AAL 2019 Proxy Statement

and United. In addition, in 2018, we validated the total target direct compensation of our top executives against Willis Towers Watson’s database of similarly sized companies. For 2018, our annual review of executive compensation also included tally sheets for our executive officers. Each tally provides an overview of total compensation targets as well as estimated upcoming short- and long-term incentive payments. The Compensation Committee used these forward-looking compensation summary sheets to provide a comprehensive picture of each executive officers’ estimated future compensation. Executive Compensation Mix with an Emphasis on Performance-Based Pay As described above, our executive compensation structure includes both fixed and performance-based pay. Specifically, our executive compensation structure consists of three core components which align management and stockholder interests: • a base salary paid in cash; • an annual incentive program paid in cash based on achievement of annual profitability targets; and • a long-term equity incentive program in the form of RSUs that incorporate both performance- and time-vesting components. The overarching goal is to align executive and stockholder interests, so the executive compensation programs emphasize pay for performance (such that compensation is paid only if we meet pre-determined performance targets) and equity- based compensation tied to our stock performance. For 2018, our named executive officers’ fixed compensation was at or below 15% of target total compensation, reflecting a heavy weighting on variable or performance-based compensation vesting over multiple time periods, with Mr. Parker’s direct compensation provided 100% in the form of long-term equity incentives. Base Salary Base salaries provide a secure, consistent amount of fixed pay that compensates executives for their scope of responsibility, competence and performance. While we aim to establish competitive compensation, our greater focus is on establishing a culture where creating long-term value for our stockholders is always at the forefront of our leadership team’s decision-making. We believe that our reduced emphasis on fixed compensation, achieved through below-median base salaries combined with higher levels of target variable cash incentives and equity compensation, allows us to retain our management team and recruit from other network airlines and general industry while also emphasizing our pay-for-performance philosophy. As discussed above, Mr. Parker’s direct compensation for 2018 was provided 100% in the form of long-term equity incentives, and he received no any base salary. In 2018, our other named executive officers were eligible for a 2.5% salary increase over 2017 levels, consistent with merit increases in the total direct compensation for the general management employee population. The 2018 base salary level for Mr. Isom was set at $736,000 and for Messrs. Kerr, Johnson and Ms. Leibman were set at $638,000, effective September 10, 2018. Annual Cash Incentive Program The second core component of our overall compensation program is a short-term cash incentive program. We have implemented an annual cash incentive program based on pre-established adjusted pre-tax income targets. We believe that pre-tax income is an effective way to capture cost management and revenue performance. Annual incentives also serve as a retention tool as employees generally must remain employed through the payment date in order to receive payment of any potential annual incentive program awards. For 2018, the named executive officers (other than Mr. Parker, who received his compensation entirely in the form of long- term equity incentives, as discussed above) participated in the 2018 STIP. Payouts under the 2018 STIP were tied to the achievement of pre-established adjusted pre-tax income goals (excluding special items, profit sharing and annual incentive programs and related payroll taxes and 401(k) company contributions). The Compensation Committee is committed to setting rigorous goals under the STIP. For 2018, the Compensation Committee maintained the threshold, target and maximum adjusted pre-tax income levels (excluding special items, profit sharing and annual incentive programs and related payroll taxes and 401(k) company contributions) at $3.0 billion, $5.0 billion, and $7.0 billion, respectively, as in 2017. The Compensation Committee believed the target level of $5.0 billion would be a challenging goal for 2018, as it was significantly above the budgeted pre-tax income excluding special item projections for 2018, taking into account a variety of factors, including higher forecasted fuel prices in 2018 than 2017 and

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2019 Proxy Statement |