AAL 2019 Proxy Statement

For 2018, our long-term incentive program included both performance- and time-vesting components, each weighted 50% by value (other than with respect to Mr. Parker). Mr. Parker’s annual grant was weighted approximately 54% performance- vesting and 46% time-vesting by value, reflecting the relative proportions from 2015 when he began to be compensated solely in equity awards. At that time, the value of his base salary was added to his time-vesting award and his target STI value was added to his performance-vesting award, resulting in a split of 54% performance-vesting awards and 46% time- vesting awards. For 2018, the annual grants to our named executive officers under our long-term incentive plan were made in February. Two-thirds of the time-vesting RSUs vest in February 2019 and the remaining one-third vest in February 2020, subject to each executive’s continued employment with the Company. The performance-vesting RSUs vest based on the Company’s achievement of pre-tax income margin, excluding special charges, over a three-year performance period, with an additional adjustment pursuant to which the number of shares vesting will be increased or decreased by up to 25% based on the Company’s relative TSR ranking. The maximum number of shares that may be issued in respect of each performance-vesting RSU, taking into account the Company’s relative TSR ranking, remains at 200%. Pre-tax income margin is measured over the three-year period from January 1, 2018 to December 31, 2020, relative to the weighted average pre-tax income margin of a peer group comprised of Delta, United, Southwest, JetBlue, Alaska and Spirit. TSR is measured based on the 20-day average stock price prior to February 20, 2018 and the 20-day average stock price ending on February 20, 2021, calculated assuming reinvestment of dividends, and is ranked relative to the same peer group of airlines.

Pre-Tax Income Margin Performance Relative to Peer Group

Payout (as a % of Target)

150% or higher

160% 100%

100%

50%

66 2/3%

Less than 50%

0%

TSR Modifier

1 or 2 ranking = 125%

3, 4 or 5 ranking = 100%

6 or 7 ranking = 75%

In the event that the Company’s pre-tax income margin is negative for the performance period, pre-tax income achievement would be capped at 100%, and in the event the Company’s TSR is negative for the performance period, the TSR modifier would be capped at 100%. Linear interpolation will be used to determine the payouts for performance attained between 50% and 100% and between 100% and 150% of the peer group weighted average pre-tax income margin. For our named executive officers, the Compensation Committee determined to award target grant values with a 3% increase over 2017 target grant values, consistent with the standard increase under our long-term incentive program at all levels made in each of the last two years. For Mr. Parker, this resulted in annual target compensation set at $11,670,000. 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. Please see the Grants of Plan-Based Awards table below for a description of the grants awarded to our named executive officers during 2018. For the performance-vesting component of the RSU grants, 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, which will depend on our relative pre-tax income margin and total stockholder return performance over three years. As shown in the chart above under “Realizable Compensation Significantly Less Than Targeted Compensation,” our named executive officers’ three- year and one-year average target compensation was significantly higher than their realizable compensation for the same period. For our CEO, as of December 31, 2018, his three-year average realizable compensation was only 61% of targeted compensation, and for our other named executive officers, their three-year average realizable compensation was only 72% of targeted compensation. As of December 31, 2018, our CEO’s 2018 realizable compensation was only 46% of his

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2019 Proxy Statement |