Human Capital & Careers

American Airlines: Bonuses amid Losses

Under a plan written in 2003, the company's troubled parent reportedly will award executives and managers up to $568 million. Since 2001, however, ...
Stephen TaubJanuary 6, 2006

AMR Corp., the holding company for American Airlines, may have lost nearly $600 million or so in the past four quarters. But roughly 1,000 management employees are in line to get nearly the same amount of money in stock-based bonuses in April, according to the Associated Press.

The potential largesse stems from a plan written in 2003, when AMR was teetering on the brink of bankruptcy. The plan called for executives and managers to be rewarded if the parent’s stock performed as well or better than those of other airline companies through the end of 2005, the wire service reported.

Under the plan, management employees got units that vest in April at a strike price of $5. AMR shares are currently kicking around in the low-$20 range. Jeff Brundage, a senior vice president, wrote AMR managers and executives a letter informing them that, assuming a share price of $20 in April, the total value of employee bonuses could top $568 million, according to the AP. Since 2001, AMR has lost more than $7 billion.

The bonuses “reward managers for superior performance,” Brundage reportedly wrote. “Our compensation policy is designed to hold managers and executives directly accountable for the company’s performance by placing a significant portion of your total compensation at risk when the company does not meet or exceed predetermined performance goals.”

The bonuses will range from about $2,000 to a top award of about $1.7 million for Daniel Garton, the airline’s executive vice president for marketing. Gerard Arpey, the company’s chairman and chief executive, didn’t participate in the program, the AP noted. Lisa Bailey, a representative for American, told the wire service that unit amounts varied based on job level and performance.

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