Some American Airline's Execs to Get Hefty Bonuses
Several American Airlines executives will receive million-dollar-plus bonuses this spring, thanks to the recent jump in the stock price of AMR Corp., the airline's parent.
Many more management employees will also receive payouts under the airline's performance plan, which was approved in 2003 and covered work until the end of 2005.
The plan's participants include midlevel managers and higher, said American spokeswoman Lisa Bailey, although she added that not all managers fall under the plan. About 1,000 people participate, she said.
She stressed that the awards are not traditional bonuses. Instead, she said, they are an attempt to tie a portion of management compensation to the company's overall performance.
"This was compensation that was deferred and placed at risk," she said. "We don't consider it a bonus."
The top payout will go to Dan Garton, American's executive vice president of marketing, whose award would be worth more than $1.7 million if valued today, according to company filings.
Three other executives -- Will Ris, American's senior vice president of government affairs; Henry Joyner, senior vice president of planning; and Monte Ford, senior vice president of information technology -- will receive awards currently valued at $1.4 million.
Gerard Arpey, American's chief executive, was not enrolled in the plan for those years and will not receive any money.
The payouts are by far the largest granted to top American executives in more than five years.
"Our compensation policy is designed to hold managers and executives directly accountable for the company's performance by placing a significant portion of [their] total compensation at risk when the company does not meet or exceed predetermined performance goals," Jeff Brundage, American's senior vice president of human resources, said in a letter to employees Thursday.
Under the plan, participants were awarded units that will vest in April. The value of the payouts varies according to how well American's stock does compared with other airlines'.
AMR shares jumped 169 percent from 2003 to 2005.
The stock has soared despite another year of red ink. Analysts expect the company to report losses of $600 million to $800 million for 2005 when it releases its quarterly and year-end reports Jan. 18.
Because AMR shares were the industry's best performers, each unit will be worth 175 percent of the value of one share of AMR stock the day they vest, Bailey said.
For example, Garton was granted 44,000 units in the plan, according to financial statements. At the stock's current price of $22.51 per share, that would equate to a $1.7 million payment in April.
The smallest award was 50 units, Bailey said, which would be worth about $2,000 today.
If the stock continues to rise before April, the award could be worth even more. If shares drop, however, the payment would be smaller.
American executives warned Wall Street in a financial filing last month that larger-than-expected management incentives could affect the company's costs.
American's stock options plan for employees, which was part of the 2003 concessions agreement, will also vest in April. Those options had a strike price of $5, giving the options a total value to employees of more than $568 million, Brundage said.
Management perks have been a sensitive topic at American since 2003, when employees learned of lucrative retention bonuses and retirement perks for top executives one day after painful concessions were approved.
The resulting uproar forced then-Chief Executive Don Carty to resign.
But Bailey pointed out that union leaders were told two years ago about the performance plan that will be paid out in April.
And in his letter to employees, Brundage said it is "good news" that the airline's stock has strengthened.
It is "evidence of the extent to which the financial markets have responded to our efforts to remain solvent and jointly address our competitive challenges," he wrote, "particularly true in comparison to our competitors who took the painful path of bankruptcy."
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