 | (8) | 96.30 | 2/14/27 | 7,000(8) | 514,570 | 13,900(10) | 1,021,789 | |||||||||||||||||||||||||||
Benito Minicucci |
| |||||||||||||||||||||||||||||||||||
2/11/13 | 4,986 | — | 24.40 | 2/11/23 | ||||||||||||||||||||||||||||||||
2/11/14 | 3,050 | 3,050 | (2) | 38.755 | 2/11/24 | |||||||||||||||||||||||||||||||
5/12/14 | 1,114 | 1,116 | (3) | 48.945 | 5/12/24 | |||||||||||||||||||||||||||||||
2/10/15 | 5,695 | 5,695 | (4) | 65.370 | 2/10/25 | 4,990(4) | 366,815 | |||||||||||||||||||||||||||||
2/9/16 | 3,000 | 9,000 | (5) | 65.630 | 2/9/26 | 5,000(5) | 367,550 | 10,010(10) | 735,835 | |||||||||||||||||||||||||||
5/12/16 | 260(6) | 19,113 | ||||||||||||||||||||||||||||||||||
2/14/17 | — | 10,130 | (8) | 96.30 | 2/14/27 | 4,400(8) | 323,444 | 8,810(10) | 647,623 | |||||||||||||||||||||||||||
3/7/17 | 1,034(10) | 76,009 | ||||||||||||||||||||||||||||||||||
Brandon S. Pedersen |
| |||||||||||||||||||||||||||||||||||
2/11/14 | 472 | 2,446 | (2) | 38.755 | 2/11/24 | |||||||||||||||||||||||||||||||
5/12/14 | 1,136 | 3,112 | (3) | 48.945 | 5/12/24 | |||||||||||||||||||||||||||||||
2/10/15 | — | 4,215 | (4) | 65.370 | 2/10/25 | 3,690(4) | 271,252 | |||||||||||||||||||||||||||||
2/9/16 | — | 5,483 | (5) | 65.630 | 2/9/26 | 3,050(5) | 224,206 | 6,090(10) | 447,676 | |||||||||||||||||||||||||||
2/14/17 | — | 7,410 | (8) | 96.30 | 2/14/27 | 3,230(8) | 237,437 | 6,450(10) | 474,140 | |||||||||||||||||||||||||||
3/7/17 | 1,294(10) | 95,122 | ||||||||||||||||||||||||||||||||||
Andrew R. Harrison |
| |||||||||||||||||||||||||||||||||||
2/11/14 | — | 840 | (2) | 38.755 | 2/11/24 | |||||||||||||||||||||||||||||||
5/12/14 | 750 | 750 | (3) | 48.945 | 5/12/24 | |||||||||||||||||||||||||||||||
2/10/15 | — | 3,145 | (4) | 65.370 | 2/10/25 | 2,750(4) | 202,153 | |||||||||||||||||||||||||||||
2/9/16 | — | 5,483 | (5) | 65.630 | 2/9/26 | 3,050(5) | 224,206 | 6,090(10) | 447,676 | |||||||||||||||||||||||||||
2/14/17 | — | 7,410 | (8) | 96.30 | 2/14/27 | 3,230(8) | 237,437 | 6,450(10) | 474,140 | |||||||||||||||||||||||||||
3/7/17 | 1,294(10) | 95,122 | ||||||||||||||||||||||||||||||||||
Peter D. Hunt |
| |||||||||||||||||||||||||||||||||||
12/14/16 | 11,288(7) | 829,781 | ||||||||||||||||||||||||||||||||||
12/14/17 | 13,642(9) | 1,002,823 |
(1) | The dollar amounts shown in Column (h) and Column (j) are determined by multiplying the number of shares or units reported in Column (g) and Column (i), respectively, by |
(2) |
|
|
|
|
|
|
|
| The RSUs awarded on 2/10/15 |
| The RSUs awarded on 2/9/16 |
| The RSUs awarded to Mr. Minicucci on 5/12/16 |
| The RSUs awarded to Mr. Hunt on 12/14/16 are scheduled to become fully vested on 6/14/18, subject to Mr. Hunt’s continued employment with the Company. |
(8) | The RSUs awarded on 2/14/17 are scheduled to become fully vested on 2/14/20. The unvested options under the 2/14/17 grant have or are scheduled to become vested as follows: Mr. Tilden – 4,000 on 2/14/18, 4,000 on 2/14/19, 4,000 on 2/14/20 and 4,000 on 2/14/21; Mr. Minicucci – 2,532 on 2/14/18, 2,533 on 2/14/19, 2,532 on 2/14/20 and 2,533 on 2/14/21; Mr. Pedersen – 1,852 on 2/14/18, 1,853 on 2/14/19, 1,852 on 2/14/20 and 1,853 on 2/14/21; and Mr. Harrison – 1,852 on 2/14/18, 1,853 on 2/14/19, 1,852 on 2/14/20 and 1,853 on 2/14/21. |
(9) | The RSUs awarded to Mr. Hunt on 12/14/17 are scheduled to become vested as follows: 6,821 on 6/14/18, and, subject to Mr. Hunt’s continued employment with the Company after 6/14/18, 1,137 on 7/14/18, 1,137 on 8/14/18, 1,137 on 9/14/18, 1,137 on 10/14/18, 1,137 on 11/14/18; and 1,136 on 12/14/18. |
(10) | The performance stock units reported in Column (i) are eligible to vest based on the Company’s performance over a three-year period as described in the Compensation Discussion and Analysis |
20162017 Option Exercises and Stock Vested
The following table presents information regarding the exercise of stock options by the Named Executive Officers during 20162017 and the vesting during 20162017 of other stock awards previously granted to the Named Executive Officers.
|
|
| Option Awards |
| Stock Awards |
| ||||
| Name (a) |
| Number of Shares Acquired on Exercise (#) (b) |
| Value Realized on Exercise(1) ($) (c) |
| Number of Shares Acquired on Vesting (#) (d) |
| Value Realized on Vesting(1) ($) (e) |
|
| Bradley D. Tilden |
| 24,920 |
| 1,832,357 |
| 45,950 |
| 3,039,776 |
|
| Benito Minicucci |
| 17,158 |
| 994,218 |
| 24,150 |
| 1,597,619 |
|
| Brandon S. Pedersen |
| 10,772 |
| 549,308 |
| 47,873 |
| 3,365,627 |
|
| Andrew R. Harrison |
| 6,406 |
| 271,746 |
| 33,508 |
| 2,384,766 |
|
| David L. Campbell |
| — |
| — |
| — |
| — |
|
Option Awards | Stock Awards | |||||||||||||||
Name (a) | Number of Shares Acquired on Exercise (#) (b) | Value Realized on Exercise(1) ($) (c) | Number of Shares Acquired on Vesting (#) (d) | Value Realized on Vesting(1) ($) (e) | ||||||||||||
Bradley D. Tilden | 25,600 | 2,107,997 | 48,300 | 4,138,502 | ||||||||||||
Benito Minicucci | — | — | 35,347 | 2,909,047 | ||||||||||||
Brandon S. Pedersen | 11,360 | 578,286 | 27,414 | 2,263,097 | ||||||||||||
Andrew R. Harrison | 5,816 | 273,798 | 15,869 | 1,228,138 | ||||||||||||
Peter D. Hunt | — | — | — | — |
(1) | The amounts shown in Column (c) above for option awards are determined by multiplying the number of shares by the difference between theper-share closing price of the Company’s common stock on the date of exercise and the exercise price of the options. The amounts shown in Column (e) above for stock awards are determined by multiplying the number of vested units by theper-share closing price of the Company’s common stock on the vesting date. |
Pension and Other Retirement Plans
The Company maintains two primary defined-benefit pension plans covering Mr. Tilden, Mr. Minicucci, Mr. Pedersen, Mr. Harrison and Mr. Campbell participate in the defined-contribution plans only (as described below).Tilden. The Alaska Air Group, Inc. Retirement Plan for Salaried Employees (the Salaried Retirement Plan) is thea qualified defined-benefit employee retirement plan, and Mr. Tilden participates in this plan on the same general terms as other eligible employees. The Alaska Air Group, Inc. 1995 Elected Officers Supplementary Retirement
Plan (the Supplementary Retirement Plan) is a nonqualified defined benefit plan, in which Mr. Tilden also participates. Mr. Minicucci, Mr. Pedersen, Mr. Harrison and Mr. Hunt participate in the defined-contribution plans (as described below) in lieu of these defined-benefit pension plans.
The following table presents information regarding the present value of accumulated benefits that may become payable to the Named Executive Officers under the qualified and nonqualified defined-benefit pension plans.
| Name (a) |
| Plan Name (b) |
| Number of Years Credited Service(1) (#) (c) |
| Present Value of Accumulated Benefit(1) ($) (d) |
| Payments During Last Fiscal Year ($) (e) |
|
| Bradley D. Tilden |
| Salaried Retirement Plan |
| 22.844 |
| 1,289,389 |
| N/A |
|
|
|
| Supplementary Retirement Plan |
| 14.919 |
| 2,397,787 |
| N/A |
|
| Benito Minicucci(2) |
| Salaried Retirement Plan |
| N/A |
| N/A |
| N/A |
|
|
|
| Supplementary Retirement Plan |
| N/A |
| N/A |
| N/A |
|
| Brandon S. Pedersen(2) |
| Salaried Retirement Plan |
| N/A |
| N/A |
| N/A |
|
|
|
| Supplementary Retirement Plan |
| N/A |
| N/A |
| N/A |
|
| Andrew R. Harrison(2) |
| Salaried Retirement Plan |
| N/A |
| N/A |
| N/A |
|
|
|
| Supplementary Retirement Plan |
| N/A |
| N/A |
| N/A |
|
| David L. Campbell(2) |
| Salaried Retirement Plan |
| N/A |
| N/A |
| N/A |
|
|
|
| Supplementary Retirement Plan |
| N/A |
| N/A |
| N/A |
|
Name (a) | Plan Name (b) | Number of Years Credited Service(1) (#) (c) | Present Value of Accumulated Benefit(1) ($) (d) | Payments During Last Fiscal Year ($) (e) | ||||
Bradley D. Tilden | Salaried Retirement Plan | 22.844 | 1,497,748 | N/A | ||||
Supplementary Retirement Plan | 14.919 | 2,669,630 | N/A | |||||
Benito Minicucci(2) | Salaried Retirement Plan | N/A | N/A | N/A | ||||
Supplementary Retirement Plan | N/A | N/A | N/A | |||||
Brandon S. Pedersen(2) | Salaried Retirement Plan | N/A | N/A | N/A | ||||
Supplementary Retirement Plan | N/A | N/A | N/A | |||||
Andrew R. Harrison(2) | Salaried Retirement Plan | N/A | N/A | N/A | ||||
Supplementary Retirement Plan | N/A | N/A | N/A | |||||
Peter D. Hunt(2) | Salaried Retirement Plan | N/A | N/A | N/A | ||||
Supplementary Retirement Plan | N/A | N/A | N/A |
(1) | The years of credited service through December 31, 2013, when the Plan was frozen, and the present value of accumulated benefits as of December 31, 2016 assume that each Named Executive Officer retires at normal retirement age and that benefits are paid out in accordance with the terms of each plan described below. For a description of the material assumptions used to calculate the present value of accumulated benefits shown above, please see Note |
(2) | In lieu of participation in the defined-benefit plans, Mr. Minicucci, Mr. Pedersen, |
Salaried Retirement Plan
The Salaried Retirement Plan is atax-qualified, defined-benefit retirement plan for certain salaried Alaska Airlines employees hired prior to April 1, 2003. Mr. Tilden is fully vested in his accrued benefits under the Salaried Retirement Plan. Benefits payable under the Salaried Retirement Plan are generally based on years of credited service with the Company and its affiliates and final average base salary for the five highest complete and consecutive calendar years of an employee’s last ten complete calendar years of service. The annual retirement benefit at age 62 (normal retirement age under the Salaried Retirement Plan) is equal to 2% of the employee’s final average base salary times years of credited service (limited to 40 years). Annual benefits are computed on a straight-life annuity basis beginning at normal retirement age. Benefits under the Salaried Retirement Plan are not subject to offset for Social Security benefits.
On June 20, 2011, the Board amended the Salaried Retirement Plan to provide that effective January 1, 2014, the plan would be frozen so that participants in the plans would not accrue any benefits with respect to services performed or compensation earned on or after that date.
The tax law limits the annual benefits that may be paid from atax-qualified retirement plan. For 2016,2017, this limit on annual benefits was $210,000.$215,000.
Supplementary Retirement Plans
In addition to the benefits described above, Mr. Tilden is eligible to receive retirement benefits under the Supplementary Retirement Plan. This plan is anon-qualified, unfunded, defined-benefit plan. Normal retirement benefits are payable once the officer reaches age 60. Benefits are calculated as a monthly amount on a straight-life annuity basis. In general, the monthly benefit is determined as a percentage (50% to 75% of a participant’s final average monthly base salary) based on the officer’s length of service with the Company and length of service as an elected officer.
This benefit amount is subject to offset by the amount of the officer’s Social Security benefits and the amount of benefits paid under the Salaried Retirement Plan to the extent such benefits were accrued after the officer became a participant in the Supplementary Retirement Plan. (There is no offset for any Salaried Retirement Plan benefits accrued for service before the officer became a participant in the Supplementary Retirement Plan.)
Participants in the Supplementary Retirement Plan become fully vested in their benefits under the plan upon attaining age 50 and completing 10 years of service as an elected officer. Plan benefits will also become fully vested upon a change in control of the Company or upon termination of the participant’s employment due to death or disability.
In lieu of the Supplementary Retirement Plan, the other Named Executive Officers (except Mr. Minicucci, Mr. Pedersen, Mr. Harrison and Mr. CampbellHunt) participate in the Company’s Nonqualified Deferred CompensationDC Supplementary Retirement Plan. This plan is a defined-contribution plan. Under this plan, the Company contributes 10% of the officer’s eligible wages (or 6% of Mr. Campbell’s eligible wages),Minicucci, Mr. Pedersen and Mr. Harrison, as defined in plan documents, minus the maximum legal Company contribution that the Company made, or could have made, under the Company’s qualified defined-contribution plan (the 401(k) plan).
On June 20, 2011, the Board of Directors amended the Salaried Retirement Plan and the Supplementary Retirement Plan to provide that, effective January 1, 2014, both plansthe plan would be frozen so that participants in the plansplan would not accrue any benefits with respect to services performed or compensation earned on or after that date. The Board also amended the Nonqualified Deferred CompensationSupplementary Retirement Plan so that, effective January 1, 2014, officers who previously participated in the Supplementary Retirement Plan, including Mr. Tilden, and are then employed by the Company, will be eligible to participate in the DC Supplementary Retirement Plan. Under this plan, the Company contributes up to 12% of Mr. Tilden’s eligible wages.
2017 Nonqualified Deferred Compensation Plan.
2016 Nonqualified Deferred Compensation
Under the Nonqualified Deferred Compensation Plan, the Named Executive Officers and other key employees may elect to receive a portion of some or all of their Performance-Based Pay awards on a deferred basis. Participants under the plan have the opportunity to elect among several investment funds, which mirror the funds offered under the Company’s 401(k) plan, for purposes of determining the return of their plan assets. In addition, the plan also offers an interest-bearing option with a rate equal to the yield on a Moody’s index ofBa2-rated industrial bonds as of November of the preceding year, rounded to the nearestone-quarter of one percent, for certain prior deferred amounts. Subject to applicable tax laws, amounts deferred under the plan are generally distributed on termination of the participant’s employment, although participants may elect an earlier distribution date and may elect payment in a lump sum or installments.
The following table presents information regarding the contributions to and earnings on the Named Executive Officers’ balances under the Company’s nonqualified deferred compensation plans during 2016,2017, and also shows the total deferred amounts for the Named Executive Officers as of December 31, 2016.2017.
| Name (a) |
| Executive Contributions in Last FY ($) (b) |
| Registrant Contributions in Last FY ($) (c) |
| Aggregate Earnings in Last FY(1) ($) (d) |
| Aggregate Withdrawals/ Distributions ($) (e) |
| Aggregate Balance at Last FYE(1) ($) (f) |
|
| Bradley D. Tilden |
| 135,045 |
| — |
| 19,919 |
| — |
| 318,652 |
|
| Benito Minicucci |
| 77,062 |
| — |
| 10,251 |
| — |
| 408,678 |
|
| Brandon S. Pedersen |
| 69,331 |
| — |
| 9,076 |
| — |
| 376,015 |
|
| Andrew R. Harrison |
| 56,479 |
| — |
| 6,457 |
| — |
| 277,424 |
|
| David L. Campbell |
| 9,336 |
| — |
| 390 |
| — |
| 14,966 |
|
Name (a) | Executive Contributions in Last FY ($) (b) | Registrant Contributions in Last FY ($) (c) | Aggregate Earnings in Last FY(1) ($) (d) | Aggregate Withdrawals/ Distributions ($) (e) | Aggregate Balance at Last FYE(1) ($) (f) | |||||||||||||||
Bradley D. Tilden | — | 145,930 | 82,021 | — | 546,604 | |||||||||||||||
Benito Minicucci | — | 81,393 | 23,472 | — | 513,543 | |||||||||||||||
Brandon S. Pedersen | — | 73,585 | 62,053 | — | 511,653 | |||||||||||||||
Andrew R. Harrison | — | 69,219 | 59,622 | — | 406,262 | |||||||||||||||
Peter D. Hunt | — | — | — | — | — |
(1) | Only the portion of earnings on deferred compensation that is considered to be at above-market rates under SEC rules is required to be included as compensation for each Named Executive Officer in Column (h) of the Summary Compensation Table. Because the earnings were at market rates available to other investors, the amounts shown above were not included in the Summary Compensation Table. |
Potential Payments Upon Change in Control and Termination
Messrs. Tilden, Pedersen, Minicucci and Harrison
The Company has entered intochange-in-control agreements with each of the Named Executive Officers.Messrs. Tilden, Pedersen, Minicucci and Harrison. Under these agreements, if a change inof control occurs, a three-year employment periodan “employment period” of three years would go into effect. During the employment period, the executivethese four executives would be entitled to:
receive the highest monthly salary the executive received at any time during the12-month period preceding the change in control;
receive an annual incentive payment equal to the higher of the executive’s target Performance-Based Pay Plan incentive or the average of the executive’s annual incentive payments for the three years preceding the year in which the change in control occurs;
participate in fringe benefit programs that are at least as favorable as those in which the executive was participating prior to the change in control.
If the executive’s employment is terminated by the Company without cause or by the executive for “good reason” during the employment period (or, in certain circumstances, if such a termination occurs prior to and in connection with a change in control), the executive would be entitled to receive alump-sum payment equal to the value of the payments and benefits identified above that the executive would have received had he continued to be employed for the entire employment period. The amount an executive would be entitled to receive would be reduced on apro-rata basis for any time the executive worked during the employment period. (The terms “cause,” “good reason” and “change in control” are each defined in thechange-in-control agreements.)
The In 2012, the Company does not gross up to offset any excise tax that could be triggered.eliminated the conditionalgross-up provision in favor of a modified cap provision for all executives. Under this provision, in the event that change-in-controlchange in control benefits exceed the threshold amount that would trigger an excise tax under Section 280G of the Internal Revenue Code, the executive would receive the larger of the following amounts:
1. | The “safe harbor amount,” which is equal to the level at which excise taxes are triggered |
2. | The full change in control benefits if, after receipt of the full change in control benefits and payment of the excise tax, theafter-tax amount is greater than the safe harbor amount from #1 |
the “safe harbor amount,” which is equal to the level above which excise taxes are triggered; or
the full change-in-control benefits if, after receipt of the full change-in-control benefits and payment of the excise tax, the after-tax amount is greater than the safe harbor amount described above.
In addition, outstanding and unvested stock options, restricted stock units and the target number of performance stock units would become vested under the terms of the Company’sour equity plans. Under the 2008 and 2016 Performance Incentive Plans,Plan, awards will not vest unless a termination of employment without cause or for good reason also occurs or an acquirer does not assume outstanding awards. Finally, the executive’s unvested benefits under the Supplementary Retirement Plan would vest on a change in control whether or not the executive’s employment was terminated. The outstanding equity awards held by the executives as of December 31, 20162017, are described in the Outstandingabove under “Outstanding Equity Awards at Fiscal Year End tableEnd” and each executive’s accrued benefits under the Company’sour retirement plans are described above under Pension“Pension and Other Retirement Plans.”
In the event the executive’s employment terminates by reason of death, disability or retirement, (1)(i) restricted stock units would become vested under the terms of the Company’sour equity plans; (2) (ii)a prorated portion of the performance stock units would vest at the conclusion of the performance period based on actual performance and the portion of the performance period in which the executive was employed; and (3)(iii) stock options would become fully vested upon death or disability and vested to the extent they would have vested in the next three years upon retirement. Stock options would remain exercisable for three years following termination of employment or until their expiration date, whichever comes first.
Mr. Hunt
The Company has not entered into achange-in-control agreement with Mr. Hunt. Should his employment terminate by reason of death, disability or retirement, his benefit is limited to lifetime air travel.
Mr. Hunt does receive certain benefits under a scenario of termination without cause, which are detailed in the tables below.
Calculations
In the tables below, we have estimated the potential cost to the Company of providing the benefits shown to each of the Company’sour Named Executive Officers as if the executive’s employment had terminated due to retirement, death or disability, termination without cause, or due to change in control on December 31, 2016.2017. The value of accelerated vesting shown in the Equity Acceleration“Equity Acceleration” column below assumes theany performance share units pay at target. As described above, except for the equity acceleration value, the amount an executive would be entitled to receive would be reduced on apro-rata basis for any time the executive worked during the employment period.
These calculations are estimates for proxy disclosure purposes only. Actual payments may differ based on factors such as transaction price, timing of employment termination and payments, methodology for valuing stock options, changes in compensation, and other factors.
Retirement
Name | Cash Severance ($) | Enhanced Retirement Benefit ($) | Benefit Continuation ($) | Lifetime Airfare Benefit(1) ($) | Equity Acceleration(2) ($) | Total ($) | ||||||||||||||||||
Bradley D. Tilden | 0 | 0 | 0 | 11,447 | 4,298,828 | 4,310,275 | ||||||||||||||||||
Benito Minicucci | 0 | 0 | 0 | 10,254 | 3,687,289 | 3,697,543 | ||||||||||||||||||
Brandon S. Pedersen | 0 | 0 | 0 | 21,627 | 2,546,282 | 2,567,909 | ||||||||||||||||||
Andrew R. Harrison | 0 | 0 | 0 | 25,397 | 2,199,040 | 2,224,437 | ||||||||||||||||||
Peter D. Hunt | 0 | 0 | 0 | 17,962 | 0 | 17,962 |
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Death or Disability
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Name | Cash Severance ($) | Enhanced Retirement Benefit ($) | Benefit Continuation ($) | Lifetime Airfare Benefit(1) ($) | Equity Acceleration(2) ($) | Total ($) | ||||||||||||||||||
Bradley D. Tilden | 0 | 0 | 0 | 11,447 | 4,298,828 | 4,310,275 | ||||||||||||||||||
Benito Minicucci | 0 | 0 | 0 | 10,254 | 3,687,289 | 3,697,543 | ||||||||||||||||||
Brandon S. Pedersen | 0 | 0 | 0 | 21,627 | 2,546,282 | 2,567,909 | ||||||||||||||||||
Andrew R. Harrison | 0 | 0 | 0 | 25,397 | 2,199,040 | 2,224,437 | ||||||||||||||||||
Peter D. Hunt | 0 | 0 | 0 | 17,962 | 0 | 17,962 |
Termination without Cause
Name | Cash Severance(3) ($) | Enhanced Retirement Benefit(4) ($) | Benefit Contin- uation(5) ($) | Lifetime Airfare Benefit(1) ($) | Equity Acceleration(2) ($) | Total ($) | ||||||||||||||||||
Bradley D. Tilden | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Benito Minicucci | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Brandon S. Pedersen | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Andrew R. Harrison | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Peter D. Hunt | 619,033 | 0 | 24,826 | 17,962 | 1,080,487 | 1,742,308 |
Change in Control
Name | Cash Severance(3) ($) | Enhanced Retirement Benefit(4) ($) | Benefit Contin- uation(5) ($) | Lifetime Airfare Benefit(1) ($) | Equity Acceleration(2) ($) | Excise Tax ($) | Cutback Due to Modified Cap ($) | Total ($) | ||||||||||||||||||||||||
Bradley D. Tilden | 4,415,724 | 534,991 | 48,360 | 11,447 | 7,441,180 | 0 | 0 | 12,451,702 | ||||||||||||||||||||||||
Benito Minicucci | 3,120,987 | 292,778 | 102,027 | 10,254 | 5,936,779 | 0 | 0 | 9,462,825 | ||||||||||||||||||||||||
Brandon S. Pedersen | 2,850,232 | 269,356 | 103,865 | 21,627 | 4,130,580 | 0 | 0 | 7,375,660 | ||||||||||||||||||||||||
Andrew R. Harrison | 2,696,990 | 256,247 | 116,103 | 25,397 | 3,645,044 | 0 | -807,313 | 5,932,468 | ||||||||||||||||||||||||
Peter D. Hunt | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
(1) |
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| All employees who retire with more than ten years of service are entitled to flight benefits on Alaska Airlines |
(2) |
|
$73.51. The value of the extended term of the options is not reflected in the table because we have assumed that the executive’s outstanding stock options would be assumed by the acquiring company pursuant to a change in control. For Mr. Hunt, only under termination without cause, represents full acceleration of his 12/14/2016 RSU grant and 50% acceleration of his 12/14/2017 RSU grant. |
(3) |
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(5) | For Messrs. Tilden, Pedersen, Minicucci and Harrison, under all scenarios except termination without cause, represents the estimated cost of (a) 18 months of premiums under |
Proposal 3: Advisory Vote on FrequencyWe are providing the following information about the relationship of Future Advisory Vote on Named Executive Officer Compensation
As described in Proposal No. 2 above, the Company’s stockholders are being provided the opportunity to cast an advisory vote on themedian annual total compensation of the Company’s named executive officers.employees and the annual total compensation of Mr. Tilden, the Company’s CEO, pursuant to Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of RegulationS-K.
This Proposal No. 3 affords stockholdersFor 2017, the opportunityCompany’s last completed fiscal year:
Based on this information, for 2017 the ratio of the annual total compensation of the CEO to cast an advisory vote on how oftenthe median of the annual total compensation of all employees was 115.5 to 1. The Company believes this ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of RegulationS-K.
To identify the median of the annual total compensation of all company employees, we used the following methodology, assumptions and estimates:
Selection of Determination Date. SEC rules require the Company should include an advisory vote on executive compensation in its proxy materials for future annual stockholder meetings (or special stockholder meeting forto select a date within the last three months of the fiscal year. We selected December 31, 2017 as the date upon which the Company must include executive compensation information in“median employee” would be identified.
Determination of Adjusted Employee Population. We determined that, as of December 31, 2017, the proxy statementemployee population for that meeting). Underpurposes of this Proposal No. 3, stockholders may vote to have the advisory vote on executive compensation held every one year, every two years or every three years.
After carefuldisclosure, after taking into consideration our Boardcertain adjustments permitted by SEC rules (as described below), consisted of Directors believes that advisory votes on executive compensation should be conducted every year so that stockholders may annually express their views on the Company’s executive compensation program. The Compensation Committee, which administers the Company’s executive compensation program, values the opinions expressed by stockholders in these votes and will consider the outcome of these votes when making future compensation decisions for our named executive officers.
22,764 individuals. This proposal on the frequency of future advisory votes on executive compensation is advisory only and will not be binding on the Company or our Board. In voting on this proposal, you will be able to indicate your preference regarding the frequency of future advisory votes on executive compensation by specifying a choice of one year, two years or three years. If you do not have a preference regarding the frequency of future advisory votes on executive compensation, you should abstain from voting on the proposal. Stockholders are not voting to approve or disapprove the Board’s recommendation. Although non-binding, the Board and the Compensation Committee will carefully review the voting results. Notwithstanding the Board’s recommendation and the outcome of the stockholder vote, the Board may in the future decide to conduct advisory votes on executive compensationpopulation includes all employees, whether employed on a morefull-time, part-time, temporary or seasonal basis. However, as permitted under SEC rules, we excludednon-U.S. employees as they make up less frequent basis and may vary practice based on factors such as discussions with stockholders and the adoption of material changes to the Company’s executive compensation program.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO HOLD FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION EVERY ONE YEAR (AS OPPOSED TO EVERY TWO YEARS OR EVERY THREE YEARS).
Proposal 4: Adoption and Approval of Amendment of the Certificate of Incorporation
to Increase Authorized Shares of Common Stock
General
The Company’s current Certificate of Incorporation authorizes the issuance of 200,000,000 sharesthan 5% of the Company’s capital stock,total employee population. As of which 5,000,000 shares are designated as preferred stock and 195,000,000 shares are designated as common stock. On February 14,December 31, 2017, the Company’s Boardsubsidiaries employed 59 employees in Canada, two (2) employees in Costa Rica, and 105 employees in Mexico, as compared to a total global employee population of Directors unanimously adopted22,930 (i.e., 22,764 U.S., 166non-U.S.). The Company did not employ any othernon-U.S. employees as of December 31, 2017.
Identification of Median Employee. To identify the median employee from the Company’s adjusted employee population outlined above, we compared the amount of gross earnings of these employees as reflected in payroll records. We identified the median employee using this compensation measure, which was consistently applied to all employees included in the calculation. We then identified the employee whose wages fell at the midpoint of the distribution.
Calculation of Annual Total Compensation. Once the median employee was identified, all of the elements of such employee’s compensation for 2017 were combined in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K (i.e., the same rules used to determine the CEO’s total compensation for 2017 as reported in the Summary Compensation Table), resulting in annual total compensation of $49,664, including the estimated value of such employee’snon-discriminatory benefits (estimated for the employee and approved an amendmentsuch employee’s eligible dependents at $8,143).
With respect to the Company’s Certificateannual total compensation of Incorporation to increase the number of authorized shares of Company common stock from 200,000,000 to 400,000,000 (the Share Amendment), subject to stockholder approval. The Board has declaredCEO, we used the proposed Share Amendment to be advisable andamount reported in the best interests“Total” column (column (j)) of the Company and its stockholders and has directed that adoption and approval of the Share Amendment be submitted to the Company’s stockholders for their consideration at this Annual Meeting.
The Company’s Board of Directors recommends that stockholders adopt and approve the proposed Share Amendment to the Company’s Certificate of Incorporation. The text of the proposed Share Amendment is attached as Appendix A and incorporated2017 Summary Compensation Table included in this Proxy Statement by reference.
Purpose and Backgroundplus the estimated value of the Proposed Share AmendmentCEO’snon-discriminatory benefits for a total amount of $5,734,862.
The Company believes the methodology, assumptions and estimates described above to be reasonable given the specific employee population. Companies are permitted under SEC rules to exercise significant flexibility and discretion in determining the methodology used to comply with the requirements of this disclosure. As acknowledged by the SEC, this flexibility could reduce the comparability of March 10, 2016, there were approximately [___________] sharesdisclosed pay ratios across companies. Therefore, the pay ratio may not necessarily be representative of Company common stock issued and outstanding. This number does not include approximately [___________] shares of Company common stock that are subjector comparable to outstanding equity awards under our 2016 Performance Incentive Plan and 2008 Performance Incentive Plan and an additional [___________] shares of Company common stock that are reserved for future issuance under our 2016 Performance Incentive Plan and our Employee Stock Purchase Plan as of March 10, 2016. Based upon our issued and reserved shares of common stock, there are approximately [___________] million shares of common stock available for issuancepay ratios disclosed by other companies in the future for other corporate purposes.airline industry or otherwise.
The purpose of the proposed Share Amendment is to allow the Company to have a sufficient number of shares of authorized and unissued common stock for issuance in connection with such corporate purposes as may, from time to time, be considered advisable by the Company’s Board of Directors. Having such shares available for issuance in the future will give the Company greater flexibility and will allow the shares to be issued from time to time as determined by the Company’s Board and, unless otherwise required by NYSE listing rules or other applicable rules and regulations, without the expense and delay of a special stockholders' meeting to approve the additional authorized capital stock. The corporate purposes for which the Company may issue common stock could include, without limitation, issuances in connection with stock splits or stock dividends, issuances in connection with future acquisitions, issuances pursuant to equity awards granted under current or future equity compensation plans and issuances in connection with equity financings. There are currently no commitments or understandings with respect to the issuance of any of the additional shares of Company common stock that would be authorized by the proposed Share Amendment.
Rights of Additional Authorized Shares
Any authorized shares of Company common stock, if and when issued, would be part of our existing class of common stock and would have the same rights and privileges as the shares of common stock currently outstanding. The holders of Company common stock have no preemptive rights to subscribe for or purchase any additional shares of Company common stock that may be issued in the future.
Effect of Proposed Share Amendment
The increase in the Company’s authorized common stock will not have any immediate effect on the rights of existing stockholders. However, the Company’s Board of Directors will have the authority to issue common stock without requiring future stockholder approval of such issuances, except as may be required by the Company’s Certificate of Incorporation, NYSE listing rules or other applicable rules and regulations. To the extent that the additional authorized shares are issued in the future, they could decrease the Company’s existing stockholders' percentage equity ownership and, depending upon the price at which they are issued as compared to the price paid by existing stockholders for their shares, could be dilutive to the Company’s existing stockholders.
The increase in the authorized number of shares of Company common stock and the subsequent issuance of such shares could have the effect of delaying or preventing a change in control of the Company without further action by the stockholders. Shares of authorized and unissued common stock could (within the limits imposed by applicable law) be issued in one or more transactions that would make a change in control of the Company more difficult, and therefore less likely. Any such issuance of additional stock could have the effect of diluting the earnings per share and book value per share of the Company’s outstanding shares of common stock, and such additional shares could be used to dilute the stock ownership or voting rights of a person seeking to obtain control of the Company. The Company’s Board of Directors is not aware of any attempt to take control of the Company and has not presented this proposal with the intention that the increase in our authorized shares of common stock be used as a type of anti-takeover device.
Implementing the Proposed Share Amendment
If approved by the Company’s stockholders at the Annual Meeting, the proposed Share Amendment to the Company’s Certificate of Incorporation will become effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware. Although the Company’s Board of Directors intends to file the Certificate of Amendment as soon as practicable after the Annual Meeting, if, in the judgment of the Company’s Board of Directors, any circumstances exist that would make consummation of the proposed Share Amendment inadvisable, then, in accordance with Delaware law and notwithstanding approval of the proposed Share Amendment to the Certificate of Incorporation by the Company’s stockholders, the Company’s Board of Directors may abandon the proposed Share Amendment, either before or after approval and authorization by the Company’s stockholders, at any time prior to the effectiveness of the filing of the Certificate of Amendment.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of the holders of at least a majority of the outstanding shares of common stock, whether or not present or represented by proxy at the Annual Meeting, is required to approve the Share Amendment to the Company’s Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
ADOPTION AND APPROVAL OF THE SHARE AMENDMENT TO THE
CERTIFICATE OF INCORPORATION.AUDIT COMMITTEE MATTERS
Proposal 5:3: Ratification of the Appointment of the Company’s Independent Accountants
The Audit Committee has selected KPMG LLP (KPMG) as the Company’s independent accountants for fiscal year 2017,2018, and the Board is asking stockholders to ratify that selection. Although current law, rules, and regulations, as well as the charter of the Audit Committee, require the Audit Committee to engage, retain, and supervise the independent accountants, the Board considers the selection of the independent accountants to be an important matter of stockholder concern and is submitting the selection of KPMG for ratification by stockholders as a matter of good corporate practice.
The affirmative vote of holders of a majority of the shares of common stock represented at the meeting and entitled to vote on the proposal is required to ratify the selection of KPMG as the Company’s independent accountant for the current fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTEFOR THE RATIFICATION OF THE COMPANY’S INDEPENDENT ACCOUNTANTS.
Independent Registered Public Accountants
Selection of Independent Accountants for the Current Fiscal Year
The Audit Committee of the Board of Directors has selected, and is recommending that stockholders ratify, KPMG LLP (KPMG) as the Company’s independent accountants for the 20172018 fiscal year. KPMG also served as the Company’s independent accountants for fiscal year 2016.2017. Representatives of KPMG are expected to attend the meeting to respond to questions from stockholders and will have the opportunity to make a statement, if they wish to do so.
Fees Paid to Independent Accountants
During fiscal years 2017, 2016 2015 and 2014,2015, the Company retained KPMG as its principal independent accountants. Below are the fees paid for the services described during each of the three years:
| |||||
2017 | |||||
Audit Fees for the Company’s Annual Financial Statements and Quarterly Reviews(1) |
| 2,681,166 | |||
| Audit-Related Fees(2) |
| 34,100 | ||
| Tax Fees(3) |
| — | ||
| All Other Fees(4) |
| 5,387 | ||
|
| ||||
|
|
| |||
Total Fees for 2017 | 2,720,653 | ||||
| |||||
2016 | |||||
Audit Fees for the Company’s Annual Financial Statements and Quarterly Reviews(1) |
| 2,344,998 | |||
| Audit-Related Fees(2) |
| 230,680 | ||
| Tax Fees(3) |
| — | ||
| All Other Fees(4) |
| 5,681 | ||
|
| ||||
|
|
| |||
Total Fees for 2016 | 2,581,359 | ||||
| |||||
2015 | |||||
Audit Fees for the Company’s Annual Financial Statements and Quarterly Reviews(1) |
| 1,271,460 | |||
| Audit-Related Fees(2) |
| 136,750 | ||
| Tax Fees(3) |
| 123,000 | ||
| All Other Fees(4) | 26,000 | |||
|
| ||||
Total Fees for | 1,557,210 | ||||
|
|
(1) | Audit fees represent the arranged fees for the years presented, including the annual audit of internal controls as mandated under Sarbanes-Oxley Section 404. |
|
(2) | Includes fees and expenses paid in connection with the audit of Alaska Air Group’s employee benefit plans in all years and accounting consultations regarding the Virgin America Inc. acquisition in 2016. Also consists of fees paid for professional services in connection with (i) the audit of passenger facility charges and examination of related controls and (ii) agreed-upon procedures for the U.S. Citizenship and Immigration Services in all years. |
(3) | Consists of fees paid for professional services in connection with general and international tax consulting. These services werepre-approved by the Audit Committee. |
(4) | Consists of agreed-upon procedures for Mexico payroll tax compliance requirements. |
The Audit Committee has considered whether the provision of thenon-audit services referenced above is compatible with maintaining the independence of the Company’s independent accountants, and has determined that it does not impact the independence of the accountants.
Independent Accountant Engagement Policy
The Audit Committee has established and annually reviews an Independent Accountant Engagement Policy designed to ensure that the Company’s independent accountant performs its services independently and with the highest integrity and professionalism. In addition to certain specific prohibited services, the Audit Committee considers whether any service provided by the independent accountants may impair the firm’s independence in fact or appearance.
The policy provides that any engagement of the Company’s outside accountant must be consistent with principles determined by the SEC, namely, whether the independent accountant is capable of exercising impartial judgment on all issues encompassed within the accountant’s engagement.
Permitted services under the policy include audit services, audit-related services, certain tax services and certain other services not prohibited by SEC rules or other federal regulations. Before retaining its independent accountant fornon-audit services, the Audit Committee will consider factors such as whether the services might compromise the accountant’s independence, whether the accountant is the best provider for the services, and whether the proportion of audit tonon-audit services is appropriate.
All services must bepre-approved by the Audit Committee except for certain services other than audit, review, or attest services that meet the “de minimis exception” under 17 CFRSection 210.2-01, namely:
the aggregate amount of fees paid for all such services is not more than 5% of the total fees paid by the Company to its accountant during the fiscal year in which the services are provided;
such services were not recognized by the Company at the time of the engagement to benon-audit services; and
such services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit.
During fiscal years 2017, 2016 2015 and 2014,2015, there were no such services that were performed pursuant to the “de minimis exception.”
Audit CommitteeCommittee Report
The following report of the Audit Committee shall not be deemed to be soliciting material or to be filed with the SEC under the Exchange Act, as amended, or incorporated by reference in any document so filed.
Review of the Company’s Audited Financial Statements
The Audit Committee has reviewed and discussed with management and KPMG, the Company’s independent accountants, the Company’s audited financial statements included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2016.2017. The Committee believes that management maintains an effective system of internal controls that results in fairly presented financial statements.
The Audit Committee has discussed with KPMG the matters required to be discussed by Public Company Accounting Oversight Board (PCAOB) Auditing Standards No. 16 (Communications with Audit Committees), as amended, as adopted by the PCAOB.
The Committee has also received and reviewed the written disclosures and the KPMG letter required by PCAOB Rule 3526, Communicating with Audit Committees Concerning Independence, and has discussed with KPMG their independence.
Based on the review and discussions described above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Alaska Air Group’s Annual Report on Form10-K for the fiscal year ended December 31, 2016.2017.
Audit Committee Charter
The Audit Committee has adopted a written charter, which is posted on the Company’s website atwww.alaskaair.com. It describes the roles of the Audit Committee and the independent accountants (for which the Audit Committee approves the appointment and compensation and whom the Committee oversees). In addition, it describes the Audit Committee’s relationship to internal audit and the Committee’s responsibilities with regard to assessing the Company’s internal controls and enterprise risk.
Audit Committee Independence and Financial Expertise
All members of the Audit Committee meet the independence, financial literacy and experience requirements of the NYSE and of the SEC. The SEC requires that at least one member qualify as a “financial expert” as defined pursuant to the Sarbanes-Oxley Act.
Mr. Yeaman’s prior experience as a chief financial officer of a public company and Ms. Bedient’s prior experience as a public company chief financial officer and former partner of a global accounting firm and Mr. Yeaman’s experience as a chief financial officer of a public company qualify each of them as a financial expert.
Audit Committee of the Board of Directors
Eric K. Yeaman, Chair
Patricia M. Bedient, Member
Dhiren R. Fonseca, Member
Dennis F. Madsen, Member
Proposal 6:4: Shareholder Proposal - Shareholder Proxy Access Reform
Mr. John Chevedden has given notice of his intention to present a proposal at the 20172018 Annual Meeting. Mr. Chevedden'sChevedden’s address is 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, and Mr. Chevedden represents that he has continuously owned no less than 100 shares of the Company'sCompany’s common stock since JulyOctober 1, 2013.2016. Mr. Chevedden'sChevedden’s proposal and supporting statement, as submitted to the Company, appear below.
The Board of Directors opposes adoption of Mr. Chevedden'sChevedden’s proposal and asks stockholders to review the Board'sBoard’s response, which follows Mr. Chevedden'sChevedden’s proposal and supporting statement below.
The affirmative vote of the holders of a majority of the shares of common stock present, in person or represented by proxy at the meeting and entitled to vote is required to approve this proposal.
Proposal [4] – Assured Shareholder Proxy Access
Shareholders request that ourRESOLVED: Stockholders ask the board of directors taketo amend its proxy access bylaw provisions and any associated documents, to include the steps necessaryfollowing changes for the purpose of decreasing the average amount of Company common stock the average member of a nominating group would be required to enable at least 50 shareholdershold for3-years to satisfy the aggregate ownership requirements to form a nominating group and to increase the possible number of proxy access director candidates:
No limitation shall be placed on the number of stockholders that can aggregate their shares to equalachieve the 3% of common stock required to nominate directors under our stock owned continuously for 3-yearsCompany’s proxy access provisions.
The number of shareholder-nominated candidates eligible to appear in orderproxy materials will not be less than 2 when our board has less than 12 members. The number of shareholder-nominated candidates eligible to make use of shareholderappear in proxy access.
materials will not be less than 3 when our board has more than 12 members.
Even if the 20 largest public pension funds were able to aggregate their shares, they would not meet the current 3% criteria for a continuous3-years at most companies examined byaccording to the Council of Institutional Investors. Additionally many ofThis proposal addresses the situation that our company now has with proxy access potentially for only the largest investorsshareholders who are the least unlikely shareholders to make use of major companies are routinely passive investors who would be unlikelyit.
It is especially important to be part of theimprove a shareholder right, such as proxy access, shareholder aggregation process.
Under this proposal it is unlikely that the number of shareholders who participate in the aggregation process would reach an unwieldy number due to the rigorous rules our management adopted for a shareholder to qualify as one of the aggregation participants. Plus it is easymake up for our management taking away an important shareholder right – the right to screen aggregating shareholders because management simply needs to find one item lacking from a list of typical proxy access requirements.
This proposal has added importance to our company because we doanin-person annual meeting. We did not even have an independent Chairmanopportunity to vote on giving up this right.
For decades shareholders of U.S. companies had aonce-a-year opportunity to ask a $6 million CEO and directors questions in person. Now our directors can casually flip their phones to mute during the annual shareholder meeting.
Our management is now free to run a make-believe meeting with Investor Relations devising softball questions in advance while tossing out serious shareholder questions. Then our $6 million CEO can simply read the scripted IR answers to a microphone – no opportunity for live audience feedback. There is no auditor present to see if IR is trashing incoming shareholder questions.
The lack of anin-person annual meeting means that a board meeting can be scheduled months after the virtual meeting – by which time any serious issues raised by shareholders under these adverse conditions will be long forgotten by the directors. Plus a virtual meeting guarantees that there will be no media coverage for the benefit of shareholders.
A virtual meeting is a complacency plan for our directors and top management. Top management has no incentive to avoid making mistakes for 365 days of the Board. Ouryear out of concern that there will be anin-person accounting at the annual meeting. Shareholders can vote against the $6 million paycheck of a CEO Bradley Tilden reportswho refuses to our Chairman, Bradley Tilden. This was the same arrangement that Wells Fargo had until it dumped John Stumpf after millions of lucrative fake accounts were opened for Wells Fargo customers under his watch.
Plus our Lead Director, Phyllis Campbell has 14-years long tenure on our Board which can make her thinkanswer shareholder questionsin-person and acts like an insider. And Ms. Campbell does not bringin-person contact with shareholders is a fresh perspective from any recent directorship at another large company.
nuisance.
Please vote to enhanceimprove proxy access to help make up for top management stripping away an important shareholder value:right:
Assured Shareholder Proxy Access Reform – Proposal 6[4]
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTEAGAINST PROPOSAL 64 FOR THE FOLLOWING REASONS:
In December 2015, the Board of Directors adopted a bylaw amendment granting proxy access to shareholdersstockholders who meet certain stock holding and other eligibility requirements. The Company’s proxy access bylaw permits a stockholder, or a group of up to 20 stockholders, owning at least 3% of our outstanding shares of common stock continuously for at least three years, to nominate and include in our annual meeting proxy materials the greater of two director candidates or 20% of the total number of current director seats. The adoption of such a provisionproxy access right is considered good corporate governance, by many investors. As an increasing numberand the terms of companies adoptedthe Company’s proxy access provisions during 2015 and 2016, certain standards emerged. The Company’s bylaw provisions mirror the current prevalent practice, including permitting up to 20 shareholders to aggregate their holdings in order to reach the share ownership threshold.right reflect prevailing market practice.
Aggregation Limit. The Company’s existing proxy access bylaw does not prevent shareholders with more limitedprovides all stockholders, regardless of the size of their holdings, thea meaningful and fair opportunity to nominate director candidates for inclusion in the Company’s proxy materials when combined with other shareholders (not exceeding 20 in total) to satisfy the ownership requirements.materials. We believe ana20-stockholder aggregation limit of 20 provides abundant opportunities for the Company’s shareholders to combine with other shareholders to satisfy the ownership requirement, provided that they also satisfy the required holding period requirement, which would be determined at that time by proof of ownership from the specific aggregating shareholders. More than 50%is particularly appropriate in light of the Company’s shares are held by the top 25 shareholders, andconcentration of significant holdings of our common stock: as of December 16, 2016, each of these shareholders owned between 0.72% and 15.45%September 30, 2017, over 63% of our outstanding common stock. The concentrationstock was held by 64 stockholders who, for at least three years, individually held the minimum average number of significant holdings among these shareholders means that any shareholder seekingshares to formparticipate in a group to make aconsisting of 20 stockholders. Under the Company’s proxy access nomination, regardless of the size of its holdings, could achievebylaw any stockholder may combine with up to 19 other stockholders (provided they have all held their shares for at least three years) to meet the 3% minimum requiredholding requirement. Thus, the existing proxy access bylaw provides numerous opportunities for any stockholder to combine with as few as one like-minded stockholder to satisfy the bylaw’s ownership in any number of ways, by combining with one or a small number of the 25 largest shareholders, or by combining their shares with other shareholders with any amount of holdings who also meet the eligibility requirements. If the aggregation and ownership requirements for proxy access cannot be satisfied, other avenues are still available to a shareholderstockholder seeking change to the Company’s boardBoard of directors,Directors, including recommending director candidates for nomination by our boardBoard of directorsDirectors as described in the Director Nomination Policy section of this proxy statement and nominating director candidates for election to the boardBoard of directorsDirectors in accordance with the requirements of the Company’s advance notice bylaw.
Through June 2016,The20-stockholder aggregation limit included in the Company’s proxy access bylaw reflects prevailing governance practices in the marketplace. As of January 5, 2018, the vast majority (93%) of the 313 S&P 500 companies that have implemented proxy access have adopted an aggregation limit of 20 shareholders has been adopted by the vast majority (88%) of companies that have implemented proxy access.stockholders. In fact, many of the Company’s long-term shareholdersstockholders have adopted a 20 shareholderstockholder aggregation limit as a standard for their own governance practices.
Increasing The Council of Institutional Investors now also recognizes a20-stockholder aggregation limit as the numbermarket standard in its publication of shareholders that are able to aggregate shares to meet the holding requirements of the Company’s proxy access bylawbest practices.
The Company believes that the changes advocated by the proponent would increase the administrative burden on the Company to ensure the eligibility and procedural requirements have been satisfied by each shareholderstockholder in the aggregate pool. This presents a drain onburden would unduly strain Company resources of time and money,without any corresponding benefits, which the Company believes would be detrimental to stockholder value.
In connection with our 2017 annual meeting, the proponent submitted, and we included in our proxy materials for the meeting, a similar proposal, which requested that we amend our proxy access bylaw to increase the aggregation limit to 50 stockholders. That proposal received only 23.3% approval, signaling that stockholders believed that the current20-stockholder aggregation limit provides a fair and reasonable opportunity for all stockholders regardless of the amount of their holdings, while minimizing undue administrative burden, complexity, and expense.
Number of Director Nominees. Under the Company’s current proxy access bylaw, eligible stockholders may nominate two director candidates in all cases, even when the size of the Board falls below ten directors, and may nominate up to three director candidates if the size of the Board increases to 15 directors. At this annual meeting, the Board has nominated 11 directors to serve on the Board. The Board does not presently have plans to increase the size of the Board to the more than 12 directors that would permit for a minimum of three proxy access nominees under the proponent’s proposal, nor has the Company had 12 or more directors serving on the Board at any time during the past ten years. Notwithstanding this, we also believe the Company’s current proxy access bylaw, which requires a minimum of 15 directors before increasing the number of permitted nominees under the proxy access bylaw, is notreasonable to maintain proportionality and reflect alignment with the interests of stockholders as a whole.
The proposal also addresses other matters unrelated to the subject of the proposal, such as the Company’s virtual shareholder meeting format. The Board’s position on virtual shareholder meetings is addressed in the best interestCorporate Governance section of the shareholders.this Proxy Statement.
For the reasons stated above, and because the Board believes the current shareholderstockholder aggregation limit and number of permitted nominees set forth in the proxy access provisions contained incontinues to reflect prevailing market terms, the Company’s Bylaws achieves the purpose of the proponent’s proposal, the Board of Directors unanimously recommends a vote againstAGAINST the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTEAGAINST THE PROPOSAL 4 WITH RESPECT TO ASSURED SHAREHOLDER PROXY ACCESS REFORM.ACCESS.
Securities Ownership of Certain Beneficial Owners and Management
This table shows how much Alaska Air Group common stock is owned as of [March 10, 2017],March 9, 2018, by each director and nominee, each of the Company’s Named Executive Officers, and all Company directors and executive officers as a group. Except as otherwise indicated and subject to applicable community property laws, the persons named in the table below have sole voting and investment power with respect to all shares of common stock beneficially owned.
Securities Ownership of Management
| Name |
| Number of Shares of Common Stock Owned(1) |
| Options Exercisable within 60 Days |
| Total Shares Beneficially Owned(2) |
| Percent of Outstanding Shares(3) |
|
| Patricia M. Bedient |
| 39,350 |
| — |
| 39,350 |
| * |
|
| Marion C. Blakey |
| 12,218 |
| — |
| 12,218 |
| * |
|
| Phyllis J. Campbell |
| 39,918 |
| — |
| 39,918 |
| * |
|
| Dhiren R. Fonseca |
| 2,526 |
| — |
| 2,526 |
| * |
|
| Jessie J. Knight, Jr. |
| 27,329 |
| — |
| 27,329 |
| * |
|
| Dennis F. Madsen |
| 22,914 |
| — |
| 22,914 |
| * |
|
| Helvi K. Sandvik |
| 4,716 |
| — |
| 4,716 |
| * |
|
| Katherine J. Savitt |
| 1,372 |
| — |
| 1,372 |
| * |
|
| J. Kenneth Thompson |
| 34,450 |
| — |
| 34,450 |
| * |
|
| Bradley D. Tilden (4) |
| 171,524 |
| 147,410 |
| 318,934 |
| * |
|
| Eric K. Yeaman |
| 6,786 |
| — |
| 6,786 |
| * |
|
| Benito Minicucci |
| 68,522 |
| 17,845 |
| 86,367 |
| * |
|
| Brandon S. Pedersen |
| 16,132 |
| 1,136 |
| 17,268 |
| * |
|
| Andrew R. Harrison |
| 16,926 |
| 68 |
| 16,994 |
| * |
|
| David L. Campbell |
| 4,940 |
| 4,007 |
| 8,947 |
| * |
|
| All Company directors and executive officers as a group (21 persons) |
| 382,300 |
| 187,426 |
| 701,128 |
| * |
|
Name | Number of Shares of Common Stock Owned(1) | Options Exercisable within 60 Days | Total Shares Beneficially Owned(2) | Percent of Outstanding Shares(3) | ||||||||||||
Patricia M. Bedient | 40,364 | 40,364 | * | |||||||||||||
James A. Beer | 794 | 794 | * | |||||||||||||
Marion C. Blakey | 13,232 | 13,232 | * | |||||||||||||
Phyllis J. Campbell | 40,932 | 40,932 | * | |||||||||||||
Raymond L. Conner | 422 | 422 | * | |||||||||||||
Dhiren R. Fonseca | 3,540 | 3,540 | * | |||||||||||||
Dennis F. Madsen | 23,928 | 23,928 | * | |||||||||||||
Helvi K. Sandvik | 5,730 | 5,730 | * | |||||||||||||
J. Kenneth Thompson | 35,464 | 35,464 | * | |||||||||||||
Eric K. Yeaman | 7,800 | 7,800 | * | |||||||||||||
Bradley D. Tilden(4) | 174,130 | 145,660 | 319,790 | * | ||||||||||||
Benito Minicucci | 84,531 | 22,590 | 107,121 | * | ||||||||||||
Brandon S. Pedersen | 22,500 | 9,369 | 31,869 | * | ||||||||||||
Andrew R. Harrison | 21,042 | 6,842 | 27,884 | * | ||||||||||||
Peter D. Hunt | — | — | — | * | ||||||||||||
All Company directors and executive officers as a group (21 persons) | 496,957 | 197,350 | 694,307 | * |
*Less than 1%
(1) | Consists of the aggregate total of shares of common stock held by the reporting person either directly or indirectly, including 401(k) Plan holdings. |
(2) | Total beneficial ownership is determined in accordance with the rules of the SEC and represents the sum of the Number of Shares of Common Stock Owned and Options Exercisable within 60 Days columns. Beneficial ownership does not include shares of common stock payable upon the vesting of restricted stock units, none of which will vest within 60 days of the record date, as follows: Mr. Tilden, |
Total shares beneficially owned reported for non-employee directors also include underlying common shares to be issued upon the director’s resignation from the Board in connection with deferred stock units granted as part of their annual compensation. The aggregate number of deferred stock units granted to date: Ms. Bedient, 22,914; Ms. Blakey, 10,846; Ms. Campbell, 21,344; Mr. Knight, 23,870; Mr. Madsen, 22,914; Ms. Sandvik, 4,108; Ms. Savitt, 1,372; Mr. Thompson, 21,344; and Mr. Yeaman, 2,690.
| Total shares beneficially owned reported fornon-employee directors also include underlying common shares to be issued upon the director’s resignation from the Board in connection with deferred stock units granted as part of their annual compensation. The aggregate number of deferred stock units granted to date: Ms. Bedient, 22,914; Ms. Blakey, 10,846; Ms. Campbell, 21,344; Mr. Madsen, 22,914; Ms. Sandvik, 5,122; Mr. Thompson, 21,344; and Mr. Yeaman, 2,960. |
(3) | We determined applicable percentage ownership based on |
(4) | Mr. |
5% or More BeneficialBeneficial Owners
The table below identifies those persons known by us to have beneficial ownership of more than 5% of the Company’s outstanding common stock, as of March 10, 2017.9, 2018.
| Beneficial Owner Name and Address |
| Number of Shares Owned |
| Percent of Outstanding Shares(1) |
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| T. Rowe Price Associates, Inc.(2) |
| 12,509,734 |
| 10.2 | % |
| 100 E. Pratt Street |
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| Baltimore, Maryland 21202 |
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| The Vanguard Group(3) |
| 11,997,698 |
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| 100 Vanguard Blvd. |
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| Malvern, Pennsylvania 19355 |
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| Blackrock, Inc.(4) |
| 6,911,024 |
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| 55 East 52nd Street |
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| New York, New York 10022 |
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Beneficial Owner Name and Address | Number of Shares Owned | Percent of Outstanding Shares(1) | ||||||
The Vanguard Group(2) | 12,037,170 | 9.8% | ||||||
100 Vanguard Blvd. | ||||||||
Malvern, Pennsylvania 19355
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T. Rowe Price Associates, Inc.(3) | 9,042,552 | 7.4% | ||||||
100 E. Pratt Street | ||||||||
Baltimore, Maryland 21202 | ||||||||
BlackRock, Inc.(4) | 7,310,003 | 5.9% | ||||||
55 East 52nd Street | ||||||||
New York, New York 10022 |
(1) | We determine applicable percentage ownership based on more than |
(2) | A Schedule 13G filed on |
(3) | A Schedule 13G/A filed on February 14, 2018 by T. Rowe Price Associates, Inc. reported sole voting power over |
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| A Schedule 13G/A filed on January |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s directors and certain of its officers to send reports of their ownership of Company common stock and changes in such ownership to the SEC and the NYSE. The Company assists its directors and officers by preparing forms for filing. SEC regulations also require the Company to identify in this Proxy Statement any person subject to this requirement who failed to file a report on a timely basis. A Form 54 due February 15, 2015 for Mr. J. Kenneth ThompsonChristopher Berry relating to the giftdisposition of Alaska Air Group common shares on October 31, 2014,February 21, 2017, was instead filed on Form 54 on January 25, 2017.February 12, 2018. Based on a review of copies of reports furnished to the Company and written representations that no other reports were required, the Company believes that everyone subject to Section 16(a), except Mr. Thompson,Berry, filed the required reports on a timely basis during 2016. 2017.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Why am I receiving the Annual Meeting Material? |
| You are receiving the Annual Meeting Material from us because you owned Alaska Air Group common stock as of March
You may own shares of Alaska Air Group common stock in several different ways. If your stock is represented by one or more stock certificates registered in your name or if you have a Direct Registration Service (DRS) advice evidencing shares held in book entry form, then you have a stockholder account with the Company’s transfer agent, Computershare Trust Company, N.A. (Computershare), and you are a stockholder of record. If you hold your shares in a brokerage, trust, or similar account, then you are the beneficial owner but not the stockholder of record of those shares. Employees of the Company’s subsidiaries who hold shares of stock in one or more of the Company’s 401(k) retirement plans are beneficial owners. | |
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What other business may be properly brought before the meeting, and what discretionary authority is granted? | Under the Company’s Bylaws, as amended December 9, 2015, a stockholder may bring business before the meeting or for publication in the Company’s The Company has not received valid notice that any business other than that described or referenced in this Proxy Statement will be brought before the meeting.
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Can I attend the Annual Meeting, and what do I need for access? | Participation in the Annual Meeting is limited to Air Group stockholders as of March To be admitted access to the Annual Meeting, please use the
Each stockholder of record or beneficial stockholder, including institutional holders, may designate one person to represent his or her shares at the meeting. If multiple representatives request access on behalf of the same stockholder, the first person to register for the Annual Meeting with appropriate |
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How many shares must be present to hold the meeting? | A majority of the Company’s outstanding shares entitled to vote as of the record date, or or withholds or abstains from voting. | ||
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How can I submit a proposal for next year’s annual meeting? | The Company expects to hold its next annual meeting on or about May If you wish to submit a proposal for inclusion in the proxy materials for that meeting, you must send the proposal to the Corporate Secretary at the address below. The proposal must be received at the Company’s corporate offices no later than November 23, If you intend to nominate candidates for election as directors or present a proposal at the meeting without including it in the Company’s proxy materials, If you intend to nominate candidates for election as directors to be included in the Company’s Corporate Secretary Alaska Air Group, Inc. P.O. Box 68947 Seattle, WA 98168 | |
Is a list of stockholders entitled to vote at the Annual Meeting available? | A list of stockholders of record entitled to vote at the 2018 Annual Meeting will be available Monday through Friday from March 26, 2018 through May 2, 2018 between the hours of 9 a.m. and 4 p.m., Pacific Time, at the offices of the Corporate Secretary, 19300 International Blvd., Seattle, WA 98188. A stockholder of record may examine the list for any legally valid purpose related to the Annual Meeting. |
How can I reduce the number of annual meeting materials I receive? | If you are a stockholder of record receiving multiple copies of the annual meeting materials either because you have multiple stockholder of record accounts or because you share an address with other stockholders of record, and you would like to discontinue receiving multiple copies, you can contact the Company’s transfer agent, Computershare, by telephone at(877) 282-1168 or send a written request to Computershare, P.O. Box 505000, Louisville, KY 40233. If you are a beneficial stockholder, but not a stockholder of record, and you share an address with other stockholders of record, the number of annual meeting materials you receive is already reduced because your broker, bank or other institution is permitted to deliver a single copy of this material for all stockholders at your address unless a stockholder has requested separate copies. If you would like to receive separate copies, please contact your broker, bank or institution and update your preference for future meetings. | |
Can I receive future materials via the Internet? | If you vote on the Internet, simply follow the prompts for enrolling in electronic proxy delivery service. This will reduce the Company’s printing and postage costs, as well as the number of paper documents you will receive. Stockholders of record may enroll in that service at the time they vote their proxies viawww.proxyvote.com or at any time after the Annual Meeting viawww.computershare.com/investor. Beneficial owners, other than employee participants in one of the Company 401(k) plans,may enroll for electronic proxy delivery by contracting your broker. Employee participants in one of the Company’s 401(k) plans may not elect to receive the notice and proxy materials via electronic delivery at this time. If you already receive your proxy materials via the Internet, you will continue to receive them that way until you instruct otherwise through one of the methods referenced above. |
What am I voting on and what does the Board of Directors recommend? | You are being asked to vote on the following: 1. the election of the 11 director nominees named in this Proxy Statement; 2. approval (on an advisory basis) of the compensation of the Company’s Named Executive Officers; THE BOARD RECOMMENDS A VOTE ‘FOR’ ITEM 2. 3. ratification of the appointment of KPMG LLP as the Company’s independent accountants; THE BOARD RECOMMENDS A VOTE ‘FOR’ ITEM 3. 4. a stockholder proposal regarding changes to the Company’s proxy access bylaw. THE BOARD RECOMMENDS A VOTE ‘AGAINST’ ITEM 4. When you sign and mail the proxy card or submit your proxy by phone or the Internet, you appoint each of Mr. Bradley D. Tilden and Mr. Kyle B. Levine, or their respective substitutes or nominees, as your representatives at the meeting. (When we refer to the “named proxies,” we are referring to Mr. Tilden and Mr. Levine.) If you sign and submit your proxy or vote via telephone or the Internet, your shares will be voted even if you cannot attend the meeting. | |
How many votes must the nominees have to be elected? | Votes to Elect the 11 Nominees for Director The Company’s Bylaws (as amended December 9, 2015) require that each director be elected annually by a majority of votes cast with respect to that director. This means that the number of votes “for” a director must exceed the number of votes “against” that director. In the event that a nominee for director receives more “against” votes for his or her election than “for” votes, the Board must consider such director’s resignation following a recommendation by the Board’s Governance and Nominating Committee. The majority voting standard does not apply, however, in the event that the number of nominees for director exceeds the number of directors to be elected. In such circumstances, directors will instead be elected by a plurality of the votes cast, meaning that the persons receiving the highest number of “for” votes, up to the total number of directors to be elected at the Annual Meeting, will be elected. With regard to the election of directors, the Board intends to nominate the 11 persons identified as its nominees in this Proxy Statement. Because the Company has not received notice from any stockholder of an intent to nominate directors at the Annual Meeting, each of the directors must be elected by a majority of votes cast. “Abstain” votes and brokernon-votes are not treated as votes cast with respect to a director and therefore will not be counted in determining the outcome of the election of directors. |
What happens if a director candidate nominated by the Board of Directors is unable to stand for election? | The Board of Directors may reduce the number of seats on the Board or it may designate a substitute nominee. If the Board designates a substitute, shares represented by proxies held by the named proxies will be voted for the substitute nominee. | |
Not including the election of directors, how many votes must the proposals receive in order to pass? | Votes to Approve (on an advisory basis) the Compensation of the Company’s Named Executive Officers A majority of the shares present in person or by proxy at the meeting and entitled to vote on the proposal must be voted “for” the proposal in order for it to pass. “Abstain” votes are deemed present and entitled to vote and are included for purposes of determining the number of shares constituting a majority of shares present and entitled to vote. Accordingly, an abstention, because it is not a vote “for,” will have the effect of a negative vote. In addition, brokernon-votes are not considered entitled to vote for purposes of determining whether the proposal has been approved by stockholders and therefore will not be counted in determining the outcome of the vote on the proposal. | |
Votes to Ratify the Appointment of KPMG LLP as the Company’s Independent Accountants for Fiscal Year 2018 A majority of the shares present in person or by proxy at the meeting and entitled to vote on the proposal must be voted “for” the proposal in order for it to pass. “Abstain” votes are deemed present and entitled to vote and are included for purposes of determining the number of shares constituting a majority of shares present and entitled to vote. Accordingly, an abstention, because it is not a vote “for,” will have the effect of a negative vote. Votes on the Stockholder Proposal Regarding Assured Shareholder Proxy Access. A majority of the shares present in person or by proxy at the meeting and entitled to vote on the proposal must be voted “for” the proposal in order for it to pass. “Abstain” votes are deemed present and entitled to vote and are included for purposes of determining the number of shares constituting a majority of shares present and entitled to vote. Accordingly, an abstention, because it is not a vote “for,” will have the effect of a negative vote. In addition, brokernon-votes are not considered entitled to vote for purposes of determining whether the proposal has been approved by stockholders and, therefore, will not be counted in determining the outcome of the vote on the proposal. | ||
How are votes counted? | Voting results will be tabulated by Broadridge. Broadridge will also serve as the independent inspector of election. | |
Is my vote confidential? | The Company has a confidential voting policy as a part of its governance guidelines, which are published on the Company’s website. |
Who pays the costs of proxy solicitation? | The Company pays for distributing and soliciting proxies and reimburses brokers, nominees, fiduciaries and other custodians their reasonable fees and expenses in forwarding proxy materials to beneficial owners. The Company has engaged Georgeson LLC (Georgeson) to assist in the solicitation of proxies for the meeting. It is intended that proxies will be solicited by the following means: additional mailings, personal interview, mail, phone and electronic means. Although no precise estimate can be made at this time, we anticipate that the aggregate amount we will spend in connection with the solicitation of proxies will be approximately $36,500, the majority of which has been incurred to date. This amount includes fees payable to Georgeson, but excludes salaries and expenses of the Company’s officers, directors and employees. | |
How do I vote my shares? | Stockholders of record can vote by mail, by phone or via the Internet as described below. Beneficial owners whose stock is held in a brokerage account can vote by using the voting instruction form provided by the broker or by phone or the Internet as described below. Beneficial owners whose stock is held by a bank, and who have the power to vote or to direct the voting of the shares, can vote using the proxy or the voting information form provided by the bank or, if made available by the bank, by phone or the Internet as described below. Beneficial owners whose stock is held in trust under an arrangement that provides the beneficial owner with the power to vote or to direct the voting of the shares can vote in accordance with the provisions of such arrangement. Beneficial owners whose stock is held in trust in one of the Company’s 401(k) retirement plans can vote by telephone or via the Internet, or by mailing the voting instruction form provided by the trustee as described below. Beneficial owners other than those who beneficially own stock held in trust in one of the Company’s 401(k) retirement plans can vote at the meeting provided that he or she obtains a “legal proxy” from the person or entity holding the stock for him or her (typically a broker, bank, or trustee). A beneficial owner can obtain a legal proxy by making a request to the broker, bank, or trustee. Under a legal proxy, the bank, broker, or trustee confers all of its rights as a record holder to grant proxies or to vote at the meeting. | |
Vote by Internet. Prior to the Annual Meeting — Stockholders of record and beneficial owners of the Company’s common stock can vote via the Internet 24 hours a day until 11:59 p.m. Eastern Time on Wednesday, May 2, 2018. To allow sufficient time for voting by the trustee, shares held by participants in the Company’s 401(k) plan can vote via the Internet 24 hours a day until 11:59 p.m. Eastern Time on Monday, April 30, 2018. |
Voting via the Internet is permitted regardless of whether stockholders receive their annual meeting materials through the mail or via the Internet. Instructions for voting are provided along with your notice, proxy card or voting instruction form. If you vote on the Internet, please do not mail your proxy card if you received one (unless you intend for it to revoke your prior Internet vote). Your Internet vote will authorize the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. During the Annual Meeting — Stockholders of record and beneficial owners (with a legal proxy from the bank, broker or trustee) of the Company’s common stock, other than shares held by participants in the Company’s 401(k) plan, can vote via the Internet during the Annual Meeting by visiting www.proxyvote.com and following the instructions provided along with your notice, proxy card or voting instruction form. Because shares held by participants in the Company’s 401(k) plans must be voted by trustee, these shares may not be voted during the Annual Meeting. Voting by Internet is fast and convenient and your vote is immediately confirmed and tabulated. By using the Internet to vote, you help Alaska Air Group conserve natural resources and reduce postage and proxy tabulation costs. | ||
Vote by phone. Prior to the Annual Meeting — Stockholders of record and beneficial owners of the Company’s common stock can vote by phone. Instructions are provided along with your notice, proxy card or voting instruction form. If you vote by phone, do not mail your proxy card if you received one (unless you intend for it to revoke your prior vote submitted by phone). Your vote by phone will authorize the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. Voting by phone is fast and convenient and your vote is immediately confirmed and tabulated. By using the phone to vote, you help Alaska Air Group conserve natural resources and reduce postage and proxy tabulation costs. | ||
Vote by mail. Prior to the Annual Meeting — If you received this Proxy Statement by mail, simply sign and date the enclosed proxy card or voting instruction form and mail it in the enclosed prepaid and addressed envelope. If you mark your choices on the card or voting instruction form, your shares will be voted as you instruct. | ||
How will my shares be voted if I return a blank proxy or voting instruction form? | If you sign and return a proxy card without giving specific voting instructions, your shares will be voted in accordance with the recommendations of the Board of Directors shown above and as the named proxies may determine in their discretion with respect to any other matters properly presented for a vote during the meeting or any postponement or adjournment of the meeting. |
If my shares are held in a brokerage account, how will my shares be voted if I do not return voting instructions to my broker? | If you own shares beneficially through a brokerage account and you do not submit voting instructions to your broker, your broker may generally vote your shares in its discretion on matters designated as routine under NYSE rules. However, a broker cannot vote shares held in street name on matters designated asnon-routine by the NYSE, unless the broker receives voting instructions from the street name (beneficial) owner. The proposal to ratify the appointment of the Company’s independent accountants for fiscal year 2018 is considered routine under NYSE rules. Each of the other items to be submitted for a vote is considerednon-routine under applicable NYSE rules. Accordingly, if you hold your shares in street name through a brokerage account and you do not submit voting instructions to your broker, your broker may exercise its discretion to vote your shares on the proposal to ratify the appointment of the Company’s independent accountants but will not be permitted to vote your shares on any of the other items. If your broker exercises this discretion, your shares will be counted as present for the purpose of determining a quorum at the Annual Meeting and will be voted on the proposal to ratify the Company’s independent accountants in the manner instructed by your broker, but your shares will not be voted (i.e. they will constitute “brokernon-votes”) on each of the other items at the Annual Meeting. For a description of the effect of brokernon-votes on the proposals, seeHow many votes must the nominees have to be elected? and Not including the election of directors, how many votes must the proposals receive in order to pass? | |
What if I change my mind after I submit my proxy? | Stockholders of record and beneficial owners, except for persons who beneficially own shares held in trust in one of the Company’s 401(k) retirement plans, may revoke a proxy and change a vote by delivering a later-dated proxy or by voting at the meeting. The later-dated proxy may be delivered by phone, Internet or mail and need not be delivered by the same means used in delivering the prior proxy submission. Stockholders of record and beneficial owners, except for persons beneficially owning shares in one of the Company’s 401(k) retirement plans, may submit a new vote at a later date or time by: • voting by phone or the Internet before 11:59 p.m. Eastern Time on Wednesday, May 2, 2018 (your latest phone or Internet proxy will be counted); • signing and delivering a proxy card with a later date; or • voting during the meeting via the Internet. (If you hold your shares beneficially through a broker, you must have a legal proxy and16-digit control number from the broker in order to vote during the meeting. Please also note that attendance at the meeting, in and of itself, without voting during the meeting, will not cause your previously granted proxy to be revoked.) |
Persons beneficially owning shares in one of the Company’s 401(k) retirement plans cannot vote in person at the meeting and must vote in accordance with instructions from the trustees. Subject to these qualifications, such holders have the same rights as other record and beneficial owners to change their votes by phone or the Internet, however, in all cases your vote must be submitted by 11:59 p.m. Eastern Time on Monday, April 30, 2018. Stockholders of record can request a new proxy card by contacting Broadridge at1-800-579-1639 or sendmaterial@proxyvote.com. Stockholders with shares held by a broker, trustee or bank can obtain a new voting instruction form by contacting your broker, trustee or bank. Stockholders whose shares are held in one of the Company’s 401(k) retirement plans can obtain a new voting instruction form by contacting the trustee of such plan. You can obtain information about how to contact the trustee from the Company’s Corporate Secretary. Please refer to the section titledHow are shares voted that are held in a Company 401(k) plan? for more information. If you sign and date the proxy card or voting instruction form and submit it in accordance with the accompanying instructions and in a timely manner, any earlier proxy card or voting instruction form will be revoked and your new choices will be voted. | ||
How are shares voted that are held in the Company’s 401(k) plan? | On the record date, 2,923,445 shares were held in trust for Alaska Air Group 401(k) plan participants. The trustees, Vanguard Fiduciary Trust Company (Vanguard) and Fidelity Management Trust Company (Fidelity), provided Notice of Proxy and Access instructions to each participant who held shares through the Company’s 401(k) plans on the record date. The trustees will vote only those shares for which instructions are received from participants. If a participant does not indicate a preference as to a matter, including the election of directors, then the trustees will not vote the participant’s shares on such matters. To allow sufficient time for voting by the trustee, please provide voting instructions no later than 11:59 p.m. Eastern Time on Monday, April 30, 2018. Because the shares must be voted by the trustee, those who hold shares through the 401(k) plans may not vote those shares at the meeting. | |
Where can I find the voting results of the Annual Meeting? | We will publish the voting results on Form8-K on or before May 8, 2018. You can read or print a copy of that report by going to InvestorInformation-SEC Filings atwww.alaskaair.comor by going directly to the SEC EDGAR files atwww.sec.gov. You can also request a copy by calling the SEC at(800) SEC-0330 for the location of a public reference room. | |
What does it mean if I receive more than one proxy card, voting instruction form or email notification from the Company? | It means that you hold Alaska Air Group stock in more than one account. Please complete and submit all proxies to ensure that all your shares are voted or vote by Internet or phone using each of the identification numbers. |
VOTE BY INTERNET | ||
Before The Meeting- Go towww.proxyvote.com | ||
ALASKA AIR GROUP, INC. P.O. BOX 68947 SEATTLE, WA 98168 | Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 2, 2018 (11:59 P.M. Eastern Time on April 30, 2018 for the Employee Plans). Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | |
During The Meeting - Go to alk.onlineshareholdermeeting.com | ||
You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. | ||
VOTE BY PHONE -1-800-690-6903 | ||
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 2, 2018 (11:59 P.M. Eastern Time on April 30, 2018 for the Employee Plans). Have your proxy card in hand when you call and then follow the instructions. | ||
VOTE BY MAIL | ||
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||||
E39636-P01827 | KEEP THIS PORTION FOR YOUR RECORDS | |||
DETACH AND RETURN THIS PORTION ONLY | ||||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
ALASKA AIR GROUP, INC.
The Board of Directors recommends a voteFOR all the nominees listed, a voteFOR Proposals 2 and 3, and a voteAGAINST Proposal 4. |
1. Election of Directors |
Nominees: | For | Against | Abstain | |||||
1a. | Patricia M. Bedient | ☐ | ☐ | ☐ | ||||
1b. | James A. Beer | ☐ | ☐ | ☐ | ||||
1c. | Marion C. Blakey | ☐ | ☐ | ☐ | ||||
1d. | Phyllis J. Campbell | ☐ | ☐ | ☐ | ||||
1e. | Raymond L. Conner | ☐ | ☐ | ☐ | ||||
1f. | Dhiren R. Fonseca | ☐ | ☐ | ☐ | ||||
1g. | Susan J. Li | ☐ | ☐ | ☐ | ||||
1h. | Helvi K. Sandvik | ☐ | ☐ | ☐ | ||||
1i. | J. Kenneth Thompson | ☐ | ☐ | ☐ | ||||
1j. | Bradley D. Tilden | ☐ | ☐ | ☐ | ||||
1k. | Eric K. Yeaman | ☐ | ☐ | ☐ |
For | Against | Abstain | ||||||
2. | Advisory vote to approve the compensation of the Company’s Named Executive Officers. | ☐ | ☐ | ☐ | ||||
3. | Ratification of the appointment of KPMG LLP as the Company’s independent registered public accountants for the fiscal year 2018. | ☐ | ☐ | ☐ | ||||
4. | Consider a stockholder proposal regarding changes to the Company’s proxy access bylaw. | ☐ | ☐ | ☐ | ||||
NOTE:Such other business as may properly come before the meeting or any adjournment thereof. |
Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. | ||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Proxy Statement and Form10-K are available at www.proxyvote.com.
E39637-P01827
ALASKA AIR GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 3, 2018, 1:30 PM PACIFIC TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder hereby appoints Bradley D. Tilden and Kyle B. Levine, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this card, all of the shares of Common Stock of Alaska Air Group, Inc. that the stockholder is entitled to vote at the Annual Meeting of Stockholders.
With regard to the Company’s Employee Plans (the Employee Plans), if applicable, the undersigned has the right to give voting instructions to Vanguard Fiduciary Trust Company, Trustee of Alaska Air Group, Inc. Alaskasaver Plan, the Alaska Airlines, Inc. COPS, MRP and Dispatch 401(k) Plan, and the Horizon Air Industries, Inc. Savings Investment Plan, and/or Fidelity Management Trust Company, as Trustee of the Alaska Airlines, Inc. Pilots Investment and Savings Plan, at the Annual Meeting of Stockholders. This form, when properly executed, will be voted as directed. If voting instructions are not received by the proxy tabulator by 11:59 p.m., Eastern Time on Monday, April 30, 2018, these shares will not be voted by the Trustees.
The Annual Meeting of Stockholders is to be held online at alk.onlineshareholdermeeting.com at 1:30 p.m. Pacific Time on Thursday, May 3, 2018 and at any adjournment or postponement thereof.
When this proxy is properly executed, the shares to which the proxy relates will be voted as directed. If no such directions are made, this proxy will be votedFOR all the nominees listed,FOR Proposals 2 and 3, andAGAINST Proposal 4.
Please mark, sign, date and return this proxy card promptly using the enclosed reply envelope or by voting over the Internet or by telephone.
Continued and to be signed on reverse side.