ar01228k.htm
UNITED
STATES
SECURITIES
AND
EXCHANGE COMMISSION
Washington,
D. C.
20549
_____________
FORM
8-K
CURRENT
REPORT
Pursuant
to Section
13 or 15(d) of the
Securities
Exchange
Act of 1934
Date
of earliest
event
reported: January
15, 2008
AMR
CORPORATION _
(Exact
name of
registrant as specified in its charter)
Delaware 1-8400 75-1825172 _
(State
of
Incorporation) ( Commission File Number) (IRS
Employer Identification No.)
4333
Amon Carter
Blvd. Fort Worth,
Texas 76155
(Address
of
principal executive offices) (Zip Code)
(817)
963-1234 _
(Registrant's
telephone number)
(Former
name or former address, if changed since last report.)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[
] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[
] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[
] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item
1.01Entry into a Material Definitive Agreement
On
January 15,
2008, the Compensation Committee of the Board of Directors of AMR Corporation
(the “Corporation”) approved the 2008 Annual Incentive Plan (the “AIP”) for
American Airlines, Inc. ("American"). All U.S. based employees of
American are eligible to participate in the AIP (including the Corporation’s
executive officers). The AIP is American's annual bonus plan and
provides for the payment of awards in the event certain financial and/or
customer service metrics are satisfied, as further described in the
AIP. A copy of the AIP is attached as Exhibit 99.1.
Item
9.01
|
Financial
Statements and Exhibits
|
|
Exhibit
99.1 2008 Annual
Incentive Plan for American
|
SIGNATURE
Pursuant
to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
AMR
CORPORATION
/s/
Kenneth W.
Wimberly
Kenneth
W.
Wimberly
Corporate
Secretary
Dated: January
22, 2008
EXHIBIT
INDEX
Exhibit Description
99.1
|
2008
Annual Incentive Plan for American
|
ar0122ex99-1.htm
AMERICAN
AIRLINES
2008
ANNUAL
INCENTIVE PLAN
Background
As
part of the
restructuring process that took place in April 2003, three new broad-based
variable compensation plans were created: the Broad Based Employee Stock Option
Plan, a new Profit Sharing Plan and the Annual Incentive Plan (the “Plan” or
“AIP”).
The
framework for
the Plan was developed during the restructuring, but the specific plan metrics
were left to the discretion of the Board of Directors (sometimes referred to
as
the “Board”).
The
Board has
determined that for 2008 there will be two components to the Plan – customer
service and financial. While related, the two components will be
treated separately. The financial component will provide an award if
the company meets annual financial goals. The customer service
component will provide an award if the company meets customer satisfaction
and
dependability goals, regardless of its financial
performance. Providing the opportunity for a customer service payout
without meeting financial hurdles recognizes that the company’s performance in
the two areas most important to our customers – dependability and customer
satisfaction – will contribute to improved profitability.
These
broad-based
compensation plans have been designed to allow all employees throughout the
American Airlines team to share in the company’s success. The Plan
provides the opportunity to share immediately in that success by taking concrete
steps in each employee’s everyday work that will move the company towards
profitability.
With
input from our
employees, the unions and the Board, these broad-based variable compensation
programs will continue to evolve. Today, they form the building
blocks necessary to ensure that everyone is able to share in the company’s
success.
Definitions
Capitalized
terms
not otherwise defined in the Plan will have the meanings set forth in the 2003
Employee Stock Incentive Plan (the “2003 Stock Plan”).
“AMR”
is
defined as
AMR Corporation.
“Affiliate”
is
defined as a subsidiary of AMR or any entity that is designated by the Committee
as a participating employer under the Plan, provided that AMR directly or
indirectly owns at least 20% of the combined voting power of all classes of
stock of such entity.
“American”
is
defined as AMR less AMR subsidiaries other than American Airlines, Inc. and
its
subsidiaries.
“American
Airlines”
is defined as American Airlines, Inc.
“American’s
Pre-Tax
Earnings Margin” is a percentage and is defined as American’s earnings, relative
to its revenues, before any applicable income tax expense, excluding any profit
sharing accruals and any accruals under the Plan, and excluding any accounting
adjustments or extraordinary or unusual items as may be determined by the
Committee in its discretion, after consultation with AMR’s independent
auditors.
“Annual
A+14 Rank”
is defined as American’s relative rank with respect to the Competitors in the
category of “Arrivals within 14 minutes (A+14)” as determined by the U.S.
Department of Transportation (DOT). This ranking is based on DOT’s
monthly domestic A+14 data aggregated for the Plan Year. To the
extent that at any point during the Plan Year a Competitor ceases to report
A+14
data, that Competitor’s data will be excluded from the calculation for the month
in which it ceases to report A+14 data, and for future months until the
Competitor begins to report A+14 data for a full month.
“Committee”
is
defined as the Compensation Committee of the AMR Board of
Directors.
“Competitor”
is
defined as one of AirTran Airways, Alaska Airlines, Continental Airlines, Delta
Air Lines, Frontier Airlines, JetBlue Airways, Northwest Airlines, Southwest
Airlines, United Air Lines and US Airways. During the Plan Year, the
Committee delegates to the Incentive Compensation Committee the authority to
modify the universe of companies that comprise the definition of
“Competitor”.
“Customer
Satisfaction Survey” is defined as American’s internal customer satisfaction
survey, administered by American on a monthly basis.
“Eligible
Earnings”
is defined by the nature of the work group. For employees who are
represented by a union, the definition of Eligible Earnings will be the
definition contained in the Letter of Agreement between the union and the
company. For employees who are not represented by a union, the
definition of Eligible Earnings will be identical to the term “Qualified
Earnings” under the 2003 American Airlines Employee Profit Sharing
Plan.
"Fund"
is defined
as the fund, if any, accumulated in accordance with this Plan.
“Letters
of
Agreement” is defined as the agreements reached with the Allied Pilots
Association, Association of Professional Flight Attendants and the Transport
Workers Union during the April 2003 restructuring process that defined the
framework of the Plan.
“Likelihood
to
Recommend Score” is defined as the arithmetic mean score in the category
Likelihood to Recommend of responses from passengers in all cabins, as reported
monthly in American’s on-line Customer Satisfaction Survey.
“Likelihood
to
Recommend Target” is defined as the monthly Likelihood to Recommend Score for
the same month in the year prior to the Plan Year, plus one percentage
point.
“Measure”
is
defined, as appropriate, as American’s Pre-Tax Earnings Margin, Monthly D-0
Performance, Annual A+14 Rank or Likelihood to Recommend Score.
“Monthly
D-0
Performance” is defined as the percentage of scheduled system revenue operations
for a given month departing at or before scheduled departure time.
“Monthly
D-0
Target” is defined as American’s internal target for American’s
Monthly D-0 Performance.
“Named
Executive
Officers” is defined as the officers of American who are named in the AMR proxy
statement that reports compensation for the year in which awards under the
Plan
are earned.
“Other
Cash
Compensation Programs” is defined as cash payments to management employees that
are not predicated upon the criteria and thresholds contained in the Plan.
Per
discussions and as specified in the Letters of Agreement, this term does not
include salary, stock-based compensation, severance, retirement benefits or
deferred payments of base compensation, or eligible cash bonuses from prior
years.
“Plan
Year” is
defined as the 2008 calendar year.
“Profit
Sharing
Plan” is defined as the 2008 Employee Profit Sharing Plan.
“Target
Award” is
defined as the award (stated as a percentage of Eligible Earnings) for an
eligible participant when target level is achieved on the financial
measure. The Target Award is determined by the employee’s job
classification and level.
Plan
Measures
As
outlined
earlier, the Plan is comprised of two components: customer service and
financial.
Customer
Service Component
The
customer
service component of the Plan will include three performance metrics – customer
satisfaction, monthly dependability and annual dependability. The
Plan will reward employees if American achieves at least one of the three
metrics.
The
customer
satisfaction metric will be based on American’s Likelihood to Recommend
Score. The monthly dependability metric will be based on
American’s Monthly D-0 Performance and the annual dependability metric will be
based on Annual A+14 Rank.
Awards
will be
earned for meeting or exceeding the minimum requirements set forth
below. These award levels are the same for all employees regardless
of job classification or level.
1.
|
$40
for each
month that the Likelihood to Recommend Score meets or exceeds the
Likelihood to Recommend Target
|
2.
|
$40
for each
month that the Monthly D-0 Performance meets or exceeds the Monthly
D-0
Target
|
3.
|
$250
if
American achieves a top half ranking among its Competitors, as measured
by
the Annual A+14 Rank, for the Plan
Year
|
If
both monthly
metrics are achieved in any single month, the awards will be
additive. If the annual metric is achieved, it will be additive to
any monthly awards.
Awards
under the
customer service component will be paid annually by March 15, 2009, regardless
of performance under the financial component.
Financial
Component
The
financial
component of the Plan will be based upon American’s Pre-Tax Earnings Margin for
the Plan Year. The measure has a threshold (performance below this
level earns no award), a target and a maximum as reflected below:
American’s
Pre-Tax
Earnings
Margin
Threshold 5%
Target 10%
Maximum 15%
For
non-management,
support staff and management levels 1-4, awards under the financial component,
in combination with the customer service awards, will provide total annual
Plan
payouts ranging from 2.5% of Eligible Earnings at threshold, 5% of Eligible
Earnings at target and 10% of Eligible Earnings at maximum. Award
levels have a linear progression as American’s Pre-Tax Earnings Margin increases
between the threshold and target levels, and between the target and maximum
levels.
American’s
Pre-Tax Award
as a %
of
Earnings
Margin
Eligible
Earnings
Threshold 5% 2.5%
Target
10% 5.0%
Maximum 15%
10.0%
For
management
Levels 5 and above, none of whom participate in the Profit Sharing Plan, the
Plan is the successor to the traditional Incentive Compensation
Plan. As in the past, the awards for employees at Level 5 and above
will be determined by the senior management of AMR or, in certain instances,
by
the Board; will vary by level; and will be based on an assessment of individual
performance.
If
the company does
not achieve the threshold level of American’s Pre-Tax Earnings Margin, there
will be no financial performance payout. However, a participant retains any
awards earned in the Plan Year for customer service performance. When
the threshold level of American’s Pre-Tax Earnings Margin is met, participants
may be entitled to a payment under the Plan (refer to the example
below). In this case, any customer service awards earned during the
Plan Year, act as a “deposit” against the amount to be awarded pursuant to the
financial component. The amount of the financial performance
payout a participant receives will be the difference, if any, between what
is
earned under the financial performance formula and what has already been earned
through the customer service awards.
For
example, assume
a $730 customer service award is earned by an employee during 2008 and American
achieves a 5% Pre-Tax Earnings Margin.
Customer
Service Component
|
Amount
of
Award
|
Monthly
Likelihood to Recommend Score
|
$240
|
Monthly
D-0
Performance
|
$240
|
Annual
A+14
Rank
|
$250
|
Total
Customer Service Component Payout
|
$730
|
Financial
Component ~ Threshold award equal to 2.5% of employee’s Eligible Earnings
of $40,000, for achievement of American’s 5% Pre-Tax Earnings
Margin
|
2.5%
x
$40,000
|
$1,000
|
Less
Customer
Service Component Payout
|
($730)
|
Total
Financial Component Payout
|
$270
|
Total
Annual payout
is $1,000 ($730+ $270), or 2.5% of Eligible Earnings
The
AIP Letters of
Agreement provide that Other Cash Compensation Programs for management employees
may be no more than 20% of the maximum possible award that was or could have
been earned by the individual management employee under the Plan formula (the
“20% Limitation”). Any payment under the 20% Limitation shall be made
by March 15, 2009.
The
Board has
established a program that, based on an individual’s performance, anticipates
payouts to Level 5 and above management employees up to the 20% Limitation.
(Level 5 and above employees are not eligible for the Profit Sharing
Plan) This program is designed to commence payments at $500 million
in American’s pre-tax earnings, the same financial threshold as exists in the
Profit Sharing Plan. This is consistent with the company’s past
practice of restricting payouts under any management incentive compensation
program until payouts occur under the corresponding employee Profit Sharing
Plan. Payouts under this program will cease when the financial
threshold under the Plan (a 5% Pre-Tax Earnings Margin for American) is
achieved. Any payment under the program described in this paragraph
shall be made by March 15, 2009.
Although
the Board
has determined that a program to use the flexibility provided for in the Letters
of Agreement will not commence until reaching a threshold of $500 million in
American’s pre-tax earnings and will be discontinued when the financial
threshold of the Plan is achieved, the company also retains the ability to
make
a payment to an individual under the 20% Limitation as provided for in the
Letters of Agreement.
The
Letters of
Agreement and related discussions specify that for purposes of the 20%
Limitation, Other Cash Compensation Programs does not include salary,
stock-based compensation, severance, retirement benefits or deferred payments
of
base compensation, or eligible cash bonuses from prior years.
Eligibility
for
Participation
Customer
Service Component
Eligibility
for the
customer service component of the Plan, including each of the three performance
metrics, will be determined on a month-by-month basis. To earn an
award under the customer service component of the Plan, an individual must
have
been employed as a regular full-time or part-time employee at American, in
a
participating workgroup (employees in the United States, Puerto Rico and the
U.S. Virgin Islands) during the applicable month.
The
Committee, at
its discretion, may permit participation by employees of Affiliates who have
been so employed by the Affiliate since the first day in the applicable month,
if they become employed by American during the applicable month during the
Plan
Year.
In
addition to the
terms listed above, in order for full-time and part-time employees to earn
a
payout under the customer service measure, an individual cannot be on any type
of leave during the applicable month, except an approved FMLA, injury on duty,
military, overage or time-card leave, as provided for under the company’s
policies, collective bargaining agreement or state law as
applicable.
Moreover,
an
individual will not be eligible to earn a customer service award if such
individual is, at the same time, eligible to participate in:
|
i)
|
any
incentive
compensation, profit sharing, commission or other bonus plan sponsored
by
an Affiliate of American, or
|
ii)
|
any
commission or bonus plan, with the exception of American’s Profit Sharing
Plan or provisions of the Annual Incentive Plan, sponsored by American,
any division of American or any Affiliate of
American
|
In
order to earn a
customer service award under the Plan, an individual must satisfy the
aforementioned eligibility requirements and must be an employee of American
or
an Affiliate at the time an award under the Plan is paid. If an
individual has retired from American or an Affiliate, has been laid off, is
on
leave of absence with reinstatement rights, is Disabled, or has died, the award
which the individual otherwise would have received under the Plan but for such
retirement, lay-off, leave, Disability, or death will be paid (on a pro rata
basis) to the individual, or his/her estate in the event of
death.
The
percentage of
the payout that an individual receives for any given month will be determined
based upon the percentage of his/her schedule that the individual fulfills
in
that month. For Plan purposes, an individual will be considered to
have fulfilled his/her schedule if he/she actually works at least 50% of his/her
scheduled time (50% of monthly guarantee hours for flight crew or 50% of reserve
days for reserve crew) or takes a scheduled vacation or time-card leave, which,
together with his/her actual work time, amounts to at least 50% of his/her
scheduled time for the month. If an individual does not fulfill
his/her scheduled time due to one of the aforementioned leaves, his/her award
will be pro rated based on actual hours worked in that month (vis-a-vis hours
scheduled in that month); otherwise, no payment will be made.
Financial
Component
To
earn an award
under the financial component of the Plan, an individual must have been employed
as a regular full-time or part-time employee at American, in a participating
workgroup (employees in the United States, Puerto Rico and the U.S. Virgin
Islands) during the Plan Year to be eligible to participate in the
Plan.
The
Committee, at
its discretion, may permit participation by employees of Affiliates who have
been so employed by the Affiliate during the Plan Year, if they become employed
by American during the Plan Year. In such instances, only eligible
earnings at American will be included in the payout calculation.
Notwithstanding
the
forgoing, however, an individual will not be eligible to participate in the
Plan
if such individual is, at the same time, eligible to participate
in:
i)
|
any
incentive
compensation, profit sharing, commission or other bonus plan sponsored
by
an Affiliate of American, or
|
ii)
|
any
commission or bonus plan, with the exception of American’s Employee Profit
Sharing Plan or provisions of the Annual Incentive Plan, sponsored
by
American, any division of American or any Affiliate of
American
|
In
order to earn an
award under the financial component of the Plan, an individual must satisfy
the
aforementioned eligibility requirements and must be an employee of American
or
an Affiliate at the time such financial award under the Plan is
paid. If at the time such awards are paid under the Plan, an
individual has retired from American or an Affiliate, has been laid off, is
on
leave of absence with reinstatement rights, is Disabled, or has died, the award
which the individual otherwise would have received under the Plan but for such
retirement, lay-off, leave, Disability, or death may be paid (on a pro rata
basis) to the individual, or his/her estate in the event of death, at the
discretion of the Committee.
Allocation
of
Individual Awards
The
Committee, in
consultation with the Chairman, President and CEO of American, will approve
awards for officers of American, including the Named Executive
Officers. The award for an officer will be equal to an amount
calculated in accordance with this Plan, as adjusted for individual performance;
provided, however, that the sum of all awards made to officers may not exceed
the sum of officer awards as calculated in accordance with this
Plan. Awards for the Named Executive Officers will be equal to the
award earned under the financial component of the Plan. An award
under the Plan to an officer may not exceed the amount set forth in Section
11
of the 1998 Long Term Incentive Plan, as amended.
The
Chairman,
President and CEO of American, in consultation with the executive and senior
vice presidents of American, will approve awards for non-officer eligible
employees (Level 5 and above). An award for a non-officer will be
equal to an amount calculated in accordance with this Plan, as adjusted for
individual performance; provided, however, that the sum of all awards made
to
non-officers may not exceed the sum of non-officer awards calculated in
accordance with this Plan.
Administration
The
Committee shall
have authority to administer and interpret the Plan, establish administrative
rules, approve eligible participants, and take any other action necessary for
the proper and efficient operation of the Plan, consistent with the Letters
of
Agreement reached with each of the unions. The amount, if any, of the
Fund shall be audited by the General Auditor of American based on a
certification of American’s Pre-Tax Earnings Margin by AMR’s independent
auditors. For the Financial Measure, a summary of awards under the
Plan shall be provided to the Committee at the first regular meeting following
determination of the awards. To the extent a Measure is no longer
compiled by American during a Plan Year, the Committee will substitute a
comparable performance measure for the remainder of the Plan Year.
Method
of
Payment
The
Committee will
determine the method of payment of awards. The customer service and
financial awards shall be paid (net of all required and authorized deductions)
as soon as practicable after audited financial statements for the Plan Year
are
available, but no later than March 15, 2009.
General
Neither
this Plan
nor any action taken hereunder shall be construed as giving any employee or
participant the right to be retained in the employ of American or an
Affiliate.
Nothing
in the Plan
shall be deemed to give any employee any right, contractually or otherwise,
to
participate in the Plan or in any benefits hereunder, other than the right
to
receive payment of such incentive compensation as may have been expressly
awarded by the Committee.
In
consideration of
the employee’s privilege to participate in the Plan, the employee agrees (i) not
to disclose any trade secrets of, or other confidential/restricted information
of, American or its Affiliates to any unauthorized party, (ii) not to make
any
unauthorized use of such trade secrets or confidential or restricted information
during his or her employment with American or its Affiliates or after such
employment is terminated, and (iii) not to solicit any then current employees
of
American or any other subsidiaries of AMR to join the employee at his or her
new
place of employment after his or her employment with American or its Affiliates
is terminated.
The
employee shall
not have the right to defer any payment under the Plan, except under a Plan
intended to comply with section 401(k) of the Internal Revenue Code of 1986,
as
amended (the “Code”).
It
is intended that
this Plan be exempt from regulation under the Employee Retirement Income
Security Act of 1974, as amended, as a “payroll practice” and a “bonus program”,
as described in U.S. Department of Labor Regulations 2510.3-1(b) and
2510.3-2(c), respectively. This Plan is intended to provide
“short-term deferrals”, as described in Treasury Regulation 1.409A-1(b)(4) under
section 409A of the Code or successor guidance thereto, and is intended not
to
be a “nonqualified deferred compensation plan”, as described in Treasury
Regulation 1.409A-1(a)(1) under section 409A of the Code or successor guidance
thereto. In the administration and interpretation of the Plan, such
intention is to govern.