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Form PRE 14A American Airlines Group For: Jun 08

April 15, 2022 5:14 PM EDT
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

 

 

Filed by the Registrant      Filed by a Party other than the Registrant  

Check the appropriate box:

 

  Preliminary Proxy Statement

  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

  Definitive Proxy Statement

  Definitive Additional Materials

  Soliciting Material under § 240.14a-12

AMERICAN AIRLINES GROUP INC.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

  No fee required.

  Fee paid previously with preliminary materials.

  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 


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LOGO

Notice of 2022 annual meeting of stockholders and proxy statement American Airlines Group Inc.


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LOGO

 

April     , 2022

To Our Stockholders:

On behalf of the Board of Directors of American Airlines Group Inc., we invite you to attend the 2022 Annual Meeting of Stockholders to be held on Wednesday, June 8, 2022, at 9:00 a.m. Central Time. As with our recent meetings, this year’s Annual Meeting will be a virtual meeting of stockholders, conducted via live audio webcast. The virtual format provides the opportunity for participation by a broader group of our stockholders and enables stockholders to participate fully, and equally, from any location around the world, at no cost. You can attend the Annual Meeting via the Internet by registering at www.proxydocs.com/AAL using the control number which appears on your Notice Regarding the Availability of Proxy Materials, your proxy card (printed in the box and marked by the arrow), and the instructions that accompanied your proxy materials. You will have the ability to submit questions in advance of, and real-time during, the Annual Meeting via the meeting website.

The attached Notice of 2022 Annual Meeting of Stockholders and Proxy Statement describes the formal business to be transacted and detailed procedures for attending, submitting questions, and voting at the virtual meeting. We have produced an interactive proxy statement that will provide our stockholders with better capability to navigate through the document, making key information easier to find and evaluate. The interactive proxy statement is accessible at www.proxydocs.com/AAL prior to and during the Annual Meeting.

It is important that your shares be represented at the Annual Meeting and, regardless of whether you plan to attend, we request that you vote in advance on the matters to be presented at the Annual Meeting as described in these proxy materials.

Thank you for your continued support.

 

 

LOGO    

Sincerely,

 

   

 

LOGO

    W. Douglas Parker
   

Chairman of the Board of Directors

 

 

 

 

The accompanying Proxy Statement is dated April     , 2022, and is first being released to stockholders of American Airlines Group Inc. on or about

April     , 2022.

 


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NOTICE OF 2022 ANNUAL MEETING OF STOCKHOLDERS

 

 

DATE AND TIME:

Wednesday, June 8, 2022

9:00 a.m. Central Time

 

VIRTUAL MEETING ACCESS:

Register at www.proxydocs.com/AAL

 

RECORD DATE:

April 12, 2022

  

 

MEETING AGENDA

 

  

 

1

        

 

 

A proposal to elect 14 directors to serve until the 2023 Annual
Meeting of Stockholders and until their respective successors
have been duly elected and qualified

  

 

 

2

     

 

 

A proposal to ratify the appointment of KPMG LLP as our
independent registered public accounting firm for the fiscal year
ending December 31, 2022

  

 

 

3

     

 

 

A proposal to consider and approve, on a non-binding, advisory
basis, executive compensation as disclosed in the attached Proxy
Statement

  

 

 

4

     

 

 

A proposal to amend our Certificate of Incorporation to allow future
amendments to the Bylaws by our stockholders by simple majority
vote

  

 

 

5

     

 

 

A proposal to amend our Certificate of Incorporation to allow all
other provisions of the Certificate of Incorporation to be amended
in the future by simple majority vote

    

 

 

6

     

 

 

A proposal to approve the Tax Benefit Preservation Plan

    

 

 

7

     

 

 

Advisory vote on a stockholder proposal to provide a report on
certain lobbying activities

    

 

 

8

      

 

 

Such other business as properly may come before the 2022
Annual Meeting of Stockholders or any adjournments or
postponements of the Annual Meeting

For instructions on voting in advance of and during the virtual meeting, please see page (i) of the Proxy Statement.

 

Important notice regarding the availability of proxy materials for the Annual Meeting:

Our Proxy Statement and 2021 Annual Report on Form 10-K are available at www.proxydocs.com/AAL prior to and during the Annual Meeting.

You can help us reduce costs and the impact on the environment by electing to receive and access future copies of our proxy statements, annual reports and other stockholder materials electronically by e-mail. If your shares are registered directly in your name with our stock registrar and transfer agent, American Stock Transfer & Trust Company, LLC, you can make this election by going to its website (www.astfinancial.com) or by following the instructions provided when voting over the Internet. If you hold your shares in a brokerage account or otherwise through a third party in “street name,” please refer to the information provided by your broker, bank or other nominee for instructions on how to elect to receive and view future annual meeting materials electronically.

 

LOGO    By Order of the Board of Directors of American
Airlines Group Inc.,
  

 

LOGO

   Caroline B. Ray
  

Corporate Secretary

 

PLEASE READ THE ACCOMPANYING PROXY STATEMENT CAREFULLY.

REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING, YOUR VOTE IS IMPORTANT AND WE

ENCOURAGE YOU TO VOTE PROMPTLY.

 


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PROXY STATEMENT SUMMARY

This summary contains highlights about our company and the upcoming 2022 Annual Meeting of Stockholders (the “Annual Meeting”). This summary does not contain all of the information that you should consider in advance of the meeting and we encourage you to read the entire proxy statement and the Annual Report on Form 10-K for the year ended December 31, 2021 that accompanies this Proxy Statement before voting.

2022 Annual Meeting of Stockholders

 

 

LOGO

 

Date and Time:

Wednesday,

June 8, 2022 at

9:00 a.m., Central Time

 

         

 

LOGO

 

Virtual Meeting Access:

Register at www.proxydocs.com/AAL

 

 

LOGO

 

Record Date:

April 12, 2022

     

 

LOGO

 

Proxy Mail Date:

On or about

April     , 2022

 

         

Vote in Advance of the Meeting

 

           

Vote During the Meeting

 

 

LOGO

 

 

 

 

Over the Internet at www.proxydocs.com/AAL; or

       

 

 

Over the Internet during the Annual Meeting. Please register at www.proxydocs.com/AAL to gain access to the meeting.

 

 

LOGO

 

 

 

By telephone at 1-866-570-3320; or

 

 

 

               

 

LOGO

 

 

 

See page 1 — “Virtual Stockholder Meeting” for details on how to access the live audio webcast and vote during the Annual Meeting.

 

LOGO

 

 

By mail—sign, date and return the proxy card or voting instruction form mailed to you.

       
         

 

 

        

 

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Submitting questions at the virtual Annual Meeting.

Stockholders may submit questions in writing during the Annual Meeting by registering to attend the virtual meeting at www.proxydocs.com/AAL. Stockholders will need their unique control number which appears on their Notice Regarding the Availability of Proxy Materials, the proxy card (printed in the box and marked by the arrow) and the instructions that accompanied the proxy materials.

 

As part of the Annual Meeting, and as time permits, we will hold a live Q&A session, during which we intend to answer questions submitted during the meeting in accordance with the Annual Meeting’s Rules of Conduct which are pertinent to American Airlines Group Inc. (the “Company”) and the meeting matters. Answers to any such questions that are not addressed during the meeting will be published following the meeting on the Company’s website at www.aa.com under the links “Investor Relations”—“Annual Shareholders Meeting”—“2022 Annual Meeting of Stockholders Q&A.” Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once. In order to promote fairness, efficient use of the Company’s resources and to ensure all stockholders are responded to, we will respond to up to three questions from a single stockholder. The Annual Meeting’s Rules of Conduct will be posted on www.proxydocs.com/AAL approximately two weeks prior to the Annual Meeting.

 

Stockholder Engagement and Governance Highlights

We welcome and value communication with our stockholders. We engage in proactive dialogue with our largest stockholders year-round to gain an understanding of their perspectives on a wide range of matters, which we regularly share with the Board of Directors of the Company (the “Board”). Stockholders may communicate directly with our Board as set forth under “Communications with the Board and Non-Management Directors” on page 42. The following corporate governance and Board practices ensure accountability and enhance effectiveness in the boardroom:

 

Our Governance Best Practices

 

 

   Annual Board elections

 

   Majority voting standard

 

   All of our director nominees are independent other than our Chairman and our Chief Executive Officer

 

   Robust Lead Independent Director role with responsibilities that conform to leading governance practices

 

   Routine review of Board leadership structure

 

   Regular executive sessions held without management present

 

   Stockholder right to call special meetings of stockholders

 

  

 

   Commitment to corporate social responsibility and sustainability

 

   Stockholder right to proxy access

 

   Regular Board, committee and director evaluations

 

   Annual review of Board and committee composition

 

   All members of the Audit Committee are designated financial experts

 

   Diverse Board

 

   Significant stock ownership requirements for directors and executive officers

 

   Comprehensive risk management with Board and committee oversight

Voting Matters and Board Recommendations

 

  Matter  

Board

Recommendation

  Page

 

1. Election of directors

 

 

FOR each Director

Nominee

 

  6

 

2. Ratification of public accounting firm

 

 

 

FOR

 

  18

 

3. A proposal to consider and approve, on a non-binding, advisory basis, executive compensation as disclosed in the attached Proxy Statement

 

 

 

FOR

 

  20

 

4. A proposal to amend our Certificate of Incorporation to allow future amendments to the Bylaws by our stockholders by simple majority vote

 

 

 

FOR

 

  24

 

5. A proposal to amend our Certificate of Incorporation to allow all other provisions of the Certificate of Incorporation to be amended in the future by simple majority vote

 

 

 

FOR

 

  25

 

6. A proposal to approve the Tax Benefit Preservation Plan

 

 

 

FOR

 

  26

 

7. Advisory vote on a stockholder proposal

 

 

 

AGAINST

 

  29

 

 

 

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2022 Director Nominees (Proposal 1)

Our director nominees have demonstrated their commitment to diligently execute their fiduciary duties on behalf of our stockholders, and we recommend that our stockholders elect each of the nominees shown in the chart below at the Annual Meeting.

 

  Name   Age  

Director

Since

  Principal Occupation   Independent   AC   CC   CGPRSC    FC

James F. Albaugh

  71   2013   Advisor and consultant to financial services and investment firms; former President and Chief Executive Officer of The Boeing Company’s Commercial Airplanes business unit    

 

  M   M   

 

Jeffrey D. Benjamin

 

60

 

2013

 

Senior advisor to Cyrus Capital Partners

 

 

 

 

 

M

 

 

  

M

Adriane M. Brown

  63   2021   Managing Partner at Flying Fish Management; former President and Chief Operating Officer at Intellectual Ventures Management; former President and Chief Executive Officer of Honeywell Transportation Systems     M  

 

  M   

 

John T. Cahill

Lead Independent
Director

  64   2013   Vice Chairman of The Kraft Heinz Company; former Chairman and Chief Executive Officer of Kraft Foods Group and of The Pepsi Bottling Group     M  

 

  M   

 

Michael J. Embler

  58   2013   Private investor; former Chief Investment Officer of Franklin Mutual Advisers     M  

 

 

 

   C

Matthew J. Hart

  70   2013   Former President and Chief Operating Officer of Hilton Hotels; former Chief Financial Officer of Hilton Hotels     C  

 

 

 

  

 

Robert D. Isom

  58   2022   Chief Executive Officer and President of American Airlines Group Inc. and American Airlines, Inc.   Ñ  

 

 

 

 

 

  

 

Susan D. Kronick

  70   2015   Operating Partner at Marvin Traub Associates; former Vice Chairman of Macy’s    

 

  M   C   

 

Martin H. Nesbitt

  59   2015   Co-Chief Executive Officer of The Vistria Group; former President and Chief Executive Officer of PRG Parking Management     M  

 

 

 

   M

Denise M. O’Leary

  64   2013   Private venture capital investor; former General Partner at Menlo Ventures    

 

  C  

 

   M

 

W. Douglas Parker

Chairman

  60   2013   Chairman of American Airlines Group Inc.   Ñ  

 

 

 

 

 

  

 

Ray M. Robinson

  74   2005   Chairman of Citizens Trust Bank; former President of the Southern Region at AT&T    

 

 

 

  M    M

Gregory D. Smith

  55   2022   Former Executive Vice President and Chief Financial Officer of The Boeing Company     M  

 

  M   

 

Douglas M. Steenland

  70   2020   Senior Advisor to The Blackstone Group L.P.; Former President and Chief Executive Officer of Northwest Airlines Corporation      

 

  M    

 

   M

 

AC = Audit Committee

  

FC = Finance Committee

CC = Compensation Committee

  

M = Member

CGPRSC = Corporate Governance, Public Responsibility and Safety  Committee

  

C = Chairman

 

The Board unanimously recommends that the stockholders vote “FOR” each of the nominees shown in the chart above.

Ratification of Appointment of KPMG LLP (Proposal 2)

The Board has directed that KPMG’s appointment for the fiscal year ending December 31, 2022 be submitted to our stockholders for ratification at the Annual Meeting. KPMG is well qualified to act as our independent registered public

 

 

        

 

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accounting firm and has a deep understanding of our operations and accounting practices. The Audit Committee considered the qualifications, performance, and independence of KPMG, the quality of its discussions with KPMG, and the fees charged by KPMG for the level and quality of services provided during 2021, and determined that the reappointment of KPMG is in the best interest of the Company and its stockholders.

 

The Board unanimously recommends that the stockholders vote “FOR” the proposal to ratify the appointment of KPMG.

Approval of Executive Compensation (Proposal 3)

Our CEO and other executive officers have demonstrated their commitment to fair pay and pay-for-performance. Our executives’ compensation has been heavily weighted towards variable cash and long-term equity incentives, linking our executives’ pay opportunity to the execution of Company strategies and enhancing the interests of our stockholders. As a condition of the payroll support and loan agreements entered into with the federal government under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the payroll support agreement under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (“PSP2”) and the payroll support agreement under section 7301 of the American Rescue Plan Act of 2021 (“PSP3”), we implemented significant reductions to the total target direct compensation for our named executive officers in order to comply with the applicable limits. The 2021 program reflected these reductions to total target direct compensation and was modified, solely for 2021, to provide more certainty to and retain our executives. We have re-established our historical performance-based cash and equity incentive programs for 2022.

We are committed to effective compensation governance, as demonstrated by the following compensation policies and practices:

 

What We Do

 

               

What We Do NOT Do

 

 

  Independent Compensation Consultant that is directly engaged by the Compensation Committee to advise on executive and director compensation matters.

 

  At-Will Employment arrangements with our executive officers with no employment agreements.

 

  Stock Ownership Guidelines that align our executive officers’ long-term interests with those of our stockholders.

 

  Tally Sheet Review used to conduct a comprehensive overview of total compensation targets and potential payouts.

 

  Annual Compensation Risk Assessment to identify any elements of our compensation program design or oversight processes that carry elevated levels of adverse risk.

 

  Clawback Policy for all cash and equity incentive compensation paid to our executive officers.

 

     

 

×   No Severance or Change in Control Agreements. None of our executive officers have a severance or change in control agreement.

 

×   No Excessive Perquisites. Perquisites and other personal benefits are not a significant portion of any executive officer’s compensation and are in line with industry standards.

 

×   No Guaranteed Bonuses. Our executive officers’ bonuses are 100% performance-based and at risk.

 

×   No Payouts of Dividends. Unless and until an award’s vesting conditions are satisfied, no dividends accrued on the award are paid.

 

×   No Active Executive Retirement Plans. We do not maintain any active executive-only or supplemental retirement plans.

 

×   No Hedging or Pledging of our Stock. We prohibit our executive officers from engaging in hedging transactions or using our stock as collateral for loans.

 

×   No Excise Tax Gross-Ups. We do not provide gross ups on excise taxes in connection with a change in control.

 

 

The Board unanimously recommends that the stockholders vote “FOR” the approval of executive compensation.

 

 

 

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Approval of an Amendment to Our Certificate of Incorporation Regarding Future Bylaw Amendments (Proposal 4)

At our 2021 annual meeting of stockholders, our stockholders passed a stockholder-sponsored proposal requesting that the Board take the steps necessary to eliminate each stockholder voting requirement in our Certificate of Incorporation that calls for a greater than simple majority vote.

In response to this request, and after carefully considering the advantages and disadvantages of maintaining the supermajority voting provisions in our Certificate of Incorporation, the Board has determined that it is in the best interests of the Company and its stockholders to amend our Certificate of Incorporation to eliminate the supermajority voting requirement for amendments to the Bylaws by our stockholders (the “Bylaw Voting Threshold Amendment”).

 

The Board unanimously recommends that the stockholders vote “FOR” the approval of the proposal to amend our Certificate of Incorporation to allow our Bylaws to be amended by our stockholders by simple majority vote.

Approval of an Amendment to Our Certificate of Incorporation Regarding Other Future Charter Amendments (Proposal 5)

In response to shareholder action at our 2021 annual meeting of stockholders, and after carefully considering the advantages and disadvantages of maintaining the supermajority voting provisions in our Certificate of Incorporation, the Board has determined that it is in the best interests of the Company and its stockholders to amend our Certificate of Incorporation to eliminate the supermajority voting provisions (the “Supermajority Elimination Amendment”).

 

The Board unanimously recommends that the stockholders vote “FOR” the approval of the proposal to amend our Certificate of Incorporation to allow the Certificate of Incorporation to be amended by simple majority vote.

Approval of Tax Benefit Preservation Plan (Proposal 6)

On December 21, 2021, the Board approved and entered into a Tax Benefit Preservation Plan (the “Tax Plan”) in order to protect valuable tax benefits including those generated by net operating losses and certain other tax attributes that could be jeopardized by a single stockholder acquiring a significant portion of our common stock. However, the Tax Plan will expire upon the close of business on December 20, 2022, if stockholder approval of the Tax Plan has not been obtained by that date. Therefore, in order to maintain the benefits secured by the Tax Plan, it is important that the stockholders approve this proposal.

 

The Board unanimously recommends that the stockholders vote “FOR” the approval of the Tax Plan.

Advisory Vote on a Stockholder Proposal (Proposal 7)

A stockholder has informed the Company that he intends to present a proposal at our Annual Meeting requesting the Company to prepare an annual report disclosing the Company’s policy and procedures governing lobbying, payments by the Company for lobbying activities and a description of management’s and the Board’s decision-making process and oversight for making the foregoing payments. The Board has considered this proposal and concluded that its adoption is unnecessary in light of the Company’s existing policies and disclosures and not in the best interests of our stockholders. The Board recommends a vote against the stockholder proposal because the Company participates in the policy and political process for the benefit of stockholders, has policies in place to effectively oversee such participation and provides comprehensive disclosures of these activities on its website.

 

For the reasons stated above and in the Board’s Statement in Opposition, which follows the stockholder proposal under Proposal 7, the Board unanimously recommends that the stockholders vote “AGAINST” the stockholder proposal.

 

 

 

        

 

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PROXY STATEMENT    

 

 

 

 

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY                                              1  
THE MEETING                                                                             1  

Purpose, Date and Time

    1  

Record Date; Stockholders Entitled to Vote

    1  

Virtual Stockholder Meeting

    1  

Quorum

    2  

Vote Required to Approve Each Proposal

    2  

How to Vote Your Shares

    3  

Revoking or Changing Your Vote

    3  

Authority of Proxies

    4  

Solicitation of Votes

    4  

Inspector of Election

    4  

Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting

    4  

Electronic Delivery of Proxy Materials

    4  

Householding of Proxy Materials

    5  
PROPOSAL 1—ELECTION OF DIRECTORS                           6  

Election of Directors

    6  

Director Nominees

    7  
BOARD COMPOSITION                                                              15  

How We Build a Board that is Right for American Airlines

    15  

Board Diversity and Tenure

    15  

Stockholder Recommendations or Nominations of Director Candidates

    17  
PROPOSAL 2—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                                                               18  

Ratification of Independent Registered Public Accounting Firm

    18  

Independent Registered Public Accounting Firm Fees

    18  

Policy on Audit Committee Pre-Approval

    19  
PROPOSAL 3—ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (SAY-ON-PAY)                        20  
PROPOSAL 4—APPROVE AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO ALLOW OUR BYLAWS TO BE AMENDED BY SIMPLE MAJORITY VOTE                                                                                             24  
PROPOSAL 5—APPROVE AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO ALLOW ALL OTHER PROVISIONS OF THE CERTIFICATE OF INCORPORATION TO BE AMENDED BY SIMPLE MAJORITY VOTE                                                                         25  
PROPOSAL 6—APPROVE THE COMPANY’S TAX BENEFIT PRESERVATION PLAN                                              26  
PROPOSAL 7—ADVISORY VOTE ON A STOCKHOLDER PROPOSAL                                                                                  29  

Stockholder Proposal

    29  

The Board’s Statement in Opposition

    30  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                 33  
INFORMATION ABOUT THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE                                          35  

Governance Overview

    35  

Board Leadership and Structure

    35  

Lead Independent Director Responsibilities

    35  

Director Independence

    36  

Board Diversity and Tenure

    37  

Board Self-Evaluation

    38  

Board Meetings

    38  

Committees

    38  

Audit Committee

    38  

Compensation Committee

    39  

Corporate Governance, Public Responsibility and Safety Committee

    39  

Finance Committee

    40  

Board Role in Risk Oversight

    40  

Risk Assessment with Respect to Compensation Practices

    41  

Annual Meeting Attendance

    42  

Director Continuing Education

    42  

Communications with the Board and Non-Management Directors

    42  

Environmental, Social and Governance Issues

    43  

Codes of Ethics

    50  

Public Policy Engagement and Political Participation

    50  

Prohibition on Hedging and Pledging

    50  
DIRECTOR COMPENSATION                                                    51  

Director Compensation

    52  

Legacy Director Compensation Programs

    52  

Stock Ownership Guidelines

    53  
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS                                                                         54  

Policies and Procedures for Review and  Approval of Related Person Transactions

    54  
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS                                                            55  
COMPENSATION DISCUSSION AND ANALYSIS                   56  

Overview

    56  

Summary

    56  

2021 Compensation Objectives and Programs

    58  

Stockholder Approval of 2021 Executive Compensation

    60  

Determination of Executive Compensation

    60  

Executive Compensation Mix with an Emphasis on Performance-Based Pay

    61  

Base Salary

    61  

Annual Cash Incentive Program

    62  

Long-Term Incentive Programs

    62  

Change in Control and Severance Benefits

    64  

Other Benefits and Perquisites

    64  

Continuing Focus on Leading Practices

    65  
COMPENSATION COMMITTEE REPORT                                67  
EXECUTIVE OFFICERS                                                              68  
EXECUTIVE COMPENSATION                                                   70  

Summary Compensation Table

    70  

Grants of Plan-Based Awards in 2021

    72  

Outstanding Equity Awards at 2021 Fiscal Year-End

    73  

Options Exercised and Stock Vested

    74  

Pension Benefits

    74  

Non-Qualified Deferred Compensation

    75  

Potential Payments Upon Termination or Change in Control

    76  

Estimated Potential Payments

    77  

CEO Pay Ratio

    77  
EQUITY COMPENSATION PLAN INFORMATION                   79  
OTHER MATTERS                                                                       80  

Stockholder Proposals

    80  

Annual Report and Available Information

    80  

Cautionary Statement Regarding Forward-Looking Statements

    80  
APPENDIX A                                                                                A-1  

Amendment to Restated Bylaws

    A-1  

Amendment to Restated Certificate of Incorporate

    A-1  
APPENDIX B                                                                                B-1  

Tax Benefit Plan

    B-1  
 

 

 

        

 

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THE MEETING

Purpose, Date and Time

We are furnishing this Proxy Statement to our stockholders in connection with the solicitation by the Board of proxies to be voted at the Annual Meeting and any adjournments or postponements of that meeting. The Annual Meeting will be held in a virtual format via live audio webcast on Wednesday, June 8, 2022, at 9:00 a.m., Central Time, for the purposes described in the accompanying Notice of Annual Meeting. Stockholders can register to attend the meeting via the Internet at www.proxydocs.com/AAL by using the control number which appears on the Notice Regarding the Availability of Proxy Materials, the proxy card (printed in the box and marked by the arrow), and the instructions that accompanied your proxy materials.

The approximate date we are first sending the Notice of Annual Meeting and accompanying proxy materials to stockholders, or sending a Notice Regarding the Availability of Proxy Materials and posting the proxy materials at www.proxydocs.com/AAL, is April             , 2022.

When used in this Proxy Statement, the terms “we,” “us,” “our” and “the Company” refer to American Airlines Group Inc. and its consolidated subsidiaries. “AAG” refers to American Airlines Group Inc. and “American” refers to AAG’s wholly-owned subsidiary American Airlines, Inc.

Record Date; Stockholders Entitled to Vote

Stockholders of record at the close of business on April 12, 2022 (the “record date”) are entitled to receive notice of and to vote at the Annual Meeting. On the record date, there were 649,513,571 shares of our common stock, $0.01 par value per share (“Common Stock”), outstanding and eligible to be voted at the Annual Meeting. Each share of Common Stock entitles its owner to one vote on each matter submitted to the stockholders. As of the record date, approximately 0.3 million of the issued and outstanding shares of Common Stock were held in the Disputed Claims Reserve established in accordance with AMR Corporation’s fourth amended joint plan of reorganization. Pursuant to the plan, the shares held in the Disputed Claims Reserve will be voted by the disbursing agent holding these shares in the same proportion as the other outstanding shares of Common Stock are voted.

A list of the names of stockholders entitled to vote at the Annual Meeting will be available to stockholders for ten days prior to the Annual Meeting for any purpose germane to the Annual Meeting. Please contact our Corporate Secretary at [email protected] if you wish to examine the list prior to the Annual Meeting. The stockholder list will also be available during the virtual Annual Meeting for examination by any stockholder.

Your vote is very important. You are encouraged to vote as soon as possible.

Virtual Stockholder Meeting

The virtual meeting format enables stockholders to participate fully, and equally, from any location around the world, at little to no cost. We designed the format of our Annual Meeting to ensure that our stockholders who attend our Annual Meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting and to enhance stockholder access, participation and communication through online tools. Our directors will also attend the meeting.

Access to the Audio Webcast of the Annual Meeting. The live audio webcast of the Annual Meeting will begin promptly at 9:00 a.m. Central Time. Online access to the audio webcast will open approximately thirty minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. We encourage our stockholders to access the meeting prior to the start time.

Log in Instructions. Shareholders can register to attend the virtual meeting at www.proxydocs.com/AAL. Stockholders will need their control number which appears on the Notice Regarding the Availability of Proxy Materials, the proxy card (printed in the box and marked by the arrow). In the event that you do not have a control number, please contact your broker, bank or other nominee as soon as possible and no later than Wednesday, June 1, 2022, so that you can be provided with a control number and gain access to the meeting. Once registered, stockholders will receive an e-mail with a unique link, and instructions, on how to attend the meeting one hour prior to the start of the meeting.

Submitting questions at the virtual Annual Meeting. Our stockholders will be able to submit questions during the Annual Meeting by registering to attend the virtual meeting at www.proxydocs.com/AAL. Stockholders will need their

 

 

        

 

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unique control number which appears on their Notice Regarding the Availability of Proxy Materials, the proxy card (printed in the box and marked by the arrow), and the instructions that accompanied the proxy materials.

As part of the Annual Meeting, and as time permits, we will hold a live Q&A session, during which we intend to answer questions submitted during the meeting in accordance with the Annual Meeting’s Rules of Conduct which are pertinent to the Company and the meeting matters. Answers to any such questions that are not addressed during the meeting will be published following the meeting on the Company’s website at www.aa.com under the links “Investor Relations”—“Annual Shareholders Meeting”—“2022 Annual Meeting of Stockholders Q&A.” Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once. In order to promote fairness, efficient use of the Company’s resources and to ensure all stockholders are responded to, we will respond to up to three questions from a single stockholder.

The Annual Meeting’s Rules of Conduct will be posted on www.proxydocs.com/AAL approximately two weeks prior to the Annual Meeting.

 

Access to the Live Webcast of the Annual Meeting

 

The live audio webcast of the virtual Annual Meeting will be available to not only our stockholders, but also our team members and other constituents. In order to attend the virtual Annual Meeting, all stockholder and other guests will need to register at www.proxydocs.com/AAL.

 

A replay of the meeting will be made publicly available for two weeks after the meeting at the same website.

 

We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or the meeting, please call the technical support number that will be posted on the virtual meeting platform log-in page.

 

Quorum

The presence, in person or by proxy, of a majority of the outstanding shares of Common Stock as of the record date is necessary to constitute a quorum at the Annual Meeting. Shares are considered present “in person” if voted by the holder of those shares or by proxy during the Annual Meeting.

Vote Required to Approve Each Proposal

With respect to Proposal 1 (Election of Directors), each director must be elected by the affirmative vote of a majority of the votes cast with respect to such director by the shares present in person or represented by proxy and entitled to vote for the election of directors. A majority of the votes cast means that the number of votes cast “FOR” a nominee exceeds the number of votes cast “AGAINST” that nominee. Brokers do not have discretionary authority to vote on this proposal. Abstentions and broker non-votes (as defined below under “How to Vote Your Shares”) are not considered votes cast “FOR” or “AGAINST” a nominee’s election and will have no effect in determining whether a nominee has received a majority of the votes cast. In this election, an incumbent director nominee who does not receive the required number of votes for reelection is expected to tender his or her resignation to the Board in accordance with a policy adopted by the Board. Within approximately 90 days after certification of the election results of the stockholder vote, our Corporate Governance, Public Responsibility and Safety (“CGPRS”) Committee (or such other committee as directed by the Board) will make a determination as to whether to accept or reject the tendered resignation. Following such determination, we will publicly disclose the decision regarding any tendered resignation in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”).

Approval of Proposal 2 (Ratification of Appointment of Independent Registered Public Accounting Firm), Proposal 3 (Advisory Vote to Approve Executive Compensation), Proposal 6 (Approval of Company’s Tax Benefit Preservation Plan) and Proposal 7 (Stockholder Proposal) will require the affirmative vote of the holders of a majority of the shares represented, in person or by proxy, and entitled to vote on the matter at the Annual Meeting, provided a quorum is present. Abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and will have the same legal effect as voting against each proposal.

Approval of Proposal 4 (Amendment to our Certificate of Incorporation to Allow Our Bylaws to be Amended by our Stockholders by Simple Majority Vote) will require the affirmative vote of the holders of at least 80% of all shares

 

 

 

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outstanding as of the Record Date. Abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and will have the same legal effect as voting against Proposal 4.

Approval of Proposal 5 (an Amendment to our Certificate of Incorporation to Allow all Other Provisions of the Certificate of Incorporation to be Amended by Simple Majority Vote) will require the affirmative vote of the holders of at least two-thirds of all shares outstanding as of the Record Date. Abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and will have the same legal effect as voting against Proposal 5.

How to Vote Your Shares

If you are a stockholder of record, you may vote your shares:

 

    over the Internet at www.proxydocs.com/AAL prior to the day of the virtual Annual Meeting (and during the virtual Annual Meeting by registering at www.proxydocs.com/AAL); or

 

    by telephone using the toll-free number 1-866-570-3320 prior to the day of the virtual Annual Meeting; or

 

    by filling out, signing and dating your proxy card and mailing it in the prepaid envelope.

You will need to follow the instructions when using any of these methods to make sure your shares will be voted at the Annual Meeting. We encourage you to vote in advance by telephone, over the Internet or by mail by completing your proxy card, even if you plan to attend the virtual Annual Meeting.

If your shares are held in “street name” through a broker, bank or other nominee, you may instruct your broker, bank or other nominee to vote your shares by following the instructions that the broker, bank or other nominee provides to you with the proxy materials. If you do not provide the broker, bank or other nominee with specific voting instructions, the broker, bank or other nominee that holds your shares generally may vote on “routine” proposals but cannot vote on “non-discretionary” (non-routine) proposals. We believe that Proposal 2 is routine and that Proposals 1, 3, 4, 5, 6 and 7 are non-discretionary.

Most brokers offer the ability for stockholders to submit voting instructions over the Internet, by telephone or by mail by completing a voting instruction card after you have read these proxy materials. If you hold shares through a broker, bank or other nominee and wish to vote your shares at the Annual Meeting, you will need your unique control number which appears on the instructions that accompanied the proxy materials. In any case, voting in advance over the Internet, by telephone or by mail will not prevent you from voting in person at the virtual Annual Meeting.

If the broker, bank or other nominee that holds your shares in “street name” returns a proxy card without voting on a non-discretionary proposal because it did not receive voting instructions from you on that proposal, this is referred to as a “broker non-vote.” “Broker non-votes” are considered in determining whether a quorum exists at the Annual Meeting. Broker non-votes will have no effect on the outcome of Proposals 1, 3, 6 and 7, and will have the same effect as a vote “AGAINST” Proposals 4 and 5. Because brokers have discretionary authority to vote on Proposal 2, broker non-votes are not expected on Proposal 2.

Revoking or Changing Your Vote

Stockholders may revoke or change their votes by the following methods (your last instruction received by us will be counted):

 

    giving notice of revocation to our Corporate Secretary, at American Airlines Group Inc., 1 Skyview Drive, Fort Worth, Texas 76155 (by mail or overnight delivery);

 

    executing and delivering to our Corporate Secretary, at the address noted above, a proxy card relating to the same shares bearing a later date;

 

    voting over the Internet or by telephone prior to the time the voting facilities close; or

 

    logging onto and voting at the virtual Annual Meeting.

If you decide to revoke or change your vote other than by voting at the Annual Meeting, we must receive the notice of revocation or new vote by 11:59 p.m., Eastern Time, on Tuesday, June 7, 2022, the day prior to the date of the Annual Meeting.

 

 

        

 

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If your shares are held in “street name,” you must contact your broker, bank or other nominee to revoke or change your vote. The revocation or change must be made by the broker, bank or other nominee before the Annual Meeting.

Authority of Proxies

All proper votes received by us by 11:59 p.m. Eastern Time, on Tuesday, June 7, 2022, and not revoked will be voted at the Annual Meeting in accordance with the directions noted. In the absence of instructions, shares represented by a signed and dated proxy card will be voted “FOR” the election of all director nominees, “FOR” the ratification of the appointment of the independent registered public accounting firm, “FOR” the approval, on a non-binding, advisory basis, of executive compensation as disclosed in this Proxy Statement, “FOR” the approval of an amendment to our Certificate of Incorporation to allow our Bylaws to be amended by our stockholders by simple majority vote, “FOR” the approval of an amendment to our Certificate of Incorporation to allow all other provisions of our Certificate of Incorporation to be amended by simple majority vote, “FOR” the approval of our Tax Benefit Preservation Plan and “AGAINST” the stockholder proposal.

If any other matters properly come before the Annual Meeting, the persons named as proxies on the proxy card will vote upon those matters according to their judgment. The Board knows of no other items of business that will be presented for consideration at the Annual Meeting other than those described in this Proxy Statement.

Solicitation of Votes

In addition to soliciting votes through the mail, we may solicit votes through our directors, officers and employees in person and by e-mail, telephone or facsimile. We may also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares held of record by them. We will pay all expenses incurred in connection with the solicitation of proxies. In addition, we have retained Innisfree M&A Incorporated to assist in the solicitation for an anticipated fee of $25,000, plus expenses.

Inspector of Election

All votes at the Annual Meeting will be counted by Mediant, Inc., our inspector of election. The inspector of election will separately tabulate affirmative and negative votes, abstentions and broker non-votes.

Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting

The Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December  31, 2021 are available at www.proxydocs.com/AAL prior to and during the Annual Meeting.

Electronic Delivery of Proxy Materials

In order to eliminate the mailing of a paper notice and to speed your ability to access the proxy materials (including our Annual Report on Form 10-K for the year ended December 31, 2021), we encourage you to sign up for electronic delivery of the Notice Regarding the Availability of Proxy Materials using the instructions described below. Stockholders can help us reduce costs and the impact on the environment by electing to receive and access future copies of our proxy statements, annual reports and other stockholder materials electronically by e-mail. If your shares are registered directly in your name with our stock registrar and transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), you can make this election by going to AST’s website (www.astfinancial.com) and (1) clicking Client Login, then Shareholders & Investors, then Manage My Accounts, then select the type of Account—US Shareholder or Non US Shareholder, then Login to Transact; (2) entering the information required to gain access to your account; and (3) clicking Receive Company Mailing via E-Mail. You may also make this election by following the instructions provided when voting over the Internet. If you hold your shares in a brokerage account or otherwise through a third party in “street name,” please refer to the information provided by your broker, bank or other nominee for instructions on how to elect to receive and view future annual meeting materials electronically.

This year, we intend both to mail our proxy materials to certain stockholders and to use the “Notice and Access” method of providing proxy materials to certain stockholders. Under the Notice and Access method, if you have not opted to receive an e-mail notification, you will receive by mail a simple “Notice Regarding the Availability of Proxy Materials,” which will direct you to a website where you may access proxy materials online. You will also be told how to request proxy materials (at no charge) via mail or e-mail, as you prefer.

 

 

 

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Householding of Proxy Materials

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports, or Notices Regarding the Availability of Proxy Materials, with respect to two or more stockholders sharing the same address by delivering a single proxy statement and annual report, or Notice Regarding the Availability of Proxy Materials, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies. In accordance with these rules, only one proxy statement and annual report, or Notice Regarding the Availability of Proxy Materials, will be delivered to multiple stockholders sharing an address unless we have received contrary instructions from one or more of the stockholders. Stockholders who currently receive multiple copies of the proxy statement and annual report, or Notice Regarding the Availability of Proxy Materials, at their address and would like to request “householding” of their communications should contact their broker if they are beneficial owners or direct their request to our Corporate Secretary at the contact information below if they are registered holders.

If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, or Notice Regarding the Availability of Proxy Materials, please notify your broker, if you are a beneficial owner or, if you are a registered holder, direct your written request to Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717 or call Broadridge at 1-866-540-7095.

If requested, we will also promptly deliver, upon oral or written request, a separate copy of the proxy statement and annual report, or Notice Regarding the Availability of Proxy Materials to any shareholder residing at an address to which only one copy was mailed.

 

 

        

 

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PROPOSAL 1—ELECTION OF DIRECTORS

Election of Directors

Upon the recommendation of the CGPRS Committee, the Board has nominated the 14 director candidates listed below under the section “Director Nominees.” Each nominee is currently a director of the Company, two of whom were appointed since our 2021 annual meeting of stockholders.

The authorized number of directors is currently set at 14, and the Board currently consists of 14 members. If elected as a director at the Annual Meeting, each of the nominees will serve a one-year term expiring at the 2023 annual meeting of stockholders and until his or her successor has been duly elected and qualified.

Each of the nominees has consented to serve as a director, if elected.

 

 

The Board unanimously recommends that the stockholders vote “FOR” the proposal to elect the directors of the Company listed below under the section “Director Nominees” for a one-year term expiring at the 2023 annual meeting of stockholders and until his or her successors have been duly elected and qualified.

 

 

 

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Director Nominees

Information regarding our director nominees, including their qualifications and principal occupations, as well as the key experience and qualifications that led the Board to conclude each nominee should serve as a director, is provided below. The categories of key skills are:

 

LOGO

There are no family relationships among the directors and our executive officers.

 

LOGO

 

Independent

 

Director Since:

2013

 

Committees:

Compensation; CGPRS

 

Key Skills:

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

  

Jim Albaugh

 

Select Business Experience:

  Senior Advisor to Industrial Development Funding, a global asset management firm (2018-Present)

  Senior Advisor to Perella Weinberg Partners, a global advisory and asset management firm (2016-2018)

  Senior Advisor to The Blackstone Group L.P., a private equity and financial services firm (2012-2016)

  President and Chief Executive Officer of The Boeing Company’s (“Boeing”) Commercial Airplanes business unit (2009-2012)

  President and Chief Executive Officer of Boeing’s Integrated Defense Systems business (2002-2009)

  Joined Boeing in 1975 and held various other executive positions prior to 2002, including President and Chief Executive of Space and Communications and President of Space Transportation and former member of Boeing’s Executive Council for over ten years.

 

Current Public Company Directorships:

  Howmet Aerospace Inc. (formerly Arconic Inc.), a specialty metals company servicing the aerospace, auto and building sectors (2017-Present)

 

Past Public Company Directorships:

  Goldman Sachs Acquisition Holdings, a special purpose acquisition company (2018-2020)

  Harris Corporation, a technology company, defense contractor and information technology services provider (2016-2019)

  B/E Aerospace, Inc. (2014-2017)

  TRW Automotive Holdings Corp. (2006-2015)

 

Other Leadership Experience and Service:

Member of the boards of directors of the following private entities: Aloft Aeroarchitects (formerly PATS Aerospace), and Belcan Corporation; Chairman of the National Aeronautic Association; past President of the American Institute of Aeronautics and Astronautics; past Chairman of the Aerospace Industries Association; elected member of the International Academy of Aeronautics; elected member of the National Academy of Engineering; member of the board of trustees of Willamette University and the Columbia University School of Engineering.

 

Key Experience/Director Qualifications:

Executive leadership experience in the airplane and airline industry, including experience in the investment industry, and with complex systems, contracts and governmental oversight, as well as accounting and financial literacy and global public company board and corporate governance experience.

 
 

 

 
 
 
 
 
 
 
 
 
 
 
 

 

 

        

 

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LOGO

 

Independent

 

Director Since:

2013

 

Committees:

Compensation; Finance

 

Key Skills and Experience:

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

  

Jeff Benjamin

 

Select Business Experience:

  Senior Advisor to Cyrus Capital Partners, L.P., a registered investment advisor (2008-Present)

  Consultant to Apollo Management, L.P. (“Apollo Management”), a private investment fund (2008-2017)

 

Current Public Company Directorships:

  A-Mark Precious Metals, Inc., a full-service precious metals trading company (2014-Present)

  Rackspace Technology, Inc., a technology services company (2016-Present)

 

Past Public Company Directorships:

  Chemtura Corporation (2010-2017)

  Caesars Entertainment Corp. (2008-2017)

 

Other Leadership Experience and Service:

Member of the boards of directors of the following private entities: ImOn Communications LLC, Higher Learning Technologies Corporation, NRG Media, LLC and Shutterfly Inc.

 

Key Experience/Director Qualifications:

Executive leadership experience in the investment industry, accounting and financial literacy, corporate governance and marketing expertise, success as an investor and extensive experience serving on the boards of directors of global public and private companies.

 

 

 

LOGO

 

Independent

 

Director Since:

2021

 

Committees:

Audit; CGPRS

 

Key Skills and Experience:

 

LOGO    LOGO    LOGO    LOGO

  

Adriane Brown

 

Select Business Experience:

  Managing Partner of Flying Fish Management, LLC, a technology-based venture capital firm (2018-Present)

  President and Chief Operating Officer of Intellectual Ventures Management, LLC, a private equity firm (2010-2017)

  Various roles, including President and Chief Executive Officer of Honeywell Transportation Systems, at Honeywell International Inc., a manufacturing company (1999-2010)

  Various roles, most recently Vice President and General Manager of Environmental Products, at Corning Incorporated, a materials manufacturing company (1980-1999)

 

Current Public Company Directorships:

  KKR & Co. Inc., a global investment company (2021-Present)

  Axon Enterprise, Inc., a law-enforcement technology company (2020-Present)

  eBay Inc., an e-commerce marketplace company (2017-Present)

 

Past Public Company Directorships:

  Allergan plc (2017-2020)

  Raytheon Company (2018-2020)

  Harman International (2013-2017)

 

Other Leadership Experience and Service:

Worked at Honeywell International, Inc. and Corning Incorporated in positions of increasing responsibility. Member of the board of directors of the Washington Research Foundation/WRF Capital.

 

Key Experience/Director Qualifications:

Financial expertise, risk management experience, extensive experience as a senior operating executive for segments of large global public companies, including industrial and manufacturing companies, investment experience in technologies and service as a public company director.

 

 

 

 

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LOGO

 

Lead Independent Director

 

Director Since:

2013

 

Committees:

Audit; CGPRS

 

Key Skills and Experience:

 

LOGO    LOGO    LOGO    LOGO    LOGO      LOGO    LOGO    LOGO

  

John Cahill

 

Select Business Experience:

  Vice Chairman of The Kraft Heinz Company (“Kraft Heinz”), a food and beverage company (2015-Present)

  Chairman and Chief Executive Officer of Kraft Foods Group, Inc. (“Kraft Foods Group”), until its merger with H.J. Heinz Company (2014-2015)

  Non-Executive Chairman of Kraft Foods Group (March 2014-December 2014)

  Executive Chairman of Kraft Foods Group (2012-2014)

  Executive Chairman, North American Grocery of Kraft Foods, Inc., the former parent of Kraft Foods Group (January 2012-December 2012)

 

Current Public Company Directorships:

  Kraft Heinz (2015-Present)

  Colgate-Palmolive Company, a consumer products company (2005-Present)

 

Past Public Company Directorships:

  Kraft Foods Group (2012-2015)

  Legg Mason, Inc. (2009-2014)

  The Pepsi Bottling Group, Inc. (1999-2007)

  Frontier Holdings, Inc. (1984-1985)

 

Other Leadership Experience and Service:

Former Industrial Partner at Ripplewood Holdings LLC; spent nine years with The Pepsi Bottling Group, Inc., culminating in the position of Chairman and Chief Executive Officer; and worked at PepsiCo, Inc. for nine years in a variety of leadership positions.

 

Key Experience/Director Qualifications:

Leadership and operations experience in executive leadership roles at global public companies, as well as airline experience, investment, accounting and financial expertise, experience in consumer products industries and public company board and corporate governance experience.

 
 
 
 
 

 

 

 

LOGO

 

Independent

 

Director Since:

2013

 

Committees:

Audit; Finance

 

Key Skills and Experience:

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

  

Mike Embler

 

Select Business Experience:

  Chief Investment Officer of Franklin Mutual Advisers, LLC (“Franklin Mutual Advisers”), an asset management company (2005-2009)

  Head of Franklin Mutual Advisers’ Distressed Investment Group (2001-2005)

 

Current Public Company Directorships:

  NMI Holdings, Inc., a mortgage insurance provider (2012-Present)

  Ventas, a healthcare REIT (2022- Present)

 

Past Public Company Directorships:

  Taubman Centers, Inc., a shopping mall REIT (2018-2020)

  CIT Group Inc. (2009-2016)

  Dynegy Inc. (2011-2012)

  AboveNet Inc. (2003-2012)

  Kindred Healthcare Inc. (2001-2008)

 

Other Leadership Experience and Service:

Worked at Nomura Holding America Inc. for almost a decade in positions of increasing responsibility culminating in the position of Managing Director; former member of the board of trustees of The Mohonk Preserve; and holds certificates in Cyber Security Oversight (National Association of Corporate Directors) and Environmental Conservation and Sustainability (Earth Institute Center for Environmental Sustainability).

 

Key Experience/Director Qualifications:

Experience in finance, asset management and restructurings, capital markets and capital management, experience as a senior executive, perspective as an institutional investor, success as an investor and service as a director of global public and private companies.

 
 
 

 

 

        

 

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LOGO

 

Independent

 

Director Since:

2013

 

Committees:

Audit

 

Key Skills and Experience:

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

  

Matt Hart

 

Select Business Experience:

  President and Chief Operating Officer of Hilton Hotels Corporation (“Hilton”), a hotel developer and operator, until its acquisition by a private equity firm (2004-2007)

  Executive Vice President and Chief Financial Officer of Hilton (1996-2004)

 

Current Public Company Directorships:

  American Homes 4 Rent, a real estate investment trust (2012-Present)

  Air Lease Corporation, an aircraft leasing company (2010-Present)

 

Past Public Company Directorships:

  B. Riley Financial, Inc. (2009-2015)

  US Airways Group, Inc. (2006-2013)

  Kilroy Realty Corporation (1997-2008)

  America West Holdings Corporation (2004-2005)

 

Other Leadership Experience and Service:

Former Senior Vice President and Treasurer of The Walt Disney Company; former Executive Vice President and Chief Financial Officer of Host Marriott Corp.; and member of the board of directors of Heal the Bay.

 

Key Experience/Director Qualifications:

Financial expertise, risk management experience, extensive experience as a senior operating and finance executive for large global public companies, including companies in the consumer travel industry, investment and mergers and acquisitions experience, service as a public company director and airline experience.

 
    
 
 
 

 

 

 

LOGO

 

Chief Executive Officer and President

 

Director Since:

2022

 

Key Skills and Experience:

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

  

 

Robert Isom

 

Select Business Experience:

  Chief Executive Officer of AAG and American (2022-Present)

  President of AAG and American (2016-Present)

  Executive Vice President and Chief Operating Officer of AAG and American (2013-2016)

  Executive Vice President and Chief Operating Officer of US Airways Group, Inc. and US Airways, Inc. (2007-2013)

 

Current Public Company Directorships:

  AAG (2022-Present)

 

Past Public Company Directorships:

  Pinnacle Airlines Corporation (2003-2005)

 

Other Leadership Experience and Service:

Prior to joining US Airways, Mr. Isom held senior executive finance, commercial, operations, strategy and international roles at GMAC, LLC, Northwest Airlines and America West Airlines. He started his career at The Procter & Gamble Company. Mr. Isom serves as a board member of Airlines for America and as a member of the oneworld Governing Board.

 

Key Experience/Director Qualifications:

Financial, airline, marketing, human resources and labor relations experience, as well as nearly 30 years of experience in the airline industry; over 20 years of experience as an airline senior executive, and mergers and acquisitions experience.

 

 

 

 

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LOGO

 

Independent

 

Director Since:

2015

 

Committees:

Compensation; CGPRS

 

Key Skills and Experience:

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

  

Sue Kronick

 

Select Business Experience:

  Operating Partner at Marvin Traub Associates, a New York based retail consulting firm (2012-Present)

  Vice Chairman of Macy’s, Inc. (“Macy’s”), owner of Macy’s and Bloomingdales retail department stores (2003-2010)

  Group President, Regional Department Stores of Macy’s (2001-2003)

  Chairman and Chief Executive Officer of Burdines/Macy’s Florida (1997-2001)

 

Current Public Company Directorships:

  Hyatt Hotels Corporation, a hospitality company (2009-Present)

 

Past Public Company Directorships:

  The Pepsi Bottling Group, Inc. (1999-2010)

 

Other Leadership Experience and Service:

Member of the board of directors of the John S. and James L. Knight Foundation and the Miami City Ballet.

 

Key Experience/Director Qualifications:

Financial, marketing and operational expertise, as well as experience serving as a global public company director and building industry leading brands as a result of the various executive management positions held with Macy’s.

 

 

 

 

LOGO

 

Independent

 

Director Since:

2015

 

Committees:

Audit; Finance

 

Key Skills and Experience:

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

  

Marty Nesbitt

 

Select Business Experience:

  Co-Chief Executive Officer of The Vistria Group, LLC, a private-equity investment firm (2013-Present)

  President and Chief Executive Officer of PRG Parking Management (PRG), an owner and operator of off-airport parking facilities (1996-2012)

 

Current Public Company Directorships:

  Chewy, Inc., an online retailer for pet needs (2020-Present)

  Center Point Energy Corp, a public utility company (2018-Present)

 

Past Public Company Directorships:

  Jones Lang LaSalle Incorporated, a public commercial real estate company (2011-2021)

  Pebblebrook Hotel Trust (2009-2010)

  Norfolk Southern Corporation (2013-2018)

 

Other Leadership Experience and Service:

Former member of the board of directors of PRG; former officer of the Pritzker Realty Group, L.P.; former Vice President and Investment Manager at LaSalle Partners, one of the predecessor corporations of Jones Lang LaSalle Incorporated; Trustee of Chicago’s Museum of Contemporary Art; and Chairman of the Barack Obama Foundation.

 

Key Experience/Director Qualifications:

Executive leadership, operational, financial and investment experience, as well as global public company board experience.

 
 

 

 
 
 

 

 

        

 

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LOGO

 

Independent

 

Director Since:

2013

 

Committees:

Compensation; Finance

 

 

Key Skills and Experience:

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

  

Denise O’Leary

 

Select Business Experience:

  Private venture capital investor (1997-Present)

  Partner (1987-1996) and associate (1983-1987) at Menlo Ventures, a venture capital firm

 

Current Public Company Directorships:

  Medtronic plc, a medical technology company (2000-Present)

 

Past Public Company Directorships:

  Calpine Corporation (2009-2018)

  US Airways Group, Inc. (2005-2013)

  Chiron Corporation (2002-2006)

  America West Holdings Corporation (1998-2005)

 

Other Leadership Experience and Service:

Chair of the board of trustees of the University of Denver; member of the Board of Regents of the Smithsonian Institution; member of the board of directors of International Environmental Standards; and former member of the boards of directors of the following private entities: Galvanize, Inc., the Bonfils-Stanton Foundation, Lucile Packard Children’s Hospital, Stanford Hospital & Clinics, Smithsonian National Board, the Denver Foundation, the Corporation for Supportive Housing, Connect for Health Colorado and the University of Colorado Hospital Authority.

 

Key Experience/Director Qualifications:

Executive leadership experience in the investment industry, financial expertise, experience in the oversight of risk management, human resources expertise, extensive service as a global public company director, success as an investor and airline industry expertise.

 
 

 

 
 
 
 

 

 

 

LOGO

 

Chairman

 

Director Since:

2013

 

Key Skills and Experience:

 

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

  

Doug Parker

 

Select Business Experience:

  Chairman of the board of directors of AAG (2014-Present)

  Chief Executive Officer of AAG and American (2013-2022)

  Chairman of the board of directors of and Chief Executive Officer of US Airways Group, Inc. and US Airways, Inc. (2005-2013)

 

Current Public Company Directorships:

  AAG (2013-Present)

 

Past Public Company Directorships:

  US Airways Group, Inc. (2005-2013)

  Pinnacle West Capital Corporation (2007-2012)

  America West Holdings Corporation (1999-2005)

 

Other Leadership Experience and Service:

Former Chairman of the board of directors of and Chief Executive Officer of America West and America West Airlines (“AWA”); Chairman of Airlines for America; former Senior Vice President and Chief Financial Officer of AWA; member of the board of advisors for the Cox School of Business at Southern Methodist University; and member of the Vanderbilt University Board of Trust.

 

Key Experience/Director Qualifications:

Financial, airline, marketing, human resources and labor relations experience, as well as 30 years of experience in the airline industry, nearly 20 years of experience as an airline Chairman and Chief Executive Officer, mergers and acquisitions experience and experience as a global public company director.

 
 

 

 
 
 
 
 

 

 

 

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Independent

 

Director Since:

2005

 

Committees:

CGPRS; Finance

 

Key Skills and Experience:

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

  

Ray Robinson

 

Select Business Experience:

  Non-executive Chairman of the board of directors of Progressive Leasing, Inc. following its spin-off from Aaron’s Inc. (“Aaron’s”) (2020-Present)

  Non-executive Chairman of the board of directors of Aaron’s, Inc., a lease-to-own retailer (2014-2020)

  Director and non-executive Chairman of Citizens Trust Bank, a privately-held African American-owned bank, and its affiliated holding company (2003-Present)

  Held several executive positions at AT&T from 1968-2003, including President of the Southern Region, its largest region, President and Chief Executive Officer of AT&T Tridom, Vice President of Operations for AT&T Business Customer Care, Vice President of AT&T Outbound Services and Vice President of AT&T Public Relations

 

Current Public Company Directorships:

  Progressive Leasing, Inc., following its spin-off from Aaron’s, Inc. (2020-Present)

  Fortress Transportation and Infrastructure, a public company that invests in transportation infrastructure and equipment (2015-Present)

  Acuity Brands, Inc., a public lighting solutions company (2001-Present)

 

Past Public Company Directorships:

  Aaron’s, Inc. (2002-2020)

  Avnet, Inc. (2000-2017)

  Citizens Bancshares Corporation (deregistered as a public company in 2017)

  RailAmerica Inc. (2009-2011)

 

Other Leadership Experience and Service:

Member of the board of directors of the Georgia Aquarium; Vice Chairman of the East Lake Community Foundation; and member of the board of trustees of the University of Denver.

 

Key Experience/Director Qualifications:

Extensive technology, banking, communications, strategic and executive leadership and marketing experience, as well as experience serving as a public company director.

 
 

 

 

 

LOGO

 

Independent

 

Director Since:

2022

 

Committees:

Audit; CGPRS

 

Key Skills and Experience:

 

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO  

 

LOGO   LOGO   LOGO   LOGO

  

Gregory Smith

 

Select Business Experience:

  Chief Financial Officer and Executive Vice President of Enterprise Operations of The Boeing Company (“Boeing”) (2020-2021; 2012-2021); Interim Chief Executive Officer of Boeing (2019-2020); Vice President of Finance and Corporate Controller of Boeing (2010-2012); and Vice President of Financial Planning and Analysis of Boeing (2008-2010)

  Vice President of Investor Relations of Raytheon Company (2004-2008)

 

Current Public Company Directorships:

  Intel Corporation, a technology company (2017-Present)

 

Other Leadership Experience and Service:

Member of the boards of directors of the Lurie Children’s Hospital and Northwestern Memorial Healthcare.

 

Key Experience/Director Qualifications:

Financial expertise and extensive experience as a senior executive for a large global public company, risk management experience, extensive industry experience as executive officer of airplane manufacturer, extensive experience as a global business leader, with experience in regulatory affairs, as well as experience serving as a public company director.

 

 

        

 

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LOGO

Independent

 

Director Since:

2020

 

Committees:

Compensation; Finance

 

Key Skills and Experience:

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

  

 

Doug Steenland

 

Select Business Experience:

  Senior Advisor to The Blackstone Group L.P. (2009-Present)

  Chief Executive Officer of Northwest Airlines Corporation (2004-2008)

  President of Northwest Airlines Corporation (2001-2004)

  Senior Partner of law firm that is now DLA Piper LLP (1984-1991)

 

Current Public Company Directorships:

  American International Group, Inc., an insurance company (2009-Present)

  Hilton Worldwide Holdings, Inc., a hotel management company (2010-Present)

  London Stock Exchange Group (2021-Present)

 

Past Public Company Directorships:

  Performance Food Group (2012-2019)

  Travelport LLC (2012-2019)

 

Other Leadership Experience and Service:

Member of the boards of trustees of the Brookings Institute, the board of directors of the Middle East Investment Initiative and member of the board of visitors of the Duke University Fuqua Business School; former Chairman of the Air Transport Association.

 

Key Experience/Director Qualifications:

Former airline president and CEO, extensive experience as a global business leader, with experience in finance, restructuring and regulatory affairs, as well as experience serving as a public company director.

 
 

 

 
 
 
 
 

 

 

 

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BOARD COMPOSITION

How We Build a Board that is Right for American Airlines

Each of the 14 current nominees for director recommended for election at the Annual Meeting is a current member of the Board, two of whom were appointed since our 2021 annual meeting of stockholders. The effectiveness of the Board and the recruitment of directors are overseen by the CGPRS Committee. In evaluating candidates for director, the CGPRS Committee considers the qualifications described below. Based on its evaluation of each of the current nominees’ qualifications and his or her prior performance as a director, the CGPRS Committee determined to recommend each nominee for election. The CGPRS Committee received no nominations from stockholders for the Annual Meeting.

Consistent with its charter, the CGPRS Committee proposes for nomination existing directors and new candidates who have the highest personal and professional integrity, have demonstrated exceptional intelligence and judgment, have proven leadership skills, as well as the requisite skills necessary to advance our long-term strategic plan, are committed to our success and have the ability to work effectively with the Company’s Chief Executive Officer and other members of the Board. Also, a nominee must possess skills, experience and expertise appropriate to best serve the long-term financial interests of our stockholders.

The Corporate Governance Guidelines (the “Governance Guidelines”) specify that it is the objective of the Board that it be composed of individuals who have, among other things, a diversity of skills, expertise and perspective (including based on age, gender, race and ethnic diversity) appropriate for the business and operation of the Company. The Board currently includes a group of individuals who have demonstrated success and leadership in a variety of fields and endeavors, with a broad diversity of experience, opinions, perspectives, professions, skills, expertise, education, geographic representation and backgrounds. The CGPRS Committee and the Board believe that the Board is, and should continue to be, comprised of persons who can contribute experience in public company board service and corporate governance and areas such as strategic planning, leadership of large, complex organizations, international and global operations, the airline, travel and transportation industry, finance, accounting, and investment, risk management, legal and regulatory, customer service, marketing and consumer products, media and communications, labor relations and human resources (including leadership assessment and diversity), real estate and facilities, safety, information technology, climate change, sustainability and community service. The CGPRS Committee does not assign specific weight to particular criteria and no particular criterion is necessarily applicable to all prospective nominees.

The Governance Guidelines also require that any directors who also serve as chief executive officers of public companies should not serve on more than two boards of public companies other than the Company’s Board, and other directors should not serve on more than four boards of public companies, other than the Company’s Board.

The CGPRS Committee periodically evaluates the performance of the Board, its committees and the directors in an effort to facilitate the continuous improvement of the Board, as well as to assess the specific qualifications, experiences and perspectives of future director candidates that would be most valuable and have the most impact on our success.

In accordance with applicable listing standards of The Nasdaq Stock Market (“Nasdaq”), the Board confirms that at least a majority of the Board is independent in accordance with the Nasdaq definition of independence and that the members of the Board, as a group, maintain the requisite qualifications under applicable Nasdaq listing standards for service on the Audit, Compensation and CGPRS Committees.

As a culmination of the Board’s CEO succession planning, we announced in December 2021 that Robert Isom would succeed Doug Parker as the Chief Executive Officer of the Company and be appointed as a director of AAG effective March 31, 2022. The Board determined that it was important to retain Doug Parker in the role of Chairman of the Board in order to ensure a successful transition in leadership.

Greg Smith, who was elected to our Board on January 18, 2022, was identified to the Company by a third party search firm and was also previously known to certain of our executive officers and Board members due to his involvement in the airline industry.

Board Diversity and Tenure Matrix

The CGPRS Committee recognizes the benefits of diversity in the boardroom, including better reflecting our diverse customer and employee base and the healthy debate that stems from different viewpoints that may result from diverse backgrounds. Accordingly, our Board is diverse in many ways, with differing geographic, business, gender and racial backgrounds. One-third of our Board nominees are diverse based on gender and/or ethnicity.

 

 

        

 

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Of our 14 Board nominees, nine have served on our Board for less than ten years and another four have been on our Board for less than five years. We believe this attains the right balance between new directors who bring new ideas and insights and longer-serving directors with deep institutional knowledge of our Board and company.

The demographic information presented below is as of the date of this Proxy Statement and is based on voluntary self-identification by each nominee. Additional biographical information on each nominee is set out above starting on page 7.

 

DEMOGRAPHICS
      LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

RACE/ETHNICITY

                                         

African American or Black

                                         

Alaskan Native or Native American

                                         

Asian

                                         

Hispanic or Latinx

                                         

Native Hawaiian or Pacific Islander

                                         

White

                                         

GENDER

                                         

Male

                                         

Female

                                         

BOARD TENURE

                                         

Years

   8    8    1    8    8    8    0    6    6    8    8    16    0    1

Age

   71    60    63    64    58    70    58    70    59    64    60    74    55    70

 

Tenure    

 

  

Age    

 

 

LOGO

  

 

LOGO

Diversity    

 

                 LOGO

 

 

 

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Stockholder Recommendations or Nominations of Director Candidates

The Board welcomes recommendations from its stockholders for director candidates that they believe meet the standards described above under “How We Build a Board that is Right for American Airlines.” We encourage stockholders with any such director candidate recommendations to contact us directly prior to going through the formal director nomination procedures described below. The CGPRS Committee has a policy of considering candidates who are recommended by stockholders for membership to the Board in the same manner as candidates recommended by members of the Board.

Under our Bylaws, any stockholder wishing to nominate a director should submit in writing the candidate’s name, biographical information, business qualifications and other information required by the Bylaws, to Susan D. Kronick, Chair of the Corporate Governance, Public Responsibility and Safety Committee, American Airlines Group Inc., MD8B503, 1 Skyview Drive, Fort Worth, Texas 76155. All submissions must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director, if elected, and must otherwise be in compliance with our Bylaws. The Bylaws require that written nominations be received by the Company no sooner than 120 days and no later than 90 days prior to the first anniversary of the preceding year’s annual meeting of stockholders. For the 2023 annual meeting of stockholders, notice must be delivered no sooner than February 8, 2023 and no later than March 10, 2023. All qualified submissions will be reviewed by the CGPRS Committee at the next appropriate meeting.

In addition, our Bylaws permit certain of our stockholders who have beneficially owned 3% or more of our outstanding Common Stock continuously for at least three years to submit nominations to be included in the Company’s proxy materials for up to 20% of the total number of directors then serving. Notice of proxy access director nominations for the 2023 annual meeting of stockholders must be delivered to our Corporate Secretary at our principal executive offices no earlier than November   , 2022 and no later than the close of business on December   , 2022. The notice must set forth the information required by our Bylaws with respect to each proxy access director nomination that eligible stockholder or stockholders intend to present at the 2023 annual meeting of stockholders and must otherwise be in compliance with our Bylaws.

In addition to satisfying the foregoing requirements under the Company’s Bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 9, 2023.

In connection with the 2023 annual meeting of stockholders, we intend to file a proxy statement and a WHITE proxy card with the SEC in connection with our solicitation of proxies for that meeting.

 

 

        

 

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PROPOSAL 2—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ratification of Independent Registered Public Accounting Firm

Our Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm. Our Audit Committee annually reviews the independent registered public accounting firm’s qualifications, performance, fees and independence. Following its review, our Audit Committee has selected KPMG LLP (“KPMG”) to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2022, and our Board has directed that KPMG’s appointment be submitted to our stockholders for ratification at the Annual Meeting.

KPMG has served as our independent registered public accounting firm since 2014. The Audit Committee believes it is important for the independent registered public accounting firm to maintain its objectivity and independence. In accordance with SEC rules and KPMG policies, the firm’s lead engagement partner rotates every five years. The Audit Committee and its Chair are directly involved in the selection of KPMG’s new lead engagement partner. Furthermore, in order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered public accounting firm.

The Board has directed that KPMG’s appointment for the fiscal year ending December 31, 2022 be submitted to our stockholders for ratification at the Annual Meeting. The Audit Committee and the Board believe that the continued retention of KPMG to serve as the Company’s independent external auditor is in the best interests of the Company and its stockholders. If the stockholders do not ratify the appointment of KPMG, the Audit Committee will reconsider the appointment.

A representative of KPMG is expected to be present at the Annual Meeting. The representative will have an opportunity to make a statement if he or she desires to do so, and the representative is also expected to be available to respond to appropriate questions from stockholders.

 

The Audit Committee and the Board unanimously recommend that the stockholders vote “FOR” the proposal to ratify the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2022.

Independent Registered Public Accounting Firm Fees

The following table presents fees billed for professional services rendered by KPMG, AAG’s principal accountant for the audit of the financial statements of AAG and its subsidiaries as of and for the fiscal years ended December 31, 2021 and 2020, as well as fees billed in this period for other services rendered by KPMG.

 

       

Fiscal Year 2021

($)

    

Fiscal Year 2020

($)

    

Audit Fees

      

 

3,860,000

      

 

3,710,000

   

Audit-Related Fees

      

 

1,530,000

      

 

1,220,000

   

Tax Fees

      

 

30,000

      

 

38,000

   

All Other Fees

      

 

      

 

         

Total

      

 

5,420,000

      

 

4,968,000

         

“Audit Fees” are for professional services rendered for the audits of the annual financial statements included in our Annual Report on Form 10-K (including fees for the audits of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002, as amended) and quarterly reviews of the financial statements included in our quarterly reports on Form 10-Q.

“Audit-Related Fees” are for professional services rendered in connection with securities offerings and other SEC filings, significant auditing work on transactions and consultations concerning financial accounting and reporting standards and attest services.

 

 

 

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“Tax Fees” primarily include fees for professional services rendered in connection with tax compliance services.

There were no fees that fall into the classification of “All Other Fees” for the fiscal years ended December 31, 2021 and 2020.

Policy on Audit Committee Pre-Approval

The Audit Committee is responsible for appointing, setting compensation for and overseeing the work of the independent registered public accounting firm. The Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm, including audit services, audit-related services, tax services and other services. The Audit Committee has delegated pre-approval authority to its Chair. Under this delegation, the Chair must report any pre-approval decision he or she makes to the Audit Committee at its next meeting following such approval.

 

 

        

 

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PROPOSAL 3—ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (SAY-ON-PAY)

Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), allows our stockholders to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, commonly known as a “say-on-pay” vote. The Board has adopted a policy providing for an annual say-on-pay advisory vote. Unless the Board modifies its policy on the frequency of future say-on-pay advisory votes, we will bring these proposals to our stockholders annually and the next say-on-pay advisory vote will be held at the 2023 annual meeting of stockholders.

Our Compensation Committee and the Board believe that our compensation practices align our executive compensation structure with stockholders’ interests and current market practices. Our compensation strategy is designed to provide a total compensation package that will attract and retain high-caliber executives and align their objectives, incentives and contributions with corporate objectives and stockholder interests, as well as to be flexible and complementary to meet our compensation objectives. At the 2021 annual meeting of stockholders, our stockholders approved the compensation of our named executive officers with an approval representing approximately 86.2% of the shares represented in person or by proxy at the meeting and entitled to vote.

2021 continued to be a very challenging time in our industry’s history, as the COVID-19 pandemic caused drastic disruptions in global demand for air travel, resulting in a severe decline in our business. However, throughout these challenges, we remained consistent in our approach and philosophy that our executive compensation programs provide both fair pay and pay for performance and align with the interests of stockholders.

Substantial reductions in earned compensation over a number of years combined with the applicable compensation limits under the CARES Act, PSP2 and PSP3 shaped our 2021 executive compensation decisions. While the Compensation Committee made temporary changes to the 2021 long-term incentive program (“LTIP”) award to ensure compliance with the CARES Act, PSP2 and PSP3 and retain our executives, we have re-established our historical performance-based cash and equity incentive programs for 2022.

Highlights of our compensation program and our pay-for-performance results include:

Significant Reductions to Compensation. We entered into, with the federal government, payroll support and loan agreements under the CARES Act, PSP2 and PSP3, pursuant to which our named executive officers became subject to significant limits on their compensation. Under the applicable limits, each of our named executive officers’ total compensation during any 12-month period from March 24, 2020 until April 1, 2023, is capped at an amount equal to the sum of (i) $3 million and (ii) 50% of the total compensation in excess of $3 million received by such executive officer in calendar year 2019. For 2021, we implemented significant reductions to the total target direct compensation for our named executive officers in order to comply with such limits, as set forth in the charts below, and they will continue to be a primary determinant of our named executive officers’ compensation over the remaining period during which they are in effect. For 2021, Mr. Parker’s LTIP target value was reduced over 30% and Mr. Isom’s LTIP target value was reduced over 20%, in each case, as compared with 2020 levels.

 

 

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Adjustments to 2021 Compensation Program. Going into 2021, our named executive officers had experienced substantial decreases to their compensation, including to a much larger extent than their peers at our competitors. Our named executive officers had taken substantial base salary reductions during a significant part of 2020 at their request, the 2020 short-term incentive plan (“STIP”) had been suspended and the named executive officers did not receive any payout, and each named executive officer held three outstanding awards of performance-vesting restricted stock units (“RSUs”) as of the end of 2020, all of which were tracking at below threshold as of the end of 2020, with the 2018 and 2019 grants forfeiting in their entirety in February 2021 and February 2022, respectively.

 

Performance-Vesting RSU Pay Outcomes as of December 31, 2020

2018 Grant (forfeited in February 2021)

  Tracking Below Threshold (0%)

2019 Grant (forfeited in February 2022)

  Tracking Below Threshold (0%)

2020 Grant (potentially vesting in 2023)

  Tracking Below Threshold (0%)

In addition, as described above, as a condition of the payroll support and loan agreements entered into with the federal government under the CARES Act, PSP2 and PSP3, we implemented significant reductions to the total target direct compensation for our named executive officers in order to comply with the applicable limits. The 2021 program reflected these reductions to total target direct compensation.

In making 2021 compensation decisions, the Compensation Committee considered concerns related to the need to retain and reward our management team throughout the COVID-19 pandemic and the backdrop of significant reductions in compensation. The 2021 program was modified, solely for 2021, to provide more certainty to our management team by consisting primarily of base salary (other than in the case of Mr. Parker who has not received a base salary since 2015) and time-vesting RSUs vesting over three years. We have re-established our historical performance-based cash and equity incentive programs for 2022, as described more fully below.

A Commitment to Fair Pay and Pay-for-Performance with a substantial portion of each executive officer’s compensation being “at risk” and aligned with stockholder interests, as shown by the following:

 

    At his request, Mr. Parker’s target direct compensation has been historically set at and remained in 2021 below the average for his peers at Delta and United.

 

    100% of Mr. Parker’s direct compensation has been consistently provided in the form of equity incentives, and except for 2021, at least 50% could only vest based upon the achievement of performance objectives, underscoring our commitment to paying for performance and further aligning his interests with that of our stockholders. As described above, for 2021 only, 100% of Mr. Parker’s direct compensation was provided in the form of time-vesting equity incentives.

 

    For 2022, the Compensation Committee re-established our performance-based STIP and the performance-based components of our LTIP programs for the named executive officers. The 2022 STIP is designed to align management with our goals to run a reliable operation and to return to profitability while building on our momentum on diversity, equity and inclusion. Our 2022 LTIP for our named executive officers returned to incorporating both performance- and time-vesting components, with the performance-vesting component weighted 50% by target value and tied to attainment of total debt reduction (60% weighting) and relative pre-tax income margin improvement (40% weighting) versus our industry peers.

Performance-Vesting RSUs Continue to Track Significantly Below Target. Other than for 2021, our LTIP for our named executive officers has incorporated both performance- and time-vesting components, with the performance-vesting component weighted at least 50% by target value. Each named executive officer held two outstanding awards with performance-vesting components as of the end of 2021, with the 2019 grant tracking at below threshold as of the end of 2021 and the 2020 grant tracking at only 27% of target. The 2019 performance-vesting RSUs forfeited in their entirety in February 2022.

Realizable Compensation Significantly Less Than Target Compensation. As shown in the charts below, as of December 31, 2021, our named executive officers’ three-year average realizable compensation continued to be significantly less than their target compensation.

 

 

        

 

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Target compensation includes base salary, target annual short-term incentive and the grant date fair value of long-term incentives for the applicable year. Realizable compensation includes base salary earned, annual short-term incentive earned for each applicable year and values of equity awards granted during 2019-2021 as follows: with respect to RSUs that had vested by December 31, 2021, based on the closing stock price on the applicable vesting date, with respect to time-vesting RSUs that were unvested as of December 31, 2021, based on the closing stock price as of December 31, 2021, and with respect to performance-vesting RSUs that were unvested as of December 31, 2021, based on the performance and closing stock price as of December 31, 2021.

No Employment, Change in Control or Severance Agreements. None of our executive officers is party to any employment or severance agreement providing change in control or severance benefits. These were eliminated at our executive officers’ request.

A Continued Commitment to Good Compensation Governance Practices. Compensation packages for our executive officers are (i) established by our Compensation Committee that consists solely of independent directors, (ii) consistent with market practice, and (iii) reasonable in light of our corporate and each individual executive’s performance.

Clawback Provisions. All incentive compensation paid to our executive officers are subject to clawback provisions.

Stock Ownership Guidelines. We maintain stock ownership guidelines that further align our executives’ long-term interests with those of our stockholders, as well as good disclosure practices.

Mitigating Compensation Risk. We mitigate compensation risk by providing a compensation package that focuses on both short- and long-term goals and requiring a substantial stock ownership commitment, which encourages our executives to focus on the Company’s success both during the immediate fiscal year and for the future.

For more information about our compensation practices and philosophy, see the section entitled “Compensation Discussion and Analysis” beginning on page 56.

We are asking our stockholders to indicate their support for our named executive officer compensation as described in this Proxy Statement pursuant to the compensation disclosure rules of the SEC. This vote gives stockholders the opportunity to express their views on the named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our executive officers and our philosophy, policies and practices described in this Proxy Statement. Accordingly, we are asking our stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that AAG’s stockholders approve, on a non-binding, advisory basis, the compensation of AAG’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC in the Compensation Discussion and Analysis section, the compensation tables, narrative discussion and any related material disclosed in this Proxy Statement for the Annual Meeting.”

 

 

 

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The say-on-pay vote is advisory, and therefore not binding on us, our Compensation Committee or the Board. However, the Board and Compensation Committee value the opinions of our stockholders and will consider the outcome of this advisory vote when making future decisions about executive compensation.

 

The Board unanimously recommends that the stockholders vote “FOR” the approval of executive compensation.

 

 

        

 

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PROPOSAL 4—APPROVE AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO ALLOW OUR BYLAWS TO BE AMENDED IN THE FUTURE BY SIMPLE MAJORITY VOTE

At our 2021 annual meeting of stockholders, the stockholders voted on a stockholder-sponsored proposal requesting that the Board take the steps necessary to eliminate each stockholder voting requirement in our Certificate of Incorporation or Bylaws that calls for a greater than simple majority vote. The proposal passed with the support of a majority of the votes cast at the meeting.

The Board has carefully considered the advantages and disadvantages of maintaining the supermajority voting provisions in our Certificate of Incorporation, including the provision requiring the vote of the holders of at least 80% of the voting power of the shares outstanding in order for our stockholders to amend our Bylaws. While this provision is designed to ensure that the interests of all stockholders are fully protected by requiring any amendments to our Bylaws to be supported by a significant portion of our stockholders, the Board recognizes that there are different perspectives on this matter and, after weighing these considerations, has determined that it is in the best interests of the Company and its stockholders to amend our Certificate of Incorporation to eliminate the supermajority voting requirement for amendments to the Bylaws by our stockholders (the “Bylaw Voting Threshold Amendment”). The Board recommends that stockholders approve the Bylaw Voting Threshold Amendment.

This proposal is separate and independent from the Supermajority Elimination Amendment in Proposal 5 because the vote required to approve this proposal is different than that required to approved Proposal 5.

The description in this Proposal of the Bylaw Voting Threshold Amendment to eliminate the supermajority voting requirement in the Certificate of Incorporation with respect to amendments to the Bylaws by our stockholders is qualified in its entirety by reference to the text of the Bylaw Voting Threshold Amendment, which is attached to this Proxy Statement as Appendix A.

An affirmative vote of the holders of at least 80% of the voting power of the shares outstanding as of the Record Date is required to adopt Proposal 4. If approved, this proposal would become effective upon the filing of a certificate of amendment setting forth the Bylaw Voting Threshold Amendment with the Secretary of State of Delaware, which we intend to do promptly after the required stockholder approval is obtained.

The Board has also approved an amendment to the Bylaws to remove the corresponding supermajority amendment threshold from the Bylaws, the effectiveness of which is subject to stockholder approval of the Bylaw Voting Threshold Amendment at the 2022 Annual Meeting of Stockholders and the filing of the certificate of amendment setting forth the Bylaw Voting Threshold Amendment. If the foregoing events occur, such amendment to the Bylaws will be effective immediately following the filing of the Bylaw Voting Threshold Amendment with the Secretary of State of Delaware.

 

The Board unanimously recommends that the stockholders vote “FOR” the approval of the proposal to amend our Certificate of Incorporation to allow our Bylaws to be amended by simple majority vote.

 

 

 

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PROPOSAL 5—APPROVE AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO ALLOW ALL OTHER PROVISIONS OF THE CERTIFICATE OF INCORPORATION TO BE AMENDED BY SIMPLE MAJORITY VOTE

At our 2021 annual meeting of stockholders, the stockholders voted on a stockholder-sponsored proposal requesting that the Board take the steps necessary to eliminate each stockholder voting requirement in our Certificate of Incorporation or Bylaws that calls for a greater than simple majority vote. The proposal passed with the support of a majority of the votes cast at the meeting.

The Board has carefully considered the advantages and disadvantages of maintaining the supermajority voting provisions in our Certificate of Incorporation, including the provisions requiring the vote of the holders of at least two-thirds of the voting power of the shares outstanding in order for our stockholders to amend certain provisions of our Certificate of Incorporation (including, among other things, provisions related to the size and terms of our Board, vacancies on the Board, stockholder consents, special meetings of stockholders and the requirements to amend the Certificate of Incorporation). While the supermajority voting provisions are designed to ensure that the interests of all stockholders are fully protected by requiring any amendments to our Certificate of Incorporation to be supported by a significant portion of our stockholders, the Board recognizes that there are different perspectives on this matter and, after weighing these considerations, has determined that it is in the best interests of the Company and its stockholders to amend our Certificate of Incorporation to eliminate the supermajority voting provisions (the “Supermajority Elimination Amendment”). The Board recommends that stockholders approve the Supermajority Elimination Amendment.

This proposal is separate and independent from the Bylaw Voting Threshold Amendment in Proposal 4 because the vote required to approve this proposal is different than that required to approved Proposal 4.

The description in this Proposal of the Supermajority Elimination Amendment to eliminate the supermajority provisions in the Certificate of Incorporation is qualified in its entirety by reference to the text of the Supermajority Elimination Amendment, which is attached to this Proxy Statement as Appendix A.

An affirmative vote of the holders of at least two-thirds of the voting power of the shares outstanding as of the Record Date is required to adopt Proposal 5. If approved, this proposal would become effective upon the filing of a certificate of amendment setting forth the Supermajority Elimination Amendment with the Secretary of State of Delaware, which we intend to do promptly after the required stockholder approval is obtained.

 

The Board unanimously recommends that the stockholders vote “FOR” the approval of the proposal to amend our Certificate of Incorporation to allow the Certificate of Incorporation to be amended by simple majority vote.

 

 

        

 

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PROPOSAL 6—APPROVE THE COMPANY’S TAX BENEFIT PRESERVATION PLAN

On December 21, 2021, the Board approved and entered into a Tax Benefit Preservation Plan (the “Tax Plan”). In connection with its adoption of the Tax Plan, the Board declared a dividend of one preferred stock purchase right (individually, a “Right” and collectively, the “Rights”) for each share of Common Stock of the Company outstanding at the close of business on January 5, 2022 (the “Tax Plan Record Date”). As long as the Rights are attached to the Common Stock, the Company will issue one Right (subject to adjustment) with each new share of the Common Stock so that all such shares will have attached Rights. If and when exercisable, each Right will entitle the registered holder to purchase from the Company one one-thousandth (1/1,000th) of a share of Series B Junior Participating Preferred Stock, par value $0.01 per share (the “Series B Preferred”), of the Company at a price of $89 per one one-thousandth of a share of Series B Preferred, subject to adjustment (the “Purchase Price”).

The Tax Plan is intended to act as a deterrent to any person acquiring shares of the Company’s securities equal to or exceeding 4.9% without the approval of the Board. As such, the Tax Plan is designed to protect the valuable tax benefits held by the Company, including those generated by net operating losses and certain other tax attributes (collectively, the “Tax Benefits”) because changes in ownership by a person owning less than 4.9% of the Company’s stock are not included in the calculation of “ownership change” for purposes of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). The Board has established procedures to consider requests to exempt certain acquisitions of the Company’s securities from the Tax Plan if the Board determines that doing so would not limit or impair the availability of the Tax Benefits or is otherwise in the best interests of the Company. The Board believes the Tax Plan is in the Company’s and its stockholders’ best interests.

The following description of the terms of the Tax Plan is qualified in its entirety by reference to the full text of the Tax Plan, which can be found in the accompanying Appendix B. Please read the Tax Plan in its entirety as the discussion below is only a summary.

The Rights

The Rights will be transferred only with the Common Stock until the Distribution Date (as defined below) (or earlier redemption, exchange, termination or expiration of the Rights). After the Distribution Date, separate rights certificates will be issued evidencing the Rights and become separately transferable apart from the Common Stock.

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company beyond those as an existing stockholder, including, without limitation, the right to vote or to receive dividends.

The Rights are protected by customary antidilution provisions.

Exercisability

Subject to certain exceptions, the rights become exercisable and trade separately from Common Stock only upon the “Distribution Date,” which occurs upon the earlier of:

 

    at the close of business on the tenth business day following a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of 4.9% or more of the Common Stock (each such person, an “Acquiring Person”) or

 

    at the close of business on the tenth business day (or such later date as may be determined by action of the Board prior to such time as any person or group of affiliated persons becomes an Acquiring Person) following the commencement or announcement of an intention to make a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of affiliated or associated persons of shares of Common Stock equal to or exceeding 4.9% of the outstanding Common Stock.

The Board may postpone the Distribution Date of the rights under certain circumstances.

The Tax Plan provides that any person who beneficially owned shares of Common Stock equal to or exceeding 4.9% of the outstanding Common Stock prior, including immediately prior, to December 21, 2021 (the first public announcement of the adoption of the Tax Plan), together with any affiliates and associates of that person (each, an “Existing Holder”), shall not be deemed to be an “Acquiring Person” for purposes of the Tax Plan unless the Existing Holder becomes the beneficial owner of one or more additional shares of Common Stock (other than pursuant to (a) a dividend or distribution paid or made by the Company on the outstanding Common Stock

 

 

 

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in Common Stock, (b) a split or subdivision of the outstanding Common Stock or (c) an Exempt Acquisition). However, if upon acquiring beneficial ownership of one or more additional shares of Common Stock, the Existing Holder does not beneficially own shares of Common Stock equal to or exceeding 4.9% of the Common Stock outstanding, the Existing Holder shall not be deemed to be an “Acquiring Person” for purposes of the Tax Plan.

The Tax Plan further provides that any person who becomes the beneficial owner of one or more additional shares of Common Stock, solely as a result of (a) equity granted to the officers and members of the Board of the Company and any Subsidiary of the Company in their capacity as such officers and directors or (b) the vesting of any equity compensation awards, options, warrants, rights or similar interests granted to any person by the Company or any subsidiary of the Company (including as a result of an adjustment to the number of shares of Common Stock represented by any such equity compensation award, option warrant, right, or similar interest pursuant to the terms thereof) (each, an “Exempt Acquisition”), shall not be deemed to be an “Acquiring Person” for purposes of the Tax Plan unless such person becomes the beneficial owner of one or more additional shares of Common Stock (other than pursuant to (i) a dividend or distribution paid or made by the Company on the outstanding Common Stock in Common Stock, (ii) a split or subdivision of the outstanding Common Stock or (iii) another Exempt Acquisition). However, if upon acquiring beneficial ownership of one or more additional shares of Common Stock, such holder does not beneficially own 4.9% or more of the Common Stock, such holder shall not be deemed to be an “Acquiring Person” for purposes of the Tax Plan.

Merger, Exchange or Redemption of the Rights

In the event that a person becomes an Acquiring Person or if the Company were the surviving corporation in a merger with an Acquiring Person or any affiliate or associate of an Acquiring Person and shares of the Common Stock were not changed or exchanged, each holder of a Right, other than Rights that are or were acquired or beneficially owned by the Acquiring Person (which Rights will thereafter be null and void), will thereafter have the right to receive upon exercise that number of shares of Common Stock having a market value of two times the then current Purchase Price of the Right. In the event that, after a Person has become an Acquiring Person, the Company were acquired in a merger or other business combination transaction or more than 50% of its assets or earning power were sold, proper provision shall be made so that each holder of a Right shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price of the Right, that number of shares of common stock of the acquiring company which at the time of such transaction would have a market value of two times the then current Purchase Price of the Right.

At any time after a Person becomes an Acquiring Person and prior to the earlier of one of the events described in the last sentence of the previous paragraph or the acquisition by such Acquiring Person of 50% or more of the then outstanding Common Stock, the Board may cause the Company to exchange the Rights (other than Rights owned by an Acquiring Person which will have become null and void), in whole or in part, for shares of Common Stock at an exchange rate of one share of Common Stock per Right (subject to adjustment).

The Rights may be redeemed in whole, but not in part, at a price of $0.01 per Right (the “Redemption Price”) by the Board at any time prior to the time that an Acquiring Person has become such. The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

Exemptions

The Tax Plan includes a procedure whereby the Board will consider requests (a) to exempt certain acquisitions of Common Stock of the Company from the applicable ownership trigger if the Board determines that the acquisition will not jeopardize or endanger the availability of the Tax Benefits to the Company and (b) solely before a person beneficially owns shares of Common Stock equal to or exceeding 4.9% of the Common Stock then outstanding, to exempt certain acquisitions of Common Stock of the Company from the applicable ownership trigger if the Board determines that the acquisition is in the best interests of the Company even if it jeopardizes or endangers the availability of the Tax Benefits.

Amendments

Any of the provisions of the Tax Plan may be amended by the Board, or a duly authorized committee thereof, for so long as the Rights are then redeemable, and after the Rights are no longer redeemable, the Company may amend or supplement the Tax Plan in any manner that does not adversely affect the interests of the holders of the Rights (other than an Acquiring Person or any affiliate or associate of an Acquiring Person).

 

 

        

 

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Expiration

Unless redeemed or exchanged earlier by the Company or terminated, the rights will expire upon the earliest to occur of (a) the close of business on December 20, 2024, (b) the close of business on December 20, 2022, if stockholder approval of the Tax Plan (including as contemplated by this Proposal 6) has not been obtained by that date, (c) the close of business on the effective date of the repeal of Section 382 of the Code if the Board determines that the Tax Plan is no longer necessary or desirable for the preservation of the Tax Benefits or (d) the time at which the Board determines that the Tax Benefits are fully utilized or no longer available under Section 382 of the Code or that an ownership change under Section 382 of the Code would not adversely impact in any material respect the time period in which the Company could use the Tax Benefits, or materially impair the amount of the Tax Benefits that could be used by the Company in any particular time period, for applicable tax purposes.

Effect of a vote against approval of the Tax Plan

Neither the Company’s governing documents nor applicable law requires stockholder approval of the Tax Plan. However, the Company considers this proposal for stockholders to approve the Tax Plan to be an important opportunity for the Company’s stockholders to provide direct feedback on an important matter of corporate governance. If the Company’s stockholders do not approve the Tax Plan, the Tax Plan will expire on December 20, 2022.

 

The Board unanimously recommends that the stockholders vote “FOR” the Tax Benefit Preservation Plan.

 

 

 

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PROPOSAL 7—ADVISORY VOTE ON A STOCKHOLDER PROPOSAL TO PROVIDE A REPORT ON CERTAIN LOBBYING ACTIVITIES

A stockholder has informed the Company that he intends to present the proposal set forth below at our Annual Meeting. The name and address of the stockholder and the number of the Company’s securities that the stockholder owns will be provided to stockholders promptly upon request. If the stockholder (or his “qualified representative”) is present at the Annual Meeting and properly submits the proposal for a vote, then the stockholder proposal will be voted upon at the Annual Meeting. In accordance with federal securities laws, the stockholder proposal is presented below as submitted by the stockholder and is quoted verbatim. The Company disclaims all responsibility for the content of the proposal and the supporting statement, including other sources referenced in the supporting statement.

 

For the reasons stated in the Board’s Statement in Opposition, which follows the stockholder proposal, the Board unanimously recommends that you vote “AGAINST” the stockholder proposal.

Stockholder Proposal

Proposal 7—Transparency in Lobbying

Whereas, shareholders believe in full disclosure of American Airlines direct and indirect lobbying activities and expenditures to assess whether its lobbying is consistent with its expressed goals and in stockholders’ best interests.

Resolved, stockholders request the preparation of a report, updated annually, disclosing:

1.    Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications.

2.    Payments by AAL used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient.

3.    Description of management’s and the Board’s decision-making process and oversight for making payments described in section 2 above.

For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which AAL is a member.

Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels.

The report shall be presented to the Corporate Governance and Public Responsibility Committee and posted on AAL’s website.

Supporting Statement

Shareholders encourage transparency in AAL’s use of funds to lobby. AAL spent $76,227,000 from 2010—2020 on federal lobbying. This does not include state lobbying expenditures, where AAL also lobbies but disclosure is uneven or absent. AAL also lobbies abroad, spending between 100,000—199,999 on lobbying in Europe for 2020.

AAL fails to disclose its payments to trade associations and social welfare organizations or the amounts used for lobbying, including grassroots. Companies can give unlimited amounts to third party groups that spend millions on lobbying and often undisclosed grassroots activity, and these groups may be spending “at least double what’s publicly reported.”1 AAL serves on the boards of Airlines for America and the International Air Transport Association (“IATA”)

 

1 

https://theintercept.com/2019/08/06/business-group-spending-on-lobbying-in-washington-is-at-least-double-whats-publicly-Reported/.

 

 

        

 

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and belongs to the Chamber of Commerce and to the Business Roundtable (“BRT”), which altogether spent $207,814,400 on federal lobbying for 2019 and 2020.

Shareholders are concerned that AAL’s lack of lobbying disclosure presents reputational risks when its lobbying contradicts company public positions or takes controversial positions. For example, AAL’s lobbying against limiting baggage and ticket change fees has attracted scrutiny.2 AAL has publicly committed to a carbon emissions reduction target, yet IATA has lobbied to weaken carbon reduction regulations for international aviation.3 While AAL believes in addressing climate change, the Chamber and BRT have lobbied against passage of landmark climate legislation.4 And AAL has spoken out against state voter restrictions, yet the Chamber lobbied against the For the People Act.5

Shareholders believe reputational damage stemming from these misalignments could harm stockholder value, and thus urge AAL to expand its lobbying disclosure.

Please vote yes:

Transparency in Lobbying—Proposal 7

The Board’s Statement in Opposition

The Board of Directors has considered this proposal and concluded that its adoption is unnecessary in light of the Company’s existing disclosure regarding lobbying activities and expenditures and not in the best interests of our stockholders. Accordingly, the Board of Directors unanimously recommends a vote AGAINST this proposal for the following reasons.

We believe that our current policies and disclosures reflect a high degree of transparency and accountability in our public policy engagement and political activities. The proposed disclosures recommended by the proposal are unnecessary given the policies and disclosure practices we have in place today, the current public availability of much of the information requested by the proposal and the new disclosures we intend to make this year regarding our trade associations’ alignment with the Paris Agreement on climate change policy. We further believe the proposed disclosures could place us at a competitive disadvantage by revealing strategies and priorities designed to protect the economic future of the Company, its stockholders and team members.

We participate in the U.S. public policy and political process to the benefit of our stockholders and disclose such participation extensively on our website.

The Board of Directors believes it is in the best interests of our stockholders for the Company to actively participate in the public policy process. As a global airline, we are affected by numerous laws, regulations and policies that govern various aspects of our business in the United States and around the world. As a result, we actively review and discuss the potential impact to our business of changes in public policy. We also take part in industry dialogue and advocacy related to issues of high importance to the Company’s success and the concerns of our stakeholders. We strive to adhere to the policies we set forth in our Statement on Public Policy Engagement and Political Participation (the “Statement”) as we promote public policies that further our business objectives and support the best interests of our Company, stockholders and team members.

To advance our policy goals, we belong to a number of industry associations. This involvement allows us to gain insight into core issues for the airline industry and the broader business community and to advocate jointly for government policies that support an efficient, healthy and competitive industry and business environment. Such memberships also allow us to benefit from the opportunity to share technical expertise and operational knowledge that leads to better safety, customer service and overall efficiency.

In 1985, we formed a Political Action Committee (“PAC”) to provide an opportunity for team members to make political contributions on a bipartisan basis to qualified candidates for political office who reflect our views on relevant issues impacting our Company. In full accordance with law, the political contributions made by the PAC are funded entirely with voluntary contributions from our team members, and no corporate funds are used.

 

2 

https://www.inc.com/bill-murphv-jr/american-airlines-united-delta-made-billions-selling-1-simple-thing-passengers-truly-hate-a-key-victory-in-washington-made-it-all-possible.html

3 

https://www.theguardian.com/business/2020/apr/08/airlines-lobby-to-rewrite-carbon-deal-due-to-coronavirus.

4 

https://www.commondreams.org/news/2021/10/01/companies-vowing-climate-action-also-back-lobby-groups-trying-to-kill-landmark-climate

5 

https://thehill.com/business-a-lobbying/business-a-lobbying/554430-watchdog-group-launches-campaign-to-pressure?rl=1

 

 

 

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We have policies in place to effectively oversee decisions regarding our public policy advocacy, trade association memberships and political contributions.

The Statement, which was approved and is reviewed annually by our Board of Directors, is available on our website at www.aa.com under the links “Investor Relations”—“Corporate Governance.” The Statement explains why and how we engage in the policymaking process. It also explains our policies with regard to the Company’s lobbying activities, participation in trade associations and political contributions, as well as the voluntary participation by our team members in the political process.

The Statement also describes how the Company governs these activities. Our Senior Vice President for Corporate Affairs and Chief Government Affairs Officer (“SVP/CGA”), who reports to the Chief Executive Officer, oversees our public policy engagements, including any use of funds to further our regulatory and public policy interests. The SVP/CGA leads American Airlines’ Global Government Affairs department, which is responsible for the day-to-day implementation of our public policy engagement (including payments to trade associations and other nonprofits engaged in public advocacy) and compliance with the Statement and with applicable laws. The Global Government Affairs department works closely with American Airlines’ Chief Legal Officer and with outside counsel dedicated to government affairs and political law compliance matters to ensure adherence with all related rules, regulations and best practices.

At least annually, we review our public policy engagement activities, including our trade association memberships and priorities, with the CGPRS Committee of the Board of Directors, which has oversight over these activities.

We already provide substantial disclosure regarding the Company’s public policy engagement and political activities.

Lobbying and political activity by corporations are subject to extensive governmental regulation, and we are committed to complying with all applicable federal and state disclosure requirements related to these activities. With respect to federal lobbying activity, we file Lobbying Disclosure Act Registration and Reports (Form LD-2) with the Secretary of the U.S. Senate and the Clerk of the U.S. House of Representatives, which reflect the specific bills and issues on which the Company engaged, as well as the total lobbying expenses our Company has incurred during each calendar quarter. These reports are publicly available on websites hosted by the U.S. House of Representatives and the U.S. Senate.

We also disclose on our corporate website a full list of the Company’s trade association memberships for which our fees exceed $25,000. And this year, we began publishing the non-deductible dollar amounts of membership dues we pay to our principal trade associations.

This year, we are also working to align our trade association memberships with our commitment to address the challenge of climate change. We intend to assess the extent to which the climate lobbying activities of our principal trade groups are consistent with the goals of the Paris Agreement, and we will make this assessment available on our website.

Our Company does not use corporate funds to contribute to candidates, political party committees and political action committees, including Super PACs and political committees organized under Section 527 of the Internal Revenue Code to promote the election or defeat of candidates for office. We also do not use corporate funds to make independent political expenditures or electioneering communications. On rare occasions, we may use corporate funds to support or oppose state and local ballot initiatives if we believe an initiative would materially affect our business or the transportation infrastructure in the communities we serve. If we make any such contribution, we will disclose the amount and recipient. We did not use corporate dollars for such purposes in 2020 or 2021.

The activities of the PAC are subject to comprehensive regulation by the federal government, including detailed disclosure requirements. The PAC files monthly reports of receipts and disbursements with the Federal Election Commission, and these reports are publicly available at http://fec.gov. In addition, the PAC is subject to public reporting requirements in those states where it makes contributions.

Third party organizations and our stockholders overwhelmingly support our existing policies and disclosures.

The Board of Directors believes the Company’s practices and disclosures, as set forth in the Statement, align with best practices in this area. As evidence of this, we dramatically improved our score on the Center for Political Accountability Zicklin Index of Corporate Political Disclosure and Accountability, which benchmarks the political disclosure and accountability policies and practices of leading U.S. public companies. On a zero to 100 scale, we received a score of 88.6 in 2021, as compared to a score of 38.6 in 2019. This score puts the Company among the First Tier of S&P 500 companies.

 

 

        

 

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In addition, at both our 2019 and 2020 Annual Meetings, our stockholders voted on proposals requesting that the Company provide a report disclosing (i) policies and procedures for making political contributions and (ii) monetary and non-monetary political contributions and expenditures. Our stockholders overwhelming rejected both proposals, with 77% and 65% of stockholders voting against the proposals, respectively. The overwhelming defeat of these proposals, which are similar to the proposal presented here, was an indication to the Board of Directors that stockholders support our current policies and disclosures related to these activities.

 

For these reasons, the Board of Directors unanimously urges stockholders to vote “AGAINST” the proposal regarding the provision of a report detailing the Company’s lobbying activities and expenditures.

 

 

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides information regarding the beneficial ownership of our Common Stock as of April 12, 2022, by (1) each of our directors and nominees for director, (2) each of the individuals named in the section entitled “Executive Compensation—Summary Compensation Table” on page 70 and (3) all of our directors and executive officers as a group, based in each case on information furnished to us by these persons. We believe that each of the named individuals and each director and executive officer included in the group has sole voting and investment power with regard to the shares shown, except that certain individuals may share voting and investment power with their spouses and except as otherwise noted.

 

     AAG Common Stock Beneficially  Owned(1)

Name of Beneficial Owner and Relationship to Company

  

Amount and Nature

of Beneficial Ownership

    

Percent                    

of Class                     

Robert Isom

Chief Executive Officer, President and Director

       706,489 (2)       *    

Derek Kerr

Vice Chair, Chief Financial Officer and President, American Eagle

       502,337 (3)       *    

Steve Johnson

Executive Vice President

       609,216 (4)       *    

Maya Leibman

Executive Vice President and Chief Information Officer

       236,784 (5)       *    

Jim Albaugh

Director

       51,193 (6)       *    

Jeff Benjamin

Director

       92,071 (7)       *    

Adriane Brown

Director

       8,664 (8)       *    

John Cahill

Director

       167,071 (9)       *    

Mike Embler

Director

       50,071 (10)       *    

Matt Hart

Director

       56,677 (11)       *    

Sue Kronick

Director

       32,836 (12)       *    

Marty Nesbitt

Director

       32,836 (13)       *    

Denise O’Leary

Director

       108,125 (14)       *    

Doug Parker

Chairman

       1,983,853 (15)       *    

Ray Robinson

Director

       45,213 (16)       *    

Greg Smith

Director

       3,400 (17)       *    

Doug Steenland

Director

       13,939 (18)       *    

All directors and executive officers as a group (18 persons)

       5,086,465 (19)       *    

 

*

Represents less than 1% of the outstanding shares of our Common Stock.

 

(1)

Beneficial ownership as reported in the table has been determined in accordance with SEC rules and regulations and includes RSUs that vest within 60 days of April 12, 2022. Pursuant to SEC rules and regulations, all shares not currently outstanding that are subject to RSUs that vest within 60 days of

 

 

        

 

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  April 12, 2022 are deemed to be outstanding for the purpose of computing “Percent of Class” held by the holder of the class but are not deemed to be outstanding for the purpose of computing the “Percent of Class” held by any other stockholder.

 

(2)

Includes 706,489 shares held directly. Excludes 451,555 unvested RSUs that will not vest within 60 days of April 12, 2022.

 

(3)

Includes 302,337 shares held directly and 200,000 shares held indirectly for the benefit of the Derek J. Kerr 2021 Grantor Retained Annuity Trust. Excludes 298,737 unvested RSUs that will not vest within 60 days of April 12, 2022.

 

(4)

Includes 609,216 shares held directly. Excludes 304,633 unvested RSUs that will not vest within 60 days of April 12, 2022.

 

(5)

Includes 235,946 shares held directly and 838 shares held indirectly for the benefit of Ms. Leibman’s spouse. Excludes 300,464 unvested RSUs that will not vest within 60 days of April 12, 2022.

 

(6)

Includes 44,904 shares held directly and 6,289 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(7)

Includes 35,782 shares held directly, 50,000 shares held indirectly for the benefit of the Jeffrey Benjamin 2009 Family Trust and 6,289 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(8)

Includes 2,375 shares held directly and 6,289 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(9)

Includes 8,813 shares held directly, 27,236 shares held indirectly for the benefit of the John Tobin Cahill AAL 2020 GRAT, 74,733 shares held indirectly for the benefit of the John Tobin Cahill AAL 2021 GRAT, 10,564 shares held indirectly for the benefit of the John Tobin Cahill 2021 GRAT 2, 39,436 shares held indirectly for the benefit of the John Tobin Cahill AAL GRAT 2 and 6,289 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(10)

Includes 43,782 shares held directly and 6,289 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(11)

Includes 50,388 shares held directly and 6,289 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(12)

Includes 26,547 shares held directly and 6,289 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(13)

Includes 26,547 shares held directly and 6,289 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(14)

Includes 101,836 shares held directly and 6,289 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(15)

Includes 1,983,853 shares held directly. Excludes 603,103 unvested RSUs that will not vest within 60 days of April 12, 2022.

 

(16)

Includes 38,924 shares held directly and 6,289 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(17)

Includes 140 shares held indirectly for the benefit of Mr. Smith’s Family Trusts and 3,260 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(18)

Includes 7,650 shares held directly and 6,289 shares underlying unvested RSUs that vest within 60 days of April 12, 2022.

 

(19)

Includes 4,611,079 shares held directly, 838 shares held indirectly for the benefit of an officer’s spouse, 200,000 shares held indirectly for the benefit of the Derek J. Kerr Grantor 2021 Retained Annuity Trust, 50,000 shares held indirectly for the benefit of the Jeffrey Benjamin 2009 Family Trust, 27,236 shares held indirectly for the benefit of the John Tobin Cahill AAL 2020 GRAT, 74,733 shares held indirectly for the benefit of the John Tobin Cahill AAL 2021 GRAT, 10,564 shares held indirectly for the benefit of the John Tobin Cahill AAL 2021 GRAT 2, 39,436 shares held indirectly for the benefit of the John Tobin Cahill AAL GRAT 2 and 72,439 shares underlying unvested RSUs that vest within 60 days of April 12, 2022, held by our directors as a group. Excludes 2,104,221 shares underlying unvested RSUs held by our directors and executive officers as a group that will not vest within 60 days of April 12, 2022.

The following table sets forth information regarding the beneficial ownership of our Common Stock as of April 12, 2022 for each person known to us to be the beneficial owner of more than 5% of our outstanding Common Stock.

 

     Common Stock Beneficially Owned
  Name and Address of Beneficial Owner   

Amount and Nature

of Beneficial Ownership

     Percent of Class            

The Vanguard Group

100 Vanguard Blvd.

Malvern, PA 19355

 

       68,146,577 (a)           10.49%              

PRIMECAP Management Company

177 E. Colorado Blvd., 11th Floor

Pasadena, CA 91105

 

       40,897,051 (b)           6.30%              

Blackrock, Inc.

55 East 52nd Street

New York, NY 10055

 

       35,697,328 (c)           5.50%              

 

(a)

The amount shown and the following information are derived solely from the Schedule 13G/A filed by The Vanguard Group on February 9, 2022. The Vanguard Group has shared voting power with respect to 729,770 of such shares, sole voting power with respect to no shares, sole dispositive power with respect to 66,199,780 of such shares and shared dispositive power with respect to 1,946,797 of such shares.

 

(b)

The amount shown and the following information are derived solely from the Schedule 13G/A filed by PRIMECAP Management Company on February 10, 2022. PRIMECAP Management Company has sole dispositive power with respect to all of such shares, sole voting power with respect to 40,025,086 of such shares and shared voting power with respect to no shares.

 

(c)

The amount shown and the following information are derived solely from the Schedule 13G/A filed by BlackRock, Inc. on February 1, 2022. BlackRock, Inc. has sole dispositive power with respect to all of such shares, sole voting power with respect to 33,163,129 of such shares and shared voting power with respect to no shares.

 

 

 

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INFORMATION ABOUT THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Governance Overview

Maintaining leading governance practices is and has been a long-standing priority, and we regularly assess and refine our corporate governance policies and procedures to take into account evolving best practices.

Our Board has adopted the Governance Guidelines to facilitate our mission and to establish general principles and policies by which the Board manages its affairs. The Governance Guidelines are reviewed periodically by the CGPRS Committee and are posted on our website at www.aa.com under the links “Investor Relations”—“Corporate Governance.”

Board Leadership and Structure

Pursuant to our Bylaws, the Board is responsible for filling the positions of Chairman and Chief Executive Officer, and the independent members of the Board elect the Lead Independent Director, with the persons they deem qualified, as well as for removing and replacing such persons as and when the Board may deem necessary or appropriate. The Board periodically reviews AAG’s leadership structure and may modify the structure as it deems appropriate, given the specific circumstances then facing the Company.

The Board is currently led by Mr. Parker, our Chairman, and Mr. Cahill, our Lead Independent Director. We believe that our current leadership structure strikes an appropriate balance between effective and efficient Company leadership and oversight by independent directors.

On March 31, 2022, our independent directors selected Mr. Parker to serve as Chairman based on their belief that his continued leadership will optimize the execution of our priorities in the coming year as he mentors and oversees the transition of Mr. Isom in his new role as Chief Executive Officer. Because Mr. Parker will not be independent, we will continue to have a Lead Independent Director to ensure independent oversight of our Board.

Our independent directors believe that the current structure is appropriate because our Lead Independent Director balances our Chairman and Chief Executive Officer roles, exercising critical leadership duties to ensure effective and independent Board decision-making. The Lead Independent Director regularly consults with each of the Chairman and Chief Executive Officer to help guide management’s ongoing engagement with the Board on our strategies and related risks.

Lead Independent Director Responsibilities

The Board recognizes the importance of strong independent Board leadership. All of our directors are independent under the standards provided in the Governance Guidelines and under applicable Nasdaq listing standards, except for Mr. Parker, our Chairman, and Mr. Isom, our Chief Executive Officer. Additionally, the independent directors of the Board periodically elect a Lead Independent Director when the Chairman is not independent. The Board believes that the Lead Independent Director provides the Company and the Board with the same independent leadership, oversight and benefits that would be provided by an independent Chairman. As a result of our stockholder engagement, in 2017 we amended our Bylaws to allow for the selection of the Lead Independent Director by only the independent directors of the Board, and codified our existing practices regarding the authority and role of the Lead Independent Director to enhance transparency and ensure that the appropriate balance of authority, already characteristic of our governance practices, is memorialized in our governing documents.

The independent directors of the Board have elected Mr. Cahill to serve as the Board’s Lead Independent Director. Mr. Cahill has been a member and the Lead Independent Director of the Board since December 2013. He also serves as a member of our Audit Committee and CGPRS Committee. Mr. Cahill’s extensive leadership and operations experience in executive leadership roles at global public companies, including as Vice Chairman of Kraft Heinz, Chairman and Chief Executive Officer of Kraft Foods Group and Chairman and Chief Executive Officer of The Pepsi Bottling Group, Inc., his accounting and financial expertise and public company board and corporate governance experience, make him qualified to serve as Lead Independent Director of our Board.

 

 

        

 

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The Lead Independent Director’s duties include

the following significant responsibilities:

 Presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors

 

 Serves as liaison between the Chairman and the independent directors

 

 Ensures that the Board has proper input into the types and forms of information sent to the Board

 

 Establishes Board meeting agendas, with the Chairman

 

 Ensures that the Board has proper input into meeting agendas and schedules to assure that there is sufficient time for discussion of all agenda items

 

 Has the authority to call meetings of the independent directors

 

 Consults and communicates directly with major stockholders, as requested by such stockholders

 

 Acts as a sounding board and advisor to the Chairman and CEO

 

 Guides the CEO succession planning process in conjunction with the other independent directors

Director Independence

The Governance Guidelines contain standards for determining director independence that meet or exceed the applicable rules of the SEC and Nasdaq listing standards. The Governance Guidelines define an “independent” director as one who:

 

    is not an executive officer or employee of the Company or any other individual having a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director;

 

    is not, and has not at any time during the past three years been, employed by the Company;

 

    has not accepted, and does not have any spouse, parent, child or sibling, whether by blood, marriage or adoption, any person residing in such individual’s home, or any relative supported financially (each, a “Family Member”) who has accepted, any compensation from the Company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the determination of independence, other than (A) compensation for Board or committee service, (B) compensation paid to a Family Member who is an employee (other than an executive officer) of the Company, or (C) benefits under a tax-qualified retirement plan or non-discretionary compensation;

 

    is not a Family Member of an individual who is, or at any time during the past three years was, employed by the Company as an executive officer;

 

    is not, and does not have a Family Member who is, a partner in, or a controlling stockholder or an executive officer of, any organization to which the Company made, or from which the Company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than (A) payments arising solely from investments in the Company’s securities and (B) payments under non-discretionary charitable contribution matching programs;

 

    is not, and does not have a Family Member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the Company served on the compensation committee of such other entity;

 

    is not, and does not have a Family Member who is, a current partner of the Company’s outside auditor, and was not, and does not have a Family Member who was, a partner or employee of the Company’s outside auditor who worked on the Company’s audit at any time during any of the past three years; and

 

    satisfies any additional requirements for independence promulgated from time to time by Nasdaq.

The Governance Guidelines also provide that the Board will consider all other relevant facts and circumstances, including issues that may arise as a result of any director compensation (whether direct or indirect), any charitable contributions we make to organizations with which a director is affiliated and any consulting arrangement between the Company and a director. The CGPRS Committee reports annually to the full Board on these matters.

Pursuant to the Governance Guidelines, the CGPRS Committee and the Board undertake an annual review of director independence. Based on the CGPRS Committee’s review in April 2022, the Board affirmatively determined that all of our directors are independent under the standards provided in the Governance Guidelines and under applicable Nasdaq listing standards, except for Mr. Parker, our Chairman, who previously served as our Chief Executive Officer, and Mr. Isom, who serves as our Chief Executive Officer and President.

The following types and categories of transactions, relationships and arrangements were considered by our Board in making its independence determinations in 2022. Excluded were ordinary course air transportation by corporations or other organizations where the director’s interest solely arises from such person’s position as a director or advisor to such other corporation or organization. All of the reviewed transactions and arrangements were entered into in the ordinary

 

 

 

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course of business and none of the business transactions, donations or grants involved an amount that exceeded the greater of 5% of the recipient entity’s revenues or $200,000.

 

    Each of Ms. Kronick and Messrs. Albaugh, Benjamin, Cahill and Steenland served during 2021 or continues to serve as a member on the board of directors or an advisory board of companies or entities that engage, or whose affiliates engage, in ordinary course commercial transactions with AAG involving goods or services other than air transportation.

 

    Mr. Albaugh serves as a senior advisor to Industrial Development Funding, which may have investments in us and which we do commercial business in the ordinary course. Mr. Albaugh is not a partner in or executive officer of such company, nor is he deemed to beneficially own the securities held by such company.

The Board has concluded that these transactions and arrangements do not impair the directors’ exercise of independent judgment in carrying out their responsibilities as directors.

The Board also considered Mr. Smith’s prior role as Chief Financial Officer of Boeing, which is one of our significant commercial partners. In light of the fact Mr. Smith retired from Boeing in July 2021 before his appointment as a director and has no continuing role with Boeing, our Board determined that this past relationship does not impair his exercise of independent judgment in carrying out his responsibilities as a director.

Board Diversity and Tenure

Our Board believes that diversity is an important aspect of an effective board. The CGPRS Committee seeks to recommend individuals to the Board with, among other things, a diversity of skills, experience, expertise and perspective appropriate for the business and operation of the Company. We recognize the benefits of racial and gender diversity in the boardroom, including better reflecting our diverse customer and employee base and the healthy debate that stems from different viewpoints that may result from diverse backgrounds. Accordingly, our Board is diverse in many ways, with differing geographic, business and racial backgrounds. One-third of our Board nominees are diverse based on gender or ethnicity.

We believe that fresh perspectives and new ideas are critical to a forward-looking and strategic Board. At the same time, given the extremely complex nature of our business, it is equally important to benefit from the valuable experience and institutional knowledge that longer-serving directors bring to the boardroom. In January and March 2022, respectively, Mr. Smith and Mr. Isom joined our Board, bringing our total board size to 14. Previously, in October 2020 and February 2021, respectively, Mr. Steenland and Ms. Brown joined our Board and prior to that, in November 2015, Ms. Kronick and Mr. Nesbitt joined our Board. Our remaining directors, other than Mr. Robinson, joined our Board in December 2013 at the effective date of the merger with US Airways. The Board strongly believes that the current mix of directors provides the Company with an appropriate balance of knowledge, experience and capability, allowing us to leverage deep company experience and knowledge in addition to new viewpoints and innovative ideas among newer directors. Out of our 14 Board nominees, nine have served on our Board for less than ten years and another four have been on our Board for less than five years.

 

Tenure    

 

 

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Board Self-Evaluation

Our Governance Guidelines and CGPRS Committee charter provide that the CGPRS Committee must conduct a periodic assessment of the performance of the Board, including the committees, and provide the results to the full Board for discussion. The purpose of the review is to increase the effectiveness of the Board as a whole and of each of the committees. The assessment includes an evaluation of the Board and each committee’s contribution as a whole, of specific areas in which the Board, the applicable committee and/or management believe better contributions could be made and of the overall make-up and composition of the Board and its committees.

Board Meetings

The Board conducts its business through meetings of the full Board and committees of the Board. The Board regularly meets in executive session with only independent directors of the Board present. During 2021, the Board held eleven meetings, six of which included executive sessions comprised of only independent directors. In 2021, each incumbent director attended at least 75% of the aggregate number of meetings of the Board and of the committees on which he or she served.

Committees

The Board currently has four standing, principal committees: the Audit Committee, the Compensation Committee, the CGPRS Committee and the Finance Committee. The primary responsibilities, membership and meeting information for the committees of our Board during 2021 are summarized below. A copy of the charter of the Audit Committee, Compensation Committee and CGPRS Committee is available on our website at www.aa.com under the links “Investor Relations”—“Corporate Governance.”

 

   
 Audit Committee      

 

Members in 2021:

Matt Hart (Chair)

Adriane Brown

John Cahill

Mike Embler

Marty Nesbitt

*Greg Smith joined effective January 18, 2022

 

Meetings in 2021: 5

 

The Board has determined that each member is independent under SEC and Nasdaq rules and the Governance Guidelines. Each member is a “financial expert” under applicable SEC rules and has the financial management expertise required by Nasdaq listing standards.

  

Primary Responsibilities

  Oversee the Company’s internal accounting function; report to the Board with respect to other auditing and accounting matters

 

  Appoint or replace the independent auditor; oversee the work of the independent auditor for the purpose of preparing or issuing an audit report or related work, including determining the scope of annual audits and fees to be paid

 

  Oversee the Company’s risk management policies that relate to the financial control environment, financial reporting and disclosure controls

 

  Establish and maintain procedures for compliance with significant applicable legal, ethical and regulatory requirements and for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters

 

  Review and approve all significant conflicts of interest and related party transactions in accordance with Company policies

 

  Review cyber-security, data privacy and other risks relevant to the Company’s computerized information system controls and security

 

  Pre-approve audit and permitted non-audit services provided by the independent auditor

 

 

 

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 Compensation Committee

 

     

 

Members in 2021:

Denise O’Leary (Chair)

Jim Albaugh

Jeff Benjamin

Sue Kronick

Doug Steenland

 

Meetings in 2021: 7

 

The Board has determined that each member is independent under Nasdaq rules and the Governance Guidelines and, other than Mr. Steenland, is a “non-employee director” as defined by Rule 16b-3 under the Exchange Act.

  

 

Primary Responsibilities

  Review and approve the Company’s overall compensation strategy and policies, including performance goals for executive officers

 

  Review the relationship between the Company’s compensation strategy and risk management policies; together with the Board, oversee succession planning

 

  Evaluate the performance of the Company’s Chief Executive Officer and approve his compensation and other terms of employment

 

  Evaluate the performance of and determine the compensation and other terms of employment of the other executive officers and other members of senior management

 

  Administer the Company’s incentive and stock plans, including establishing guidelines, interpreting plan documents, selecting participants, approving grants and awards and making all other decisions regarding the operation of such plans

 

  Review compensation-related stockholder proposals in consultation with the CGPRS Committee

 

  Review the Company’s workforce diversity and inclusion

 

  Review the compensation of the non-employee members of the Board and make recommendations regarding changes to the full Board

 

  Retain outside advisors; directly retains and oversees its independent compensation consultant

 

 

 
 Corporate Governance, Public Responsibility and Safety Committee

 

Members in 2021:

Sue Kronick (Chair)

Jim Albaugh

Adriane Brown

John Cahill

Ray Robinson

*Greg Smith joined effective January 18, 2022

 

Meetings in 2021: 5

 

The Board has determined that each member is independent under Nasdaq rules and the Governance Guidelines.

  

 

Primary Responsibilities

  Oversee all aspects of the Company’s corporate governance functions, including the procedures for compliance with significant applicable legal, ethical and regulatory requirements that impact corporate governance

 

  Conduct an annual review of director independence and the performance of the Board, including the committees

 

  Identify individuals qualified to become members of the Board and recommend director nominees

 

  Periodically review and evaluate, with the Company’s management, the Company’s governance-related risks and risk management practices

 

  Review and assess the Governance Guidelines, which among other things, sets forth the responsibilities and authority of our Lead Independent Director, and recommend any changes deemed appropriate to the Board

 

  Oversee the stockholder engagement process and significant stockholder relations issues, including consideration of stockholder proposals

 

  Oversee the Company’s policies, programs and practices with respect to operational safety and compliance, and matters affecting the safety of the Company’s customers and employees including security and public health

 

  Oversee the Company’s ESG and sustainability efforts, including the risks and opportunities of climate change

 

  Oversee the Company’s lobbying activities, major advocacy priorities, principal trade association memberships and political contributions, if any, and periodically review reports on the Company’s corporate political contributions and the processes and guidelines of the PAC

 

 

 

        

 

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 Finance Committee

 

Members in 2021:

Mike Embler (Chair)

Jeff Benjamin

Marty Nesbitt

Denise O’Leary (effective February 22, 2021)

Ray Robinson

Doug Steenland

 

Meetings in 2021: 6

 

The Board has determined that each member is independent under Nasdaq rules and the Governance Guidelines.

 

  

 

Primary Responsibilities

  Oversee the Company’s financial affairs and capital spending

 

  Recommend to the Board financial policies and courses of action that will effectively accommodate the Company’s goals and operating strategies

 

  Supervise the Company’s dividend and share repurchase programs

 

  Review, approve and/or recommend to the Board our annual budget and financing plans and other matters related to the Company’s financial and strategic planning

 

  Oversee the Company’s financial risk management practices

 

Compensation Committee Process for Executive Compensation

The Compensation Committee charter gives the Compensation Committee the authority and responsibility to review and approve our overall compensation strategy and policies, including performance goals for executive officers. The Compensation Committee is responsible for reviewing and approving the compensation and other terms of employment of the Chief Executive Officer and for evaluating his performance. The Compensation Committee also evaluates, after receiving input from the Chief Executive Officer, the compensation and other terms of employment of the other executive officers, including in the case of internal promotions and new hires of executive officers. The Compensation Committee administers our incentive compensation, stock, bonus and other similar plans and programs; approves awards under those plans; reviews and, based upon the recommendation of the Chief Executive Officer, approves the adoption of, amendment to, or termination of executive compensation and benefit plans; and determines the general design and terms of, and may delegate authority to executive officers to administer, significant non-executive compensation and benefits plans. The Compensation Committee has delegated to an Equity Incentive Committee, consisting of the Chief Executive Officer, the authority to make equity grants to employees who are not executive officers within guidelines established by the Board or the Compensation Committee.

The Compensation Committee generally receives information from the Chief Executive Officer, the Chief People Officer, the Vice President—Global Talent and Total Rewards and compensation consultants engaged by the Compensation Committee in connection with its determinations regarding executive compensation. The Compensation Committee has sole authority to retain and terminate any outside advisors, such as compensation consultants and legal counsel.

Since July 2019, the Compensation Committee has engaged Korn Ferry as its compensation consultant to assist in determining our executive compensation and reviewing and analyzing proposed compensation programs for our executive officers. After review and consultation with Korn Ferry, the Compensation Committee determined that Korn Ferry is independent and there is no conflict of interest resulting from retaining Korn Ferry pursuant to applicable SEC and Nasdaq rules.

Board Role in Risk Oversight

The Board is responsible for the oversight of the Company’s ongoing assessment and management of material risks impacting our business. The Board oversees the Company’s enterprise-wide approach to risk management, which is designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and to enhance stockholder value. A fundamental part of risk management is not only understanding the risks we face and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate. Management is responsible for establishing our business strategy, identifying and assessing the related risks and establishing appropriate risk management practices. The Board, either directly or through one or more of its committees, reviews our business strategy and management’s assessment of the related risks and discusses with management the appropriate level of risk. The Board relies on each Board committee to oversee management of specific risks related to that committee’s function. The CGPRS Committee periodically reviews the Company’s governance-related risk management practices, and with management’s assistance, the committee has developed and coordinated the Board’s current risk oversight program. The Board has not established a separate risk committee because the Board believes that the most significant risks we face are most properly directly overseen by the full Board or, in certain cases, the appropriate standing committee.

 

 

 

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The Board oversees and reviews the management of our most significant strategic, financial and operations risks, the day-to-day operation of the airline and the interruption of airline service, revenue production, our information technology systems, business risks related to labor issues and costs. The management of the COVID-19 pandemic and our Board’s oversight of the management of that risk is a case in point. As we implemented our pandemic contingency plan, management regularly communicated with the Board and our Lead Independent Director. Since the beginning of the COVID-19 pandemic, we have held very frequent Board briefings devoted primarily to reviewing and discussing the planning for and management of the impact of COVID-19 on our team members, our customers and our business, the execution of our contingency plan and risk mitigation efforts, and decision making around the COVID-19 pandemic, our liquidity and federal government support under the CARES Act, PSP2 and PSP3.

The Audit Committee oversees our risk management policies that relate to the financial control environment, financial reporting and disclosure controls, cyber-security risks and our procedures for compliance with significant applicable legal, ethical and regulatory requirements that impact our financial statements. The Audit Committee meets regularly with our internal auditors, independent auditors, Chief Executive Officer, Chief Financial Officer, Controller, Chief Legal Officer, Chief Ethics and Compliance Officer, Corporate Secretary, Chief Information Officer, Chief Information Security Officer, Chief Privacy Officer and the Company’s external advisors. The Audit Committee receives regular risk and internal controls assessment reports from the independent auditors and internal auditors. The Audit Committee also establishes and maintains procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. The Audit Committee also reviews cyber-security and other risks relevant to the Company’s computerized information system controls and security.

The CGPRS Committee oversees our governance-related risk management policies, programs and practices with respect to operational safety and compliance, environmental and climate change risks, and matters affecting the safety of our customers and employees, including security and public health. The CGPRS Committee assesses our obligations and risks and reviews the adequacy of our policies, programs and practices to meet those obligations and risks. The CGPRS Committee meets regularly with the Chief Operating Officer and other responsible officers to discuss and advise on developing risks and safety standards.

The Compensation Committee oversees compensation risk management by participating in the creation of, and approving, compensation structures that create incentives that encourage an appropriate level of risk-taking behavior consistent with our business strategy, as is further described in the section entitled “Risk Assessment with Respect to Compensation Practices” below. The Compensation Committee also works with the Chief Executive Officer and the Chief People Officer to oversee risks associated with the retention of our most senior executives.

The Finance Committee oversees financial risk by working with senior management to evaluate elements of credit risk, advising on financial strategy, capital structure and liquidity needs and reviewing our financial risk management policies and practices. Our Chief Executive Officer and Chief Financial Officer meet periodically with the Finance Committee to discuss and advise on elements of these risks.

Risk Assessment with Respect to Compensation Practices

Management and the Compensation Committee, with the support of the compensation consultant, have reviewed the compensation policies and practices for our employees as they relate to our risk management and, based upon these reviews, we believe that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect on us in the future.

Our basis for this conclusion includes that our compensation programs are designed to include the following features:

 

    Formulaic annual and long-term incentive plan awards with maximum pay-out caps or guidelines instead of discretionary pay-out decisions. The STIP’s individual modifier component, to the extent applicable, is subject to the Compensation Committee’s discretion and can only be implemented by a resolution of the Compensation Committee or within limited bounds approved by the Compensation Committee.

 

    Equity incentive awards are subject to performance or time-based vesting periods that are intended to incentivize long-term rather than short-term results.

 

    Our incentive compensation plans include a set of pre-established goals and metrics that focus on areas of priority for the Company and may include financial, operational, Environmental, Social and Governance (“ESG”), total stockholder return (“TSR”) and/or the achievement of individual goals. The 2022 STIP includes financial (adjusted

 

 

        

 

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    pre-tax income—50% weighting), customer operational goals (on-time departure and controllable completion factor—40% weighting) and ESG goals (diversity, equity and inclusion –10% weighting). In addition, the goals established in our executive compensation programs are not subject to adjustment without Compensation Committee approval.

 

    Our executive officers are all at-will employees and have modest retirement benefits, which together act to minimize excessive risk-taking behaviors.

 

    All of our executive officers’ equity incentives are subject to staggered time-vesting conditions that incentivize sustained long-term appreciation of our stock price, and half of their equity incentives for 2022 are also subject to performance-vesting conditions tied to financial metrics that incentivize long-term and industry-leading financial performance.

 

    We maintain stock ownership guidelines and a clawback policy for executive officers that further reduce undue risk-taking incentives. Our executive officers have actual stock ownership that is well in excess of the required minimum.

 

    Actual performance results for incentive programs for employees at the level of director and above are reviewed and verified by a variety of departments (including finance, human resources, operations and legal) and are also reviewed by our internal auditor. These results are reported to the Compensation Committee, the Audit Committee and the Board.

 

    Our Insider Trading Policy and authorization to trade process monitors employee transactions in Company stock, including transactions from recently separated employees.

 

    All of our performance-based compensation programs are based on overall corporate performance, rather than the performance of any business unit or group.

 

    The Company maintains a separate bonus program for an organization based on their performance; all of the participants are front-line employees, the number of participants and the payments under this program is small and capped. No executives participate in this program.

 

    For a discussion of the principles underlying our compensation policies for our executive officers who are named in the “Executive Compensation—Summary Compensation Table,” see the section entitled “Compensation Discussion and Analysis” beginning on page 56.

Annual Meeting Attendance

Our Governance Guidelines provide that each of our directors is expected to attend our Annual Meeting of stockholders, except where unusual circumstances arise. All of the directors who were on our Board at the time attended our 2021 annual meeting of stockholders.

Director Continuing Education

Non-employee directors are encouraged to attend seminars, conferences and other director education programs periodically. We reimburse the directors for the costs associated with these seminars and conferences, including related travel expenses. Management also conducts a comprehensive orientation process for new directors. In addition, directors receive continuing education through educational sessions at meetings and mailings between meetings.

Communications with the Board and Non-Management Directors

The Board has approved procedures to facilitate communications between the directors and employees, stockholders and other interested third parties. Pursuant to these procedures, a person who desires to contact the Board, a standing committee of the Board or a director may do so in writing to the following address:

American Airlines Group Inc.

The Board of Directors

P.O. Box 619616, MD 5675

Dallas/Fort Worth International Airport, Texas 75261

We will review the communications with the directors, a standing committee of the Board or an officer, in each case depending on the facts and circumstances outlined in the communication. The CGPRS Committee also reviews with senior management the nature of the communications and our responses to them. Any communication relating to a stockholder nominee for a position on the Board or a stockholder proposal for business to be considered at any annual

 

 

 

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meeting of stockholders or included in any proxy statement will be sent to the Chair of the CGPRS Committee. As provided in our Governance Guidelines, our Lead Independent Director, Mr. Cahill, has been designated as the primary director representative for consultation and direct communication with our stockholders.

Environmental, Social and Governance Matters

At American Airlines, we know that leadership and effective management of environmental, social and governance issues is critical to the long-term success of our company and our planet. At the Company, ESG encompasses how we govern our business and hold ourselves accountable, minimize our environmental impacts, invest in and support our team, improve our diversity, equity and inclusion, serve our customers and give back to our communities. It also includes being responsive to our stakeholders and transparent about our performance. If we do all these well, our company and our team will thrive over the long term.

Governance and Reporting

Management of ESG issues is integral to how we operate our business and is embedded within our corporate strategy and objectives. While many issues that fall under the ESG umbrella are not new for our company—indeed, a key reason American has thrived for more than 95 years is because we have long recognized the importance of these issues—we have worked to develop a more integrated approach to ESG governance, management, measurement and reporting.

Although our full Board continues to oversee our ESG efforts, in 2020 we assigned primary responsibility for coordinating oversight to the Board’s CGPRS Committee and updated its charter to reflect these added responsibilities. Notably, the CGPRS Committee has oversight responsibility for the Company’s climate change strategy and in 2021 dedicated significant time to review the Company’s climate change risks and opportunities.

The CGPRS Committee is also responsible for reviewing and assessing the Company’s Corporate Governance Guidelines and evolving governance practices. The CGPRS Committee’s Charter sets forth its responsibilities with respect to oversight of governance, sustainability strategy, stockholder engagement, policies and programs related to safety, and public policy and political activities. In addition, in 2021, the CGPRS Committee recommended, and the Board adopted, a revised Statement on Public Policy Engagement and Political Participation, which is available at www.aa.com/esg, but is not incorporated by reference into this Proxy Statement. The Board reviews this Statement and the Company’s Human Rights Statement annually.

The Company also recently joined the United Nations Global Compact (“UNGC”), the world’s largest corporate sustainability initiative. Our membership and reporting through the UNGC further signals our commitment to operating in ways that meet fundamental responsibilities in the areas of human rights, labor, environment and anti-corruption.

We are committed to providing regular and transparent information about our strategies and performance on the ESG issues that are most important to our company and our stakeholders. We have produced an annual Corporate Responsibility Report since 2007, and in 2020 we decided to align our reporting with the recommendations of the Task Force on Climate-related Financial Disclosures and the disclosure standards for the airline industry developed by the Sustainability Accounting Standards Board. We view these reporting frameworks as best-in-class indicators of the ESG issues that investors and others consider most material, and we received positive feedback from several stakeholders. We intend to continue providing our stakeholders with information on our ESG performance annually. Our most recent ESG Report is available at www.aa.com/esgreport but is not incorporated by reference into this Proxy Statement.

Climate Change and Sustainability

Climate change is no longer a distant threat; its effects are increasingly being felt around the world today. As one of the world’s largest airlines, American intends to be a leader in helping drive the operational, policy and technological changes needed to advance the transition to a low- and no-carbon aviation future. In 2020, we set a goal to reach net zero carbon emissions by 2050, and we reinforced that commitment in 2021 by being the first airline in North America to commit to set an intermediate, science-based greenhouse gas (“GHG”) emissions reduction target through the Science Based Targets initiative (“SBTi”). In doing so, American committed to develop a GHG emissions reduction target that will be reviewed by SBTi to confirm its consistency with the latest climate science.

Jet fuel consumption drives the vast majority of our direct GHG emissions, and our long-term objective is to reduce these emissions to zero. In the near term, our climate strategy is focused on driving operational and technical improvements that reduce GHG emissions

 

 

        

 

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by continuously improving fuel efficiency and substituting petroleum-based fuels with lower-carbon alternatives. In parallel, we are helping to facilitate the broader policy, market, infrastructure and technological advances needed to enable the transition to low-carbon aviation.

The following outlines the key components of our climate strategy:

Fleet Renewal. Maximizing the fuel efficiency of our aircraft is both a core focus of our climate change strategy and a key business objective. Over the past several years, American has undertaken the most extensive fleet renewal effort in the history of our industry. Since 2013, we have taken delivery of more than 600 new, more fuel-efficient aircraft—at a cost of $24 billion—including the Boeing 737 MAX, the Airbus A321neo and the Boeing 787 Dreamliner, which were developed with the latest engine and airframe technologies. Our fleet renewal effort will have the greatest near-term impact on emissions since each new generation of aircraft targets fuel-efficiency improvements of 10–15%.

Over the same period, we retired a similar number of less fuel-efficient planes, including the last of our McDonnell Douglas MD-80 aircraft in 2019. And because of the reduction in demand due to the COVID-19 pandemic, we accelerated the retirement of four additional mainline aircraft types—Embraer 190s, Boeing 757s, Boeing 767s and Airbus A330s—and two regional fleet types–Embraer 140s and Bombardier CRJ200s. As of December 31, 2021, in total, we have retired 670 older aircraft since 2013.

Largely as a result of flying these more efficient aircraft, we have improved our fuel burn per available seat mile (“ASM”) by 10.2% compared with 2013. (ASM measures an airline’s passenger carrying capacity, and it is calculated by multiplying the number of seats available on an aircraft by the number of miles it will fly.) That adds up to 1.9 billion gallons of fuel saved and 19 million metric tons of carbon dioxide (“CO2”) emissions avoided.

As of December 31, 2021, American continues to have the youngest mainline fleet of any U.S. network airline, with an average age of 11.3 years and with more than half (55%) of our mainline aircraft being less than 10 years old.

Over the long term, we expect to rely on future technologies, including more efficient engines, lighter airframes with improved aerodynamics and alternative-powered propulsion systems, to continue reducing our fleet’s average emissions per seat.

Operational Efficiency. Alongside fleet renewal efforts, we are investing in new technology to help our aircraft operate more efficiently. For example, in 2020 we began deploying specialized software that uses real-time weather conditions to provide our flight crews with better data about optimal flight altitudes and speeds. This can save fuel and reduce emissions, particularly on long-haul flights. By year-end 2021, we were using this technology on 85% of our mainline aircraft and had saved 5.4 million gallons of fuel, equivalent to 51,300 metric tons of CO2 emissions.

In 2021, American developed a new application to optimize how we assign gates to aircraft in Dallas-Fort Worth International Airport (“DFW”). This new approach to gating optimizes for taxi time, maximizes on-time arrivals, reduces ramp congestion, minimizes gate conflicts, saves fuel and reduces GHG emissions. Leveraging real-time Federal Aviation Administration flight data and routing information, we are using the new tool for all our DFW flights today; we also expect to expand its use to other airports. Based on the reduced taxi time resulting from use of the tool today, we project full year fuel savings of 870,000 gallons at DFW alone, equal to more than 2,600 metric tons of CO2.

Sustainable Aviation Fuel. Increasing the use of sustainable aviation fuel—which can reduce lifecycle GHG emissions by up to 80% compared with conventional petroleum-based jet fuel—must be a core part of our low-carbon pathway. In early 2020, we committed to purchase nine million gallons of sustainable aviation fuel (“SAF”) over 2020-2023 from Neste, a leading producer of renewable products. As a result of this commitment, American used 1.4 million gallons of SAF in 2021, more than any other U.S. airline. We also worked with other carriers in the oneworld alliance® to source additional future deliveries of SAF, culminating in the Company’s agreement in late 2021 to purchase SAF from Aemetis, bringing our total SAF commitment to more than 120 million gallons.

We are also involved in other efforts and collaborations to build the market for SAF. Through our participation in the World Economic Forum’s (“WEF”) Clean Skies for Tomorrow Coalition, we identified an opportunity to show how a new market-based mechanism could boost the demand signal for SAF. Many of our customers have ambitious goals to reduce CO2 emissions and have made public commitments to report and reduce those emissions, including their emissions from the jet fuel that is burned when their employees travel or they ship cargo by air. In 2021, we entered into industry-leading agreements with several major corporate customers to allocate to them the emissions reduction value of a specific amount of SAF, which they can use to mitigate their emissions from travel with us. We have two goals in making these agreements: first, to signal that there is demand for SAF as a way to stimulate more production, and second, to help our customers reduce their emissions from travel with us in a way that also helps meet their own ambitious climate goals.

 

 

 

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While the SAF industry is continuing to invest and grow production capacity, there remain significant challenges to the availability of SAF in the quantities and at the prices necessary to materially reduce aviation emissions in the near term. Bringing the SAF market to scale will require the combined efforts of the private sector and effective policies from governments at all levels. We are advocating with others in our industry for Congress to enact a new, performance-based tax credit specifically aimed at incentivizing the production and use of low-carbon SAF.

Airspace Modernization. The design and operation of an air traffic control (“ATC”) system has significant environmental implications. The less time aircraft wait on the ground to depart and the more efficiently aircraft can maneuver in the air, the less fuel they burn and the fewer emissions they produce. While the United States has the safest ATC system in the world, it continues to rely heavily on outdated technology and processes that are inefficient or poorly equipped to accommodate air traffic growth as the industry emerges from the pandemic. At the same time, the complexity of our air space is expanding rapidly—from the dramatic uptick in drone use to emerging urban air mobility technologies. To keep pace with these demands and to help reduce aviation’s impact on the climate, we are advocating for modernization of the ATC system, which in turn can avoid millions of tons of CO2 each year.

Carbon Offsets. While the core focus of our company’s climate strategy is increasing efficiency and reducing emissions, we recognize that carbon offsets also have a role to play. We anticipate purchasing offsets to comply with the Carbon Offsetting and Reduction Scheme for International Aviation and, depending on the pace of advancements in SAF, airspace modernization and other new technologies, may purchase offsets to reach our 2050 goal of net zero emissions.

A few years ago, we introduced a customer-facing carbon offset program, enabling our passengers to offset their emissions from air travel. The program gives customers the opportunity to purchase verified offsets through Cool Effect, a nonprofit organization that verifies project documentation and validates each project’s financial durability. For more information, see www.cooleffect.org/american-airlines, which is not incorporated by reference into this Proxy Statement.

Technological Innovation. To accelerate private sector action, our Company in September 2021 became an anchor partner to Breakthrough Energy Catalyst (“Catalyst”), committing to invest $100 million in an innovative collaborative effort to advance a set of clean energy technologies that are critical to a zero-carbon economy but are currently more expensive than their existing fossil-fuel counterparts. Catalyst and its partners will work together to finance and produce new solutions in four technologies: SAF, green hydrogen, long-duration energy storage and direct air capture. Our investment in Catalyst, commitment to purchase SAF, engagement with our corporate customers and advocacy for supportive public policy are all aimed at helping to facilitate more widespread production of SAF and accelerate its commercial viability.

Partnerships and Collaboration. In addition to the projects with Catalyst and WEF, we participate in Business for Social Responsibility’s Sustainable Air Freight Alliance, the Business Environmental Leadership Council of the Center for Climate and Energy Solutions, the Commercial Aviation Alternative Fuels Initiative and the nonprofit International Sustainability and Carbon Certification, a leading global sustainability certification organization. We also participated in the SBTi’s Technical Working Group for the aviation sector, which developed the emissions reduction pathway for our industry.

Also, over the past several years, we have been working to reduce our GHG emissions and strengthen our reporting on these other fronts:

 

    We have set a goal to source 2.5 million gigajoules of cost-competitive renewable energy to power our operations by 2025—the equivalent of nearly 20 million gallons of jet fuel. In 2021, we sourced approximately 0.8 million gigajoules of renewable energy through the purchase of SAF. In addition, electricity for our headquarter facilities and operations at DFW are 100% powered by renewable energy. As of January 2022, American was the highest-ranked transportation company on the U.S. EPA’s Green Power Partnership Fortune 500® Partners List. In early 2022, we began taking delivery of renewable diesel, which is used to power our ground equipment, at Los Angeles International Airport.

 

    We are integrating green building principles—such as energy efficiency, water conservation and sustainable materials—into our new and renovated facilities. We have multiple LEED Gold- and Silver-certified facilities across the United States, including two LEED Gold-certified buildings at our corporate headquarters campus in Fort Worth. The buildings’ sustainable design features include the use of materials that meet stringent requirements for low or no volatile organic compounds, preferred parking for zero- and low-emitting vehicles and a 97% diversion of construction waste to landfills. Our new 600-room Hospitality Complex, which will provide accommodation for our team members visiting Fort Worth for training, was designed to meet the LEED Gold standard by reducing indoor water consumption, optimizing energy performance through mechanical systems and connecting to local park and trail systems. Additionally, the building has been designed to create low light pollution.

 

 

        

 

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    We have strengthened our voluntary reporting of our environmental impact, improving our score from CDP, a nonprofit that manages a widely-used corporate environmental disclosure system. In 2021, we were the only U.S. commercial airline to receive a CDP score of A-, which was the highest score in our industry.

Our People

The airline business is labor intensive, and our team members are our most important asset. The operational complexity of our business requires a diverse team of personnel trained and experienced in a variety of technical areas such as flight operations, ground operations, safety and maintenance, customer service and airline scheduling and planning. If we create an environment where our team members feel supported, our team members will take care of our customers and thereby support the success of our business. Therefore, we must continue to build a diverse and inclusive environment, helping all team members reach their full potential and providing them with the right resources and support. We accomplish this through our focus on labor relations; talent development; diversity, equity and inclusion; and competitive pay and comprehensive benefits.

Labor Relations. As of December 31, 2021, our company had approximately 127,000 team members around the world, about 86% of whom were represented by various labor unions, which is the highest percentage of represented workers of any U.S. airline. Our company respects our team members’ rights to free association and collective bargaining, and we strive to work collaboratively with our union partners to negotiate industry-competitive contracts. Since 2005, we have completed more than 30 collective bargaining agreements, significantly more than any other airline.

Talent Development. We give our team members the tools, training and resources they need to do their best. We have a suite of programs aimed at helping our people develop the skills and experience to succeed in their roles and build rewarding, long-term careers within our company. Additionally, we’ve partnered with leading online learning platforms to make professional development available on-demand to all our team members.

Diversity, Equity and Inclusion. Cultivating an environment that celebrates diversity, equity and inclusion (“DEI”) is a top priority for us, and we seek to create a workplace where diverse perspectives and experiences are welcomed and encouraged, where team members feel comfortable to be their authentic selves and where we are always learning from one another. Our DEI goals include:

 

    diversifying our leadership team by establishing specific objectives and laying out a plan to achieve them, including enhancing our recruitment, development and mentoring programs;

 

    providing additional learning opportunities beyond implicit bias training to generate further education and awareness of diversity and inclusion matters; and

 

    pledging to assist Black youth in developing job skills and expanding access to well-paying careers as part of our overall strategy to increase opportunities in our hub cities and Tulsa, Oklahoma, where our largest maintenance facility is based.

In 2021, we continued to take steps toward achieving these goals. We:

 

    increased Black representation at the director-and-above level by approximately 80%, exceeding our goal of a 50% increase set at the beginning of 2021;

 

    announced a second round of the Executive Sponsorship Program, first launched in September 2020, in which a group of Black leaders are paired with an executive leader for a year-long mentorship program;

 

    launched an inclusive workplace DEI training completed by more than 90,000 team members;

 

    introduced the Inclusion Education Series, a new web-based training series designed to help each team member become an upstander, with the first course focusing on how team members can recognize when something is wrong, act to make it right and better understand microaggressions;

 

    started using HiredScore, a hiring technology platform designed to ensure accountability and mitigate potential hiring bias;

 

    partnered with McKinsey & Company to offer select team members access to its Leadership Academies; and

 

    became one of six companies to receive Fair Pay Workplace’s inaugural pay equity certification for our management and support staff team to ensure equitable pay regardless of gender or race and ethnicity. This certification will require us to undergo regular check-ins for progress to build upon fair pay practices and annual re-certification. Approximately 86% of our team members are represented by unions and already have built-in pay equity.

 

 

 

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In 2022, we deepened our commitment to diversity, equity and inclusion by introducing a DEI metric into the STIP, weighted at 10%. We designed this new metric to drive accountability in the specific aspects of our DEI program that we believe are critical to our Company’s financial and operational success. Those include increasing Black representation, retaining people of color, encouraging engagement by all leaders to increase awareness of the value diversity can bring to our business, and providing team members with training to help them recognize and address bias effectively in their day-to-day work at American.

In addition, our Compensation Committee’s policy is that, when executive officers, including the Chief Executive Officer, are recruited from outside the Company, the initial lists of candidates shall include qualified female and racially/ethnically diverse candidates. Any third-party consultant asked to furnish an initial list of candidates will be instructed to include such candidates.

Competitive Pay and Comprehensive Benefits. Our goal is to offer competitive compensation and benefits packages to all our team members, including profit sharing. We also offer a wide variety of resources designed to support the physical, emotional and financial well-being of our team members and their families. We are committed to providing medical coverage that is both affordable and flexible along with health care navigation and support tools. Additionally, during the pandemic, we offered COVID-19 testing, paid pandemic leave, and vaccinations to support our team members and ensure the continuity of our operation. Detailed information about our company’s benefit programs is available at my.aa.com, which is not incorporated by reference into this Proxy Statement.

Our internal recognition programs give team members and customers the opportunity to show their appreciation, including through our Nonstop Thanks program, whereby team members award each other points for a job well done or as an expression of gratitude. Those points can be redeemed for items in an online catalog. In 2021, our team members were recognized by customers, peers and company leaders approximately two million times, and hundreds of team members were nominated for the annual Chairman’s Award, the highest honor that we bestow upon our team members.

Customer Satisfaction and Experience

Our Company flies to more than 300 destinations in the United States and internationally, and we are committed to providing our customers with a world-class travel experience. Despite the challenges presented by COVID-19 over the past two years, we continued to rigorously measure and track customer satisfaction through passenger surveys, efforts that led to further improvements in our operations and the services we provide.

Improving Customer Satisfaction Scores. American safely transported more than 165 million passengers in 2021, more than any other U.S. carrier. Despite the ongoing volatility in demand for air travel based on the spread of COVID-19 and its emerging variants, we achieved our best performance in on-time arrivals, on-time departures and completion factor since the pandemic began.

Our operating performance was particularly strong during the year-end holidays. In fact, our on-time performance in December 2021 outperformed our performance in any December in years prior to the pandemic, and American performed better than our primary competitors in key operational metrics during the month.

Driven largely by this performance, American posted record Likelihood to Recommend (LTR) scores for 2021. Our customers completed more than two million surveys in 2021, and their LTR strongly correlates with on-time performance. LTR also reflects other aspects of the customer journey at the airport and in the air, such as check-in and boarding, customer service and onboard products. Our full-year LTR score in 2021 reflected an improvement over 2020 and the score for the fourth quarter was the highest we have recorded for a single quarter.

Enhancing the Customer Experience. Providing exceptional service is crucial to our success. In 2021, American was recognized for the fourth consecutive year with the prestigious Five Star rating in The APEX Official Airline Ratings – Global Airline category. This rating is based on verified customer feedback on the overall travel experience.

Among the dozens of initiatives we implemented in 2021, we expanded our free in-flight entertainment options through exclusive partnerships with Rosetta Stone and Skillshare. We also reintroduced free access to live sports and news networks for customers traveling on any of American’s domestic narrowbody aircraft. These in-flight entertainment offerings are supported by the fastest Wi-Fi on more aircraft than any other carrier. Through our Five Star Essentials service, we simplified the airport experience at selected locations for passengers traveling with children or with anyone needing extra help.

We also updated the American Airlines app to add a chat function so that AAdvantage® customers could ask a Customer Care representative for assistance in real time. And we streamlined the process for redeeming stored value so that it can

 

 

        

 

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be done without requiring assistance. In addition, we introduced an automated callback feature to support customers who prefer to manage their travel over the phone at a time that’s most convenient for them.

Addressing Customer Concerns. The ability to respond swiftly to a customer concern is a critical part of our approach to customer satisfaction. During peak times when our response may not be as rapid as we would like, we have tools in place such as chat through the mobile app, an automated callback feature and immediate, automated correspondence to provide travelers with the most relevant information for their trip. We also share reports of customer concerns quarterly with senior executives and our Board of Directors, and our Chief Customer Officer receives information about customer correspondence daily.

American is especially focused on comments that allege discriminatory behavior, and we have empowered a special Customer Relations team to increase awareness of such complaints among customer-facing team members. Each allegation is investigated, and disciplinary action, up to and including termination, can result if we determine that unacceptable behavior occurred.

Helping Customers Navigate COVID-19. As the pandemic extended into its second year, with travel requirements shifting frequently depending on destination and other factors, American provided our customers with the resources they needed. We expanded the use of Sherpa to provide updates on international travel requirements due to COVID-19 variants. We also continued to partner with VeriFLY to help customers understand and verify their travel requirements.

Customers traveling internationally can now access our Ready to Fly checklist when viewing their eligible reservations on aa.com and the American Airlines mobile app. The checklist outlines everything our customers need including test and vaccination requirements, along with options to submit digital documentation and contact tracing information.

Ready to Fly also links to the VeriFLY app. Customers can now check-in online at aa.com, the American Airlines mobile app or the airport kiosk after receiving their green check mark from VeriFLY and head straight to the gate. These new digital options save customers time at the airport and give them peace of mind that they are ready to fly before arriving at the airport. American also partnered with trusted COVID-19 testing providers to allow customers to take a test at a clinic, take a test at home before their trip or order a test kit to pack for their return trip.

Community Impact

We are committed to making a meaningful and beneficial impact on our community. As a global airline, we look for opportunities to support both U.S.-based and international causes and philanthropic organizations. In 2022, we worked with long-established and new partners to support their missions:

 

    For more than 37 years, American has supported research for the treatment and cure of cystic fibrosis. To date, we have raised more than $44 million for the Cystic Fibrosis Foundation.

 

    In honor of our 95th birthday, we donated 10 million AAdvantage® miles to our long-standing partner, Make-A-Wish, to help grant 95 wishes. We have partnered with Make-A-Wish for more than 30 years.

 

    We have partnered with the American Red Cross for 13 years and are recognized as a member of its $1 million annual disaster giving program. In 2022, we raised more than $1.8 million to support COVID-19 and disaster relief efforts:

 

    In response to the devastating winter weather that impacted the Central United States, American activated our disaster response giving platform, allowing customers and team members to assist American Red Cross efforts in Texas and beyond.

 

    In partnership with our customers, we raised nearly $1.5 million in support of the American Red Cross and Red Crescent Societies’ efforts to fight the coronavirus pandemic around the world, including Brazil, India and other countries in need, to battle the devastating virus.

 

    For six years, American has partnered with Stand Up to Cancer in support of their innovative research and commitment to turn patients into long-term survivors. As of year-end 2021, American has raised and donated more than $11 million for the cause.

 

    We have partnered with Feeding America for more than five years, donating miles and cash to support their mission to end hunger:

 

    In 2021, we donated more than $2 million in unused on-board food and beverage products to various food banks globally.

 

 

 

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    In partnership with the Tarrant Area Food Bank and the Cotton Bowl, 300 American Airlines team members distributed more than 4,000 Thanksgiving meals to Fort Worth families in need.

 

    We donated more than 67,000 ready-to-eat meals through Feeding America to people in Louisiana impacted by Hurricane Ida.

 

    We embarked on a new partnership with the National Park Foundation to encourage exploration of some of the country’s most iconic natural wonders, historic sites and cultural treasures, and to connect customers with opportunities to support the future of America’s national parks, donating more than 37 million AAdvantage miles through our Miles for Our Planet initiative.

 

    We partnered with Team Rubicon to distribute more than 13,000 items purchased on Amazon by American Airlines team members for Afghanistan refugees as they resettled in the United States.

 

    After the building collapse in Surfside, FL, we donated three million AAdvantage® miles to provide travel assistance and help reunite families that were impacted by the tragic event.

 

    Following a 7.2 magnitude earthquake that struck Haiti, we donated one million AAdvantage® miles to Team Rubicon to transport first responders and medical professionals to assist in recovery efforts. We also donated cargo space to transport 57 pallets of emergency supplies.

 

    We joined the just keep livin Foundation’s Texas Relief Fund to help those in need recover after Winter Storm Uri, with 100% of donations dedicated to supporting charities providing critical relief services throughout the Lone Star State. AAdvantage® members were able to earn 10 miles for every dollar donated to the fund; more than 7,800 AAdvantage members came together to donate nearly $868,000 in support of the fund.

And we worked to support those who serve our country through military service:

 

    To commemorate the 80th anniversary of the attack on Pearl Harbor, we partnered with other businesses and nonprofit organizations to bring 63 World War II veterans to Hawaii on a chartered 787 for a week-long trip to honor their service and sacrifice.

 

    In partnership with MGM Resorts, the USO, Chef Robert Irvine, Gary Sinise Foundation and others, we provided 95 combat-wounded veterans from Walter Reed National Military Medical Center and their guests with a special five-day experience in Las Vegas for the 12th annual Salute to the Troops event.

 

    We had the privilege of transporting the remains of a Medal of Honor recipient from the Korean War, Chaplain Emil Kapaun, who was laid to rest where his family resides in Wichita, Kansas after his remains were identified in Honolulu.

 

    In partnership with the Dallas Cowboys, American provided a chartered aircraft to 40 wounded, ill and hospitalized soldiers and their families to fly to Dallas-Fort Worth for a VIP suite experience at a Dallas Cowboys game.

 

    Team members packed more than 10,000 care packages for military service members in 2021. Events took place in Boston, Dallas-Fort Worth and Philadelphia and were distributed across the globe.

We will continue to pursue new opportunities to help our communities and continue to seek out partnerships with various charities, aid groups and other non-profit organizations.

ESG Recognition

 

    In 2021, the Company was included in the Dow Jones Sustainability North America Index for the first time. The recognition is a testament to the Company’s ongoing commitment to excellence on matters of ESG, including reducing carbon emissions from its operation; advancing diversity, equity and inclusion; and providing regular and transparent ESG disclosures.

 

    For the 20th consecutive year, the Human Rights Campaign honored the Company with the highest possible rating in the prestigious Corporate Equality Index (“CEI”), a national benchmarking tool that rates companies on their policies and practices with regard to lesbian, gay, bisexual and transgender employees. Companies that earn the top CEI score of 100 are also named the “Best Places to Work” in the United States.

 

    The Company received the top score of 100 on the Disability Equality Index® and was named one of the 2020 Disability Equality Index® Best Places to Work for Disability Inclusion for the sixth consecutive year.

 

    The Religious Freedom and Business Foundation ranked the Company second in the Fortune 100 for religious equity, diversity and inclusion.

 

 

        

 

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    S&P and FTSE4Good included AAG stock in their sustainability-focused indices, and Newsweek named American among America’s most responsible companies.

Codes of Ethics

Our employees, including our principal executive officer and principal financial and accounting officer, and our directors are governed by one of two codes of ethics of the Company (collectively, the “Codes of Ethics”). The Codes of Ethics require our employees and directors to conduct Company business in the highest legal and ethical manner. The Codes of Ethics meet the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K and the requirements of a code of business conduct and ethics under applicable Nasdaq listing standards. The full texts of the Codes of Ethics and further details regarding the scope of each of the Codes of Ethics are available on our website at www.aa.com under the links “Investor Relations”—“Corporate Governance.” We will also provide a copy of the Codes of Ethics to stockholders, free of charge, upon request to our Corporate Secretary. Any amendments to or waivers from the Codes of Ethics will be posted at this location on our website as required by applicable SEC and Nasdaq rules.

Public Policy Engagement and Political Participation

Engagement in the political, legislative and regulatory process is important to the success of the Company. Compliance and oversight of our public policy and political engagement is provided by our Senior Vice President for Corporate Affairs and Chief Government Affairs Officer, who reports to the Chief Executive Officer, and the CGPRS Committee of the Board. In 2022, the Board adopted a revised Statement on Public Policy Engagement and Political Participation. This statement brings the Company’s practices and disclosures into closer alignment with best practices in this area. American’s score on the Center for Political Accountability Zicklin Index of Corporate Political Disclosure and Accountability improved from 81.4 in 2020 to 88.6 in 2021, on a scale of zero to 100. The Zicklin Index benchmarks the political disclosure and accountability policies and practices of leading U.S. public companies. This score put the Company in the First Tier of S&P 500 companies.

We do not use corporate funds to contribute to candidates, political party committees or political action committees, including Super PACs and political committees organized under Section 527 of the Internal Revenue Code to promote the election or defeat of candidates for office. We do not use corporate funds to make independent political expenditures or electioneering communications. If the Company makes payments to other tax-exempt organizations, such as 501(c)(4)s, that the recipient may use for political purposes, we will publicly disclose those payments on our corporate website. On rare occasions, we may use corporate funds to support or oppose state and local ballot initiatives if we believe an initiative would materially affect our business or the transportation infrastructure in the communities we serve. If we make any such contribution, we will disclose the amount and recipient on our corporate website. We did not make any such contribution in 2021.

As part of our public policy engagement, we are members of several trade and industry associations, and we disclose on our corporate website a full list of the Company’s trade association memberships for which our fees exceed $25,000. We also disclose the non-deductible portion of the dues we pay our major trade associations.

For further information, please see our Statement on Public Policy Engagement and Political Participation, available on our website at www.aa.com/esg, which is not incorporated by reference into this Proxy Statement.

Prohibition on Hedging and Pledging

Our insider trading policy prohibits the members of our Board, our executive officers, managing directors and director-level employees and our other employees with any with regular access to material non-public information, from hedging the economic risk of security ownership. This prohibition includes options trading on any of the stock exchanges or futures exchanges, as well as customized derivative or hedging transactions with third parties, such as zero-cost collars and forward sale contracts. In addition, the members of our Board and such employees are prohibited from pledging Company securities to secure margin or other loans.

 

 

 

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DIRECTOR COMPENSATION

The table below provides information regarding compensation we paid to our non-employee directors in 2021. The compensation elements are described in the narrative following the table. Doug Parker, our Chairman and former Chief Executive Officer, is not included in the table because he was an employee during 2021 and received no compensation for his service as Chairman or as a member of the Board. Gregory D. Smith and Robert Isom, our Chief Executive Officer and President, were each elected to the Board effective January 18, 2022 and March 31, 2022, respectively, and as such are not included in the table below. Mr. Isom does not receive any compensation for his service as a member of the Board.

 

  Name     

Fees Earned

or Paid

in Cash

($)(a)

    

Stock

Awards

($)(b)

    

All Other

Compensation

($)(c)

    

Total

($)

      

Jim Albaugh

     130,000      150,000        7,638      287,638  

Jeff Benjamin

     130,000      150,000      16,700      296,700  

Adriane Brown(d)

     109,643      194,000        7,290      310,933  

John Cahill

     160,000      150,000      19,680      329,680  

Mike Embler

     150,000      150,000      17,886      317,886  

Matt Hart

     140,000      150,000      20,884      310,884  

Sue Kronick

     150,000      150,000        4,972      304,972  

Marty Nesbitt

     130,000      150,000      30,352      310,352  

Denise O’Leary

     150,000      150,000      20,942      320,942  

Ray Robinson

     130,000      150,000      22,932      302,932  

Doug Steenland

     130,000      150,000      17,286      297,286        

 

(a)

The amounts represent the aggregate dollar amount of all fees the directors earned or were paid in 2021 for service as a director, including annual retainer, committee, chair, meeting and lead independent director fees.

 

(b)

The amounts represent the aggregate grant date fair value, as calculated in accordance with ASC Topic 718, of (i) 6,289 RSUs granted to each director on June 9, 2021, which will vest on June 8, 2022, subject to the continued service of the director through the vesting date and (ii) 2,375 RSUs granted to Ms. Brown on February 20, 2021, in connection with her election to the Board, which vested on June 9, 2021. The grant date fair value, as calculated in accordance with ASC Topic 718, of time-based RSUs is equal to the number of shares underlying the RSUs, multiplied by the closing price of our Common Stock on the date of grant. As of December 31, 2021, each of our non-employee directors held 6,289 RSUs. No non-employee directors held any other outstanding equity awards.

 

(c)

The amounts include (i) the value of flight privileges received in 2021 and (ii) tax reimbursements that we paid to our directors in 2022 for flight privileges provided to them in 2021. Amounts also include the portion of the premiums paid by us on behalf of Mr. Hart and Ms. O’Leary for a life insurance policy under the America West Directors’ Charitable Contribution Program, which is described more fully below in the section entitled “Legacy Director Compensation Programs.” Each of these amounts are set forth in the table below. Flight benefits are valued based on the imputed taxable income to the director, which valuation is greater than the incremental cost to the Company. For Mr. Robinson, also includes $6,496 representing the value of cash and shares received in connection with a distribution under the Disputed Claims Reserve on December 7, 2021.

 

  Name   

Flight

Privileges

($)

  

Tax

Gross-Up

on Flight

Privileges

($)

  

Insurance

Premiums

($)

Jim Albaugh

       3,819        3,819        -

Jeff Benjamin

       8,350        8,350        -

Adriane Brown

       3,645        3,645        -

John Cahill

       9,840        9,840        -

Mike Embler

       8,943        8,943        -

Matt Hart

       4,411        4,411        12,062

Sue Kronick

       2,486        2,486        -

Marty Nesbitt

       15,176        15,176        -

Denise O’Leary

       8,488        8,488        3,966

Ray Robinson

       8,218        8,218        -

Doug Steenland

       8,643        8,643        -

 

(d)

Ms. Brown was elected to the Board on February 20, 2021.

 

 

        

 

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Director Compensation

The Compensation Committee will periodically review the overall compensation of our directors in consultation with the Board and, from time to time, the assistance of the Compensation Committee’s compensation consultant. The Compensation Committee has authority to retain and terminate any outside advisors, such as compensation consultants and legal counsel, and to determine their compensation.

Annual Retainers and Grants of RSUs. For 2021, the compensation for our non-employee directors included the following cash-based annual retainers:

 

    an annual retainer of $100,000 for service on the Board;

 

    an annual retainer of $15,000 for service on each of the Audit, Compensation, CGPRS or Finance Committees;

 

    an annual retainer of $25,000 for service as the Chair of the Audit Committee and an annual retainer of $20,000 for service as the Chair of each of the Compensation, CGPRS or Finance Committees; and

 

    an additional annual retainer of $30,000 for service as our Lead Independent Director.

On the date of the 2021 annual meeting of stockholders, each continuing non-employee director received a number of RSUs equal to $150,000 divided by the closing price of our Common Stock on the date of the annual meeting. In connection with her appointment to the Board on February 20, 2021, Ms. Brown received a pro-rated award of RSUs valued at approximately $44,000 divided by the closing price of our Common Stock on the grant date. Each of the RSU awards granted to our non-employee directors will vest fully on the earlier of the first anniversary of the date of grant or the date of the next annual meeting of stockholders, subject to the continued service of the non-employee director through the vesting date.

Our non-employee director compensation program for 2021 was unchanged from 2020.

Other Compensation. As is customary in the airline industry, we provide our directors with flight benefits. During the period of time they serve on the Board, non-employee directors are entitled to complimentary personal air travel for the non-employee director and his or her immediate family members on American and American Eagle, 12 round-trip or 24 one-way passes for complimentary air travel for the non-employee director’s family and friends each year, as well as American Airlines Admirals Club® membership, and AAdvantage® ConciergeKeySM program status. Non-employee directors receive a tax gross-up for imputed taxable income related to these flight benefits. In addition, these travel benefits (except for the tax gross-up) will be provided (i) for a non-employee director’s lifetime if he or she has served for seven or more years or has otherwise vested in such benefits by virtue of the merger with US Airways or service with a predecessor airline or (ii) for five years if he or she has served for less than seven but more than two years. Non-employee directors will also be reimbursed for all reasonable out-of-pocket expenses incurred in connection with attendance at meetings upon submission of receipts.

Some of our current directors are eligible to continue participation under certain legacy programs related to service for predecessor companies, as described below.

Legacy Director Compensation Programs

Following the closing of the merger with US Airways, the America West Directors’ Charitable Contribution Program (the “Charitable Contribution Program”), a legacy director compensation program, continues to be in effect. In 1994, America West established the Charitable Contribution Program under which all directors of America West were invited to participate. This program was discontinued for new directors following the merger between America West and US Airways in 2005. Under the Charitable Contribution Program, upon the death of a participant, America West (or its successor) is required to donate $1 million to one or more qualifying charitable organizations chosen by the participant. All participants serving as directors of America West at the time of the merger became vested in the Charitable Contribution Program, and the Charitable Contribution Program may not be terminated with respect to these individuals. During 2021, the directors who were participants in the Charitable Contribution Program were Messrs. Hart and Parker and Ms. O’Leary. The charitable contributions will be substantially funded by life insurance proceeds from policies maintained by us on the lives of the participants. Under the terms of the Charitable Contribution Program, America West was allowed to place joint life insurance on two directors. The life insurance policies currently in place under the Charitable Contribution Program are structured as joint policies on the lives of two directors and the insurance benefits are payable at the death of the last survivor. Individual directors derive no direct financial benefit from the Charitable Contribution Program because all insurance proceeds are to be paid by us, and all tax deductions for the charitable contributions accrue solely to us.

 

 

 

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Stock Ownership Guidelines

We adopted stock ownership guidelines for our non-employee directors in January 2014. Non-employee directors are required to hold a number of shares of stock equal to the lesser of either (i) five times the director’s annual cash retainer or (ii) 15,000 shares of our Common Stock. Ownership is determined based on the combined value of the following director holdings: (a) shares owned outright or by immediate family members residing in the same household or in a trust for the benefit of the director or an immediate family member; (b) Common Stock, stock units or other stock equivalents obtained through the exercise of SARs/stock options or vesting of equity awards; (c) unvested equity awards granted under any equity and deferral plans; and (d) other stock or stock equivalent awards determined by the CGPRS Committee. Non-employee directors have five years from the later of: (i) the date the guidelines were adopted and (ii) the date the individual became a director to comply with the stock ownership guidelines. Under the stock ownership guidelines, until a non-employee director has reached the minimum ownership guideline, such director may not sell or otherwise dispose of the shares of Common Stock acquired upon the exercise, vesting or settlement of any equity awards except to the extent such sales do not cumulatively exceed 50% of such shares. Each of our directors with a compliance date before the date of this Proxy Statement owns shares that exceed the minimum stock ownership guidelines.

 

 

        

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Certain Relationships and Related Party Transactions

Since January 1, 2021, the Company has not participated in, nor is there currently planned, any transaction or series of similar transactions with any of the Company’s directors, nominees, executive officers, holders of more than 5% of Common Stock or any member of such person’s immediate family that is required to be reported under Regulation S-K Item 404(a) of the rules of the SEC other than the following: A child of Douglas Steenland, a director of the Company, was employed by American Airlines on a full-time basis prior to Mr. Steenland’s consideration for, and election to, the Company’s board, and the Board took this relationship into consideration in making the determination to elect Mr. Steenland to the Company’s board. During 2021, this employee received total compensation (inclusive of base pay, 401(k) employer contributions, and employer paid life insurance) of slightly more than $120,000.

We have entered into indemnity agreements with our executive officers and directors that provide, among other things, that we will indemnify each such officer or director, under the circumstances and to the extent provided for in the indemnity agreements, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings in which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of the Company.

Policies and Procedures for Review and Approval of Related Person Transactions

We believe that business decisions and actions taken by our officers, directors and employees should be based on the best interests of the Company, and must not be motivated by personal considerations or relationships. We attempt to analyze all transactions in which we participate and in which a related person may have a direct or indirect material interest, both due to the potential for a conflict of interest and to determine whether disclosure of the transaction is required under applicable SEC rules and regulations. Related persons include any of our directors or executive officers, certain of our stockholders and immediate family members of any of the above persons. The Audit Committee is responsible for reviewing and approving all significant conflicts of interest and related party transactions in accordance with our company policies.

A conflict of interest occurs when an individual’s private interest interferes, or appears to interfere, in any way with the interests of the Company. Our Codes of Ethics requires our employees, including our principal executive officer, principal financial and accounting officer and our directors who may have a potential or apparent conflict of interest to fully disclose all the relevant facts to either the Chair of the Audit Committee or the Chief Ethics and Compliance Officer, as applicable. Once the Chair of the Audit Committee or the Chief Ethics and Compliance Officer receives notice of a conflict of interest, they will report the relevant facts to our internal auditors. The internal auditors will then consult with the Audit Committee and a determination will be made as to whether the activity is permissible. The full texts of our Codes of Ethics are available on our website at www.aa.com under the links “Investor Relations”—“Corporate Governance.”

 

 

 

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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The Audit Committee has reviewed and discussed with our management our audited consolidated financial statements for the fiscal year ended December 31, 2021 (the “Audited Financial Statements”).

The Audit Committee has discussed with KPMG, our independent registered public accounting firm, the matters required to be discussed with the Audit Committee under the applicable requirements of the Public Company Accounting Oversight Board and the Securities and Exchange Commission.

The Audit Committee has received the written disclosures and the letter from KPMG regarding its independence as required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence, has discussed with KPMG its independence and has considered the compatibility of the non-audit services provided by KPMG with respect to maintenance of that independence.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, that the Audited Financial Statements be included in our Annual Report on Form 10-K for the year ended December 31, 2021, for filing with the SEC.

Respectfully submitted,

Audit Committee

Matt Hart (Chair)

Adriane Brown

John Cahill

Mike Embler

Marty Nesbitt

Greg Smith

 

This report of the Audit Committee is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy rules or the liabilities of Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by us under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act.

 

 

        

 

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COMPENSATION DISCUSSION AND ANALYSIS

Overview

This section discusses the principles underlying our compensation policies for our “named executive officers” for 2021, who during 2021 served as follows:

 

    W. Douglas Parker, Chairman and Chief Executive Officer;

 

    Robert D. Isom, President;

 

    Derek J. Kerr, Executive Vice President and Chief Financial Officer;

 

    Maya Leibman, Executive Vice President and Chief Information Officer; and

 

    Stephen L. Johnson, Executive Vice President—Corporate Affairs.

As described more fully below, our executive compensation strategy is designed to provide a total compensation package that will not only attract and retain high-caliber leaders, but also align our leaders’ contributions with our corporate objectives, stockholders’ interests and the interests of our other stakeholders.

Summary

2021 Executive Compensation Program During a Period of Unprecedented Challenges

2021 continued to be a very challenging time in our industry’s history, as the COVID-19 pandemic caused drastic disruptions in global demand for air travel, resulting in a severe decline in our business. However, throughout these challenges, we remained consistent in our approach and philosophy that our executive compensation programs provide both fair pay and pay for performance and align with the interests of stockholders.

Substantial reductions in earned compensation over a number of years combined with the applicable compensation limits under the CARES Act, PSP2 and PSP3 shaped our 2021 executive compensation decisions. While the Compensation Committee made temporary changes to the 2021 LTIP award to ensure compliance with the CARES Act, PSP2 and PSP3 and retain our executives, we have re-established our historical performance-based cash and equity incentive programs for 2022.

Significant Reductions to Compensation. We entered into, with the federal government, payroll support and loan agreements under the CARES Act, PSP2 and PSP3 pursuant to which our named executive officers became subject to significant limits on their compensation. Under the applicable limits, each of our named executive officers’ total compensation during any 12-month period from March 24, 2020 until April 1, 2023, is capped at an amount equal to the sum of (i) $3 million and (ii) 50% of the total compensation in excess of $3 million received by such executive officer in calendar year 2019. For 2021, we implemented significant reductions to the total target direct compensation for our named executive officers in order to comply with such limits, as set forth in the charts below, and they will continue to be a primary determinant of our named executive officers’ compensation over the remaining period during which they are in effect. For 2021, Mr. Parker’s LTIP target value was reduced over 30% and Mr. Isom’s LTIP target value was reduced over 20%, in each case, as compared with 2020 levels.

 

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Adjustments to 2021 Compensation Program. Going into 2021, our named executive officers had experienced substantial decreases to their compensation, including to a much larger extent than their peers at our competitors. Our named executive officers had taken substantial base salary reductions during a significant part of 2020 at their request, the 2020 STIP had been suspended and the named executive officers did not receive any payout, and each named executive officer held three outstanding awards of performance-vesting RSUs as of the end of 2020, all of which were tracking at below threshold as of the end of 2020, with the 2018 and 2019 grants forfeiting in their entirety in February 2021 and February 2022, respectively.

 

Performance-Vesting RSU Pay Outcomes as of December 31, 2020

2018 Grant (forfeited in February 2021)

   Tracking Below Threshold (0%)   

2019 Grant (forfeited in February 2022)

   Tracking Below Threshold (0%)   

2020 Grant (potentially vesting in 2023)

   Tracking Below Threshold (0%)   

In addition, as a condition of the payroll support and loan agreements entered into with the federal government under the CARES Act, PSP2 and PSP3, we implemented significant reductions to the total target direct compensation for our named executive officers in order to comply with the applicable limits. The 2021 program reflected these reductions to total target direct compensation.

In making 2021 compensation decisions, the Compensation Committee considered concerns related to the need to retain and reward our management team throughout the COVID-19 pandemic and the backdrop of significant reductions in compensation. The 2021 program was modified, solely for 2021, to provide more certainty to our management team by consisting primarily of base salary (other than in the case of Mr. Parker who has not received a base salary since 2015) and time-vesting RSUs vesting over three years.

The 2021 LTIP RSUs vest with respect to 40% of the shares on each of the first and second anniversaries of the date of grant and with respect to 20% of the shares on the third anniversary. The Compensation Committee established this vesting schedule in consideration of the significant reduction in the long-term equity incentives under the 2021 program as compared to the intended levels under the Company’s traditional total compensation design. The time-vesting schedule enhances stability of the long-term incentive by reducing volatility (as compared to performance-based awards), which is expected to enhance retention value, while assuring that a significant portion of compensation is directly linked to our stock price performance.

Performance-vesting RSUs Continue to Track Significantly Below Target. Each named executive officer held two outstanding awards of performance-vesting RSUs as of the end of 2021, with the 2019 grant tracking at below threshold as of the end of 2021 and the 2020 grant tracking at only 27% of target. In February 2022, it was determined that the pre-tax adjusted income goal for the 2019 performance-vesting RSUs was achieved at below threshold, and these awards were forfeited in their entirety.

Realizable Compensation Continues to be Significantly Less Than Target Compensation. As of December 31, 2021, Mr. Parker’s three-year average realizable compensation from 2019-2021 was only 48% of his three-year average target compensation, while the three-year average realizable compensation from 2019-2021 for our other named executive officers was only 60% of their three-year average targeted compensation.

2022 Compensation Program Places Significant Pay at Risk. For 2022, the Compensation Committee re-established our performance-based STIP and the performance-based components of our LTIP programs for the named executive officers. The 2022 STIP is designed to align management with our goals to run a reliable operation and to return to profitability while building on our momentum on diversity, equity and inclusion. Our 2022 LTIP for our named executive officers returned to incorporating both performance- and time-vesting components, with the performance-vesting component weighted 50% by target value and tied to attainment of total debt reduction (60% weighting) and relative pre-tax income margin improvement (40% weighting) versus our industry peers.

Our Track Record of Committing to Fair Pay and Pay-for-Performance

The actions highlighted above are the latest in a series of actions demonstrating our strong track record of a firm commitment to fair pay and pay-for-performance. That historic commitment has been shown by the following exceptional actions over recent years initiated by our CEO and other executive officers with respect to their compensation:

 

    Target CEO Compensation Below Peers. At his request, Mr. Parker’s target direct compensation has been historically set at and remained for 2021 below the average for his peers at Delta and United.

 

 

        

 

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    No Cash Compensation to Our CEO. Since 2015, Mr. Parker has not received any cash-based direct compensation. 100% of Mr. Parker’s direct compensation has been consistently provided in the form of equity incentives, and except for 2021, at least 50% could only vest based upon the achievement of performance objectives, underscoring our commitment to paying for performance and further aligning his interests with that of our stockholders. As described above, for 2021 only, 100% of Mr. Parker’s direct compensation was provided in the form of time-vesting equity incentives.

 

    No CEO Employment Agreement. In 2016, at Mr. Parker’s request, our Compensation Committee agreed to eliminate Mr. Parker’s employment agreement such that Mr. Parker is no longer contractually entitled to receive a set level of compensation and benefits and is no longer protected by the change in control and severance provisions of that employment agreement.

 

    No Executive Officer Severance Agreements. In 2017, at their request, the executive officers who were party to change in control and severance benefit agreements voluntarily terminated their agreements. As a result, none of our executive officers are currently contractually entitled to any cash severance or continued health benefits upon any termination, nor are we contractually obligated to provide a gross-up to cover any excise taxes incurred by any executive officer under Section 4999 of the Internal Revenue Code.

2021 Compensation Objectives and Programs

Pay-for-Performance Philosophy

The philosophy underlying our overall executive compensation program is to provide an attractive, flexible and market-based total compensation program that is both tied to our performance and aligned with the interests of our stockholders. We intend for our compensation programs to motivate the management team to maximize stockholder value over time without creating unnecessary or excessive risk-taking that would have an adverse effect on stockholder value and potentially detract from our ability to reach long term sustainable levels of income and profitability.

While for 2021 the Compensation Committee determined to approve a temporary program that was intended to provide more certainty to the named executive officers with respect to their compensation and aid in retention during an unprecedented time, beginning for 2022, the Compensation Committee re-established our historical executive compensation programs that continue to emphasize variable compensation in the form of short-term cash incentives and long-term equity incentives.

The charts below show the target mix of each element of the 2021 total compensation package for (i) our Chief Executive Officer and (ii) our other named executive officers.

 

 

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2021 Compensation Outcomes Reflected Our Pay for Performance Philosophy

Performance-Vesting RSUs Tracking Below Threshold. We have historically (other than for 2021) granted at least 50% of our annual RSUs as performance-vesting RSUs that are earned not earlier than the third anniversary of the grant date. Each named executive officer held two outstanding awards of performance-vesting RSUs as of the end of 2021. The 2020 performance-vesting RSUs may be earned based on our three-year TSR relative to that of the same pre-defined group of airlines, absolute free cash flow and relative adjusted pre-tax income, weighted equally. The 2019 performance-vesting RSUs may be earned based on our three-year pre-tax income margin as compared to that of a pre-defined group of airlines, and the number of shares earned is further adjusted upward or downward by up to 25% based on our three-year TSR relative to that of the same pre-defined group of airlines.

 

 

 

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Both awards of performance-vesting RSUs held by our named executive officers that were outstanding as of the end of 2021 were tracking at significantly below target as of the end of 2021, with the 2019 award forfeiting in their entirety in February 2022.

 

Performance-Vesting RSU Pay Outcomes as of December 31, 2021

2019 Grant (forfeited in February 2022)

  Tracking at Below Threshold (0%)

2020 Grant (potentially vesting in 2023)

  Tracking at Significantly Below Target (27%)

Realizable Compensation Significantly Less Than Target Compensation. As shown in the charts below, as of December 31, 2021, the three-year realizable compensation for our CEO and our other named executive officers were significantly less than their three-year target compensation.

Three-year Average Realizable Compensation

 

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Target compensation includes base salary, target annual short-term incentive and the grant date fair value of long-term incentives for the applicable year. Realizable compensation includes base salary earned, annual short-term incentive earned for each applicable year and values equity awards granted during 2019-2021 as follows: with respect to RSUs that had vested by December 31, 2021, based on the closing stock price on the applicable vesting date, with respect to time-vesting RSUs that were unvested as of December 31, 2021, based on the closing stock price as of December 31, 2021, and with respect to performance-vesting RSUs that were unvested as of December 31, 2021, based on the performance and closing stock price as of December 31, 2021.

 

 

        

 

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Commitment to Effective Compensation Governance

We are committed to good compensation governance and have adopted compensation policies and practices in furtherance of our commitment, including the following:

 

What We Do                 What We Do NOT Do

  Independent Compensation Consultant that is directly engaged by the Compensation Committee to advise on executive and director compensation matters.

 

  At-Will Employment arrangements with our executive officers with no employment agreements.

 

  Stock Ownership Guidelines that further align our executive officers’ long-term interests with those of our stockholders.

 

  Tally Sheet Review used to conduct a comprehensive overview of all compensation, including an overview of total compensation targets and potential payouts.

 

  Annual Compensation Risk Assessment to identify any elements of our compensation program design or oversight processes that carry elevated levels of adverse risk to the Company.

 

  Clawback Policy for all cash and equity incentive compensation paid to our executive officers.

     

×   No Severance or Change in Control Agreements. None of our executive officers have a severance or change in control agreement.

 

×   No Excessive Perquisites. Perquisites and other personal benefits are not a significant portion of any executive officer’s compensation and are in line with industry standards.

 

×   No Guaranteed Bonuses. Our executive officers’ bonuses are performance-based and 100% at risk.

 

×   No Payouts of Dividends. Unless and until an award’s vesting conditions are satisfied, no dividends accrued on the award are paid.

 

×   No Active Executive Retirement Plans. We do not maintain any active executive-only or supplemental retirement plans.

 

×   No Hedging or Pledging of Our Stock. We prohibit our executive officers from engaging in hedging transactions or using our stock as collateral for loans.

 

×   No Excise Tax Gross-Ups. We do not provide any executive officer with any tax gross-ups to cover excise taxes in connection with a change in control.

Stockholder Approval of 2020 Executive Compensation

At our 2021 annual meeting of stockholders, our stockholders voted, in a non-binding advisory vote, to approve the compensation of our named executive officers (with an approval representing approximately 86.2% of the shares represented in person or by proxy at the meeting and entitled to vote). Our Compensation Committee reviewed the result of the stockholders’ advisory vote on executive compensation and, in light of the approval by a substantial majority of stockholders, did not implement changes to the executive compensation programs solely as a result of the vote.

Determination of Executive Compensation

Role of the Compensation Committee and Management in Compensation Decisions

The Compensation Committee administers the compensation program for all officers, including the named executive officers. The Compensation Committee is comprised of five independent directors. The Compensation Committee’s overarching goal is to create executive compensation programs that align management and stockholder interests over the long-term and that allow us to recruit and retain a highly capable management team. The Compensation Committee considers management input on executive compensation programs but relies on its outside consultant for perspective and leading practice guidance. The compensation consultant also provides leading practice data for the airline industry and Fortune 500 companies generally.

Some of the elements we consider when designing compensation policies include attrition, diversity, and executive development needs. Management also will from time to time bring matters to the attention of the Compensation Committee that might require alterations to compensation policies, especially when they have identified specific circumstances that require additional executive talent or unique executive skills that we may not currently have in place. Our Chief Executive Officer also provides input and recommendations based on his direct knowledge of the other named executive officers’ individual performance and contributions given the scope of their responsibilities.

Use of Compensation Consultant

For 2021, the Compensation Committee retained Korn Ferry as its independent compensation consultant. The Compensation Committee has sole authority with regard to the decision to retain the compensation consultant and, while

 

 

 

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the compensation consultant interacts with management from time to time in order to best coordinate with, and deliver services to, the Compensation Committee, it reports directly to the Compensation Committee with respect to its executive compensation consulting advice. The Compensation Committee has assessed whether the services provided by Korn Ferry or any other relationships raised any conflicts of interest pursuant to SEC and Nasdaq rules, and has concluded that no such conflicts of interest exist.

Use of Market Data and Tally Sheets

In order to ensure a competitive design for our executive compensation program, in 2021, our Compensation Committee, with advice and analysis from its compensation consultant, reviewed our program against those of our largest competitors, Delta, United and Southwest, with an emphasis on Delta and United, our closest peers.

For 2021, 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 officer’s estimated future compensation.

CARES Act, PSP2 and PSP3 Compensation Restrictions

We entered into payroll support and loan agreements with the federal government pursuant to which we have received assistance under the CARES Act, PSP2 and PSP3, which were enacted to provide emergency assistance to individuals, families and businesses affected by the COVID-19 pandemic. In accordance with such legislation, the agreements impose certain caps on executive compensation as a condition to receipt of the assistance, including a limit applicable to any executive who received total compensation in excess of $3 million in calendar year 2019. Under the limit, each such executive’s total compensation during any 12-month period from March 24, 2020 until April 1, 2023, is capped at an amount equal to the sum of (i) $3 million and (ii) 50% of the total compensation in excess of $3 million received by such executive in calendar year 2019. The limit will apply to each of the Company’s executive officers, including the named executive officers. For 2021, we have implemented significant reductions to the total target direct compensation for our named executive officers in order to comply with the applicable limits. For example, Mr. Parker’s total compensation for 2019 was approximately $11.6 million and his total compensation for any 12-month period while the limits are in effect was limited to approximately $7.3 million, a decrease of approximately 37%. These limits will continue to be a primary determinant of our named executive officers’ compensation over the remaining period during which they are in effect.

2021 Executive Compensation

In making 2021 compensation decisions, the Compensation Committee considered concerns related to the need to retain and reward our management team throughout the COVID-19 pandemic, the backdrop of significant reductions in earned compensation as well as the significant reductions to the total target direct compensation for our named executive officers in order to comply with the applicable limits under the CARES Act, PSP2 and PSP3. The 2021 program reflected these reductions to total target direct compensation and was modified, solely for 2021, to give more certainty to our management team by consisting primarily of base salary (other than in the case of Mr. Parker who has not received a base salary since 2015) and time-vesting RSUs vesting over three years. The time-vesting RSUs enhance stability of the long-term incentive by reducing volatility (as compared to performance-based awards), which is expected to enhance retention value, while assuring that a significant portion of compensation is directly linked to the Company’s stock price performance. For 2021, our named executive officers’ fixed compensation was at or below 19% of target total compensation.

For 2022, the Compensation Committee re-established our performance-based STIP and the performance-based components of our LTIP programs for the named executive officers, as described more fully below.

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 lower levels of 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.

 

 

        

 

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For 2021, Mr. Parker continued to receive no base salary. The Compensation Committee approved a 2.5% salary increase over the levels in effect as of end of 2020 for our other named executive officers effective as of May 2021. However, our named executive officers’ base salaries were then reduced in order to comply with the applicable limits under the CARES Act, PSP2 and PSP3. The 2021 annual base salaries of our named executive officers are set forth in the table below.

 

  Named Executive Officer    2021 Base Salary ($)

Robert Isom

     $ 772,669

Derek Kerr

     $ 670,077

Maya Leibman

     $ 670,077

Steve Johnson

     $ 670,077 (a) 

 

  (a)

Mr. Johnson’s base salary was reduced in August 2021 to $610,000 due to the CARES Act, PSP2 and PSP3 compensation limits.

 

Annual Cash Incentive Program

The second core component of our overall compensation program has been a short-term cash incentive program.

However, in June 2020, upon the recommendation of management, the Compensation Committee determined to terminate the 2020 STIP in light of the unprecedented business challenges resulting from the COVID-19 pandemic. Accordingly, no payouts were made under the 2020 STIP to our named executive officers. In addition, for 2021, we suspended our named executive officers’ participation in the 2021 STIP while they are subject to the CARES Act, PSP2 and PSP3 compensation restrictions. As a result, none of our named executive officers were eligible for any cash incentives under the STIP for 2021 either.

For 2022, the Compensation Committee approved an STIP that is designed to align management with our goals to run a reliable operation and to return to profitability while building on our momentum on diversity, equity and inclusion (“DEI”), as summarized in the table below:

 

  2022 Performance Metric    Metric Weighting

Adjusted Pre-tax Income

       50 %

Mainline On-time Departure (DO)

       15 %

Mainline Controllable Completion Factor (CCF)

       15 %

Regional On-time Departure (DO)

       5 %

Regional Controllable Completion Factor (CCF)

       5 %

Diversity, Equity and Inclusion (DEI)

       10 %

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.

The Compensation Committee determines the value of long-term equity awards to be granted to an executive officer based upon the executive’s level of responsibility and job classification level and the results of compensation market analyses.

Historically, including for 2020 and commencing again for 2022, our LTIP included both performance- and time-vesting RSUs, each weighted 50% by target value. For 2021, due to the CARES Act, PSP2 and PSP3 compensation limits applicable to our named executive officers, the target values of each of their LTIP awards were reduced, with Mr. Parker’s LTIP target value reduced over 30% and Mr. Isom’s LTIP target value reduced over 20%, in each case, as compared with 2020 levels. In addition, in light of continued uncertainty in the business environment, the Compensation Committee determined to temporarily eliminate the performance-vesting RSU component of the LTIP for the named executive officers and grant the named executive officers time-vesting RSUs that vest with respect to 40% of the RSUs on each of the first and second anniversaries of the grant date and with respect to 20% of the RSUs on the third anniversary of the grant date.

 

 

 

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The 2021 target grant values for our named executive officers are set forth in the table below, and the number of shares subject to each RSU award was determined by dividing the target grant value by our closing stock price on the date of grant.

 

Named Executive Officer

   2021 Target Grant Value ($)   2020 Target Grant Value ($)

Doug Parker

       7,200,000       10,524,000

Robert Isom

       4,180,000       5,464,000

Derek Kerr

       2,825,000       2,898,000

Maya Leibman

       2,780,000 (a)        2,898,000

Steve Johnson

       2,825,000       2,898,000

 

  (a)

Ms. Leibman’s 2021 LTI grant value was further reduced due to the CARES Act, PSP2 and PSP3 compensation limits.

 

Please see the Grants of Plan-Based Awards table below for a description of the grants awarded to our named executive officers during 2021. The values included in the Summary Compensation Table and the Grants of Plan-Based Awards Table reflect the accounting grant date fair value of the grants. These values do not reflect amounts actually realizable by our named executive officers.

The Compensation Committee has adopted an equity grant policy to standardize the timing, practices and procedures in granting equity awards. The policy provides that equity awards, other than new hire, promotion or special purpose grants, will be granted once per year at the second regularly scheduled meeting of the Compensation Committee or at an Equity Incentive Committee meeting (with respect to awards to non-executive employees) or at a special meeting held for this purpose as close in time to the regularly scheduled meeting as possible.

2019 LTIP Awards

Our named executive officers’ 2019 LTIP grants were comprised of both time-vesting and performance-vesting RSUs. The performance-vesting RSUs were eligible to vest based on the Company’s achievement of a pre-tax income margin, excluding special charges, for the three years ending December 31, 2021 relative to the weighted average pre-tax income margin over the same period for a pre-defined group of airlines as increased or decreased by up to 25% based on the Company’s relative TSR ranking as compared to the same group of airlines. Based on our below-threshold achievement of pre-tax income margin relative to this peer group, none of the shares subject to the award vested, and the award was forfeited in its entirety in February 2022.

2022 LTIP Design

Our 2022 LTIP for our named executive officers returned to incorporating both performance- and time-vesting components, with the performance-vesting component weighted 50% by target value tied to attainment of total debt reduction (60% weighting) and relative pre-tax income margin improvement (40% weighting) versus our industry peers, as summarized below. The goals align with previous guidance regarding the five-year plan to reduce overall debt by $15 billion. The vesting schedule of time-vesting component continues to be intended as part of a temporary plan amid current business recovery.

 

MIX    VESTING SCHEDULE

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2022 PERFORMANCE METRICS

 

               

Total debt reduction from YE2021 to YE2024

 

Relative pre-tax income margin* improvement
vs. industry peers
(average of Delta and United)

 

*  excludes third party, special charges and profit sharing

  Performance
(Payout as
% of Target)
   Total
Debt
Reduction
   Relative
Margin
Improvement
vs. Peers
  Weighting    60%    40%
 

Maximum

(200%)

   $5B    150 bps
  Target (100%)    $4B    100 bps
 

Threshold

(50%)

   $3B    50 bps

Change in Control and Severance Benefits

Change in control and severance benefits are a customary component of executive compensation, which are generally used to reinforce and encourage executives’ continued attention and dedication to their assigned duties without the distraction arising from the possibility of a change in control. None of our executive officers is a party to any individual employment or severance agreement providing change in control or severance benefits. Pursuant to the grant agreements under the Company’s 2013 Incentive Award Plan (the “2013 Plan”), our employees, including our named executive officers, are entitled to full acceleration of their RSUs in the event of (i) a termination due to death or disability or (ii) a change in control. In addition, beginning in 2021, the vesting of each time-vesting RSU award granted to an executive officer other than Mr. Isom will accelerate in full in the event of such individual’s separation from service from the Company (other than a termination by the Company for “cause”) following the date he or she has reached the age of 55 and has 10 or more years of service with the Company or a predecessor, with performance-vesting RSUs remaining outstanding and eligible to vest based on actual performance through the end of the performance period. Information on the estimated payments and benefits that our named executive officers would have been eligible to receive in the event of a termination or change in control as of December 31, 2021 pursuant to their equity awards, the STIP and other arrangements are set forth in “Potential Payments Upon Termination or Change in Control” beginning on page 76.

Other Benefits and Perquisites

We maintain broad-based employee benefit plans in which all employees, including the named executive officers, participate, such as group life and health insurance plans and a 401(k) plan. These benefits are provided as part of the basic conditions of employment that we offer to other U.S.-based team members.

Other Benefits

We continue to provide certain benefits to our named executive officers that are common in the airline industry. The incremental cost to us of providing these benefits is not material. Following standard airline industry practice, we provide certain flight privileges to our employees. Free flights on our airline are available to all employees, and “positive space” flight privileges are provided to our senior executives, including the named executive officers. We believe that providing such flight privileges is consistent with airline industry practice and that competitive flight privileges are needed for the recruitment and retention of the most senior employees. By providing positive space flight privileges to our executives, we are able to offer a unique and highly-valued benefit at a low cost. This benefit also encourages executives to travel on the airline frequently, and while doing so, meet and listen to employees, solicit feedback from employees and customers, audit aircraft and facility appearance and quality, and monitor operational performance throughout the domestic and international route system. In addition, as in prior years, we cover the income tax liabilities of our senior executives, including the named executive officers, related to those flight privileges, which is consistent with industry practice.

The positive space flight privileges provided to our officers, including the named executive officers, include unlimited reserved travel in any class of service for the officer and his or her immediate family, including eligible dependent children, for personal purposes. Officers and their immediate families, including eligible dependent children, also have access to our Admirals Club® travel lounges at various airports and have AAdvantage Executive Platinum status. Officers are also

 

 

 

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eligible for 12 free round-trip passes or 24 free one-way passes each year for reserved travel for non-eligible family members and friends, and we cover the income tax liability related to these flight privileges. Officers are required to pay any international fees and taxes, if applicable. In addition, each of our named executive officers is entitled to continued receipt of the foregoing flight benefits upon their termination of employment, other than coverage of income tax liability.

We also offer our named executive officers perquisites in the form of financial advisory services and executive physicals. We will reimburse up to $4,500 annually for their personal tax planning, estate planning and retirement planning services from a certified financial planner, certified public accountant, or attorney. We will pay the full cost of their annual physicals and additional diagnostic tests recommended by the provider.

Mr. Parker is a participant in the Charitable Contribution Program, under which US Airways paid annual premiums on a joint life insurance policy. Under the program established by America West Airlines in 1994, a $1 million death benefit will be donated to one or more qualifying charitable organizations chosen by Mr. Parker. For a more detailed description of the charitable contribution program, see the narrative above under the Director Compensation table.

For additional information on any benefits provided to the named executive officers on an individual basis, see the section entitled “Executive Compensation”—“Summary Compensation Table” beginning on page 70.

AMR Legacy Retirement Programs

As a former AMR executive, Ms. Leibman participates in certain retirement plans we assumed from AMR in connection with the merger, including the Retirement Benefit Plan of American Airlines, Inc. for Agent, Management, Specialist, Support Personnel and Officers (the “AMR Retirement Benefit Plan”) and the Supplemental Executive Retirement Program for Officers of American Airlines, Inc. (the “AMR Non-Qualified Plan”). Mr. Parker is also a participant in the AMR Retirement Benefit Plan as a result of his employment with AMR earlier in his career. All benefits under the AMR Retirement Benefit Plan were frozen for all employees as of October 31, 2012. Effective upon the freeze of benefit accruals under the AMR Retirement Benefit Plan, AMR began making matching contributions under the American Airlines, Inc. 401(k) Plan (the “AA 401(k) Plan”) to eligible employees, including Ms. Leibman, up to 5.5% of eligible earnings. Mr. Parker does not receive matching contributions under the AA 401(k) Plan. Like the AMR Retirement Benefit Plan, as of October 31, 2012, the defined benefits portion of the AMR Non-Qualified Plan was frozen.

For further details regarding AMR’s legacy retirement plans, see the sections entitled “Executive Compensation—Pension Benefits” beginning on page 74 and “Executive Compensation”—“Non-Qualified Deferred Compensation” beginning on page 75 and the accompanying narrative discussion and footnotes that follow those tables.

Continuing Focus on Leading Practices

Stock Ownership Guidelines

We have implemented stock ownership guidelines for our executive officers. Executives are required to hold a number of shares of stock equal to the lesser of either (i) a fixed number of shares or (ii) a number of shares with a total value equal to a designated multiple of their base salary, as provided in the table below. Ownership is determined based on the combined value of the following executive holdings: (a) shares owned outright or by immediate family members residing in the same household or in a trust for the benefit of the executive or an immediate family member; (b) Common Stock, stock units or other stock equivalents obtained through the exercise of SARs/stock options or vesting of equity awards; (c) unvested equity awards granted under any equity and deferral plans; and (d) other stock or stock equivalent awards determined by the CGPRS Committee. Executives have five years from the later of the effective time of the merger with US Airways or the time of hire to comply with the ownership guidelines. Under the guidelines, until an executive has reached the minimum ownership guideline, such executive may not sell or otherwise dispose of shares of Common Stock acquired upon the exercise, vesting or settlement of any equity awards granted by us except to the extent such sales do not cumulatively exceed 50% of such shares. Each of our executive officers currently owns shares that substantially exceed the minimum ownership guidelines. The stock ownership guidelines are set forth below.

 

 

        

 

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Stock Ownership Guidelines

 

Position/Levels

    

Multiple of

Base Salary