AAL 2019 Proxy Statement

increased payroll and benefits expense. In consideration of these factors, the Committee set the following threshold, target, and maximum performance levels for the financial metrics, as well as the corresponding annual incentive funding levels:

2018 Adjusted Pre-tax Income ($)(in billions)

Funding Level (% of Target)

<3.0

0%

3.0 5.0 7.0

50%

Target

100% 200%

Maximum

Any performance falling between threshold, target and maximum levels would result in an adjustment of funding level based on straight-line interpolation. The 2018 target bonus opportunities for the participating named executive officers were set at the same levels as in 2017 as shown in the table below.

2018 Target Payout Level as a Percentage of Base Salary

Named Executive Officer

Robert Isom

175% 125% 125% 125%

Derek Kerr

Maya Leibman Steve Johnson

As in 2017, for 2018, payouts for our named executive officers were determined solely based on the achievement of the corporate performance objectives, without regard to individual performance. In 2018, we achieved an adjusted pre-tax income (excluding special items, profit sharing and annual incentive programs and related payroll taxes and 401(k) company contributions) of approximately $3.0 billion, which corresponded to achievement at 50.48% of the target level under the 2018 STIP. The following table shows the 2018 target goal, actual performance and funding level for the 2018 STIP.

2018 Target Performance Goal ($)(in billions)

Actual Performance ($)(in billions)

Funding Level (% of target)

Performance Goal

2018 Adjusted Pre-tax Income (a) 50.48% (a) Represents income before income taxes for the year ended December 31, 2018, excluding special items (as detailed on pages 43-45 of AAG’s Annual Report on Form 10-K for the year ended December 31, 2018 filed on February 26, 2019) and profit sharing and annual incentive programs and related payroll taxes and 401(k) company contributions. 5.0 3.0

Based on the funding level as described above, each named executive officer other than Mr. Parker received a bonus at 50.48% of target under the 2018 STIP. The dollar amounts of the bonuses paid to our named executive officers under the 2018 STIP are set forth in the “Summary Compensation Table” on page 55. The 2019 Short-term Incentive Program retains the same design and performance goals used in 2018 for our named executive officers. Long-Term Incentive Programs The third core component of our overall compensation program is a long-term equity incentive program that focuses our executives on our performance over time and further links the interests of recipients and stockholders. Stock-based awards, coupled with performance- and time-vesting requirements, provide an appropriate incentive to our executives to remain with the Company and meet the long-term goal of maximizing stockholder value. Consistent with our emphasis on pay for performance and our commitment to long-term value creation for our stockholders, our named executive officers’ total target direct compensation is weighted heavily toward long-term equity awards, with Mr. Parker’s total target direct compensation comprised 100% of long-term equity awards. The Compensation Committee determines the value of long-term equity awards to be granted to an executive officer based upon the executive’s level of responsibility and job classification level and the results of compensation market analyses.

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2019 Proxy Statement |