UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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14a-101)
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AMERICAN AIRLINES GROUP INC.
(Name of Registrant as Specified in its Charter)
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Stockholder Engagement Spring 2024
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January 1, 2020 FORWARD-LOOKING STATEMENTS Certain of the statementscontained
in this presentation should be considered forward-looking statements within
the meaning of the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, and the Private Securities Litigation Reform Act
of1995.These forward-looking statements may be identified by words such as
"may," "will," "expect," "intend," "anticipate," "believe," "estimate,"
"plan,""project," "could," "should," "would," "continue," "seek," "target,"
"guidance," "outlook," "if current trends continue,""optimistic," "forecast"
and other similar words. Such statements include, but are not limited to,
statements about the Company's plans, objectives, expectations, intentions,
estimates and strategies for the future, andother statements that are not
historical facts. These forward-looking statements are based on the Company's
current objectives, beliefs and expectations, and they are subject to
significant risks and uncertainties that may cause actual resultsand financial
position and timing of certain events to differ materially from the
information in the forward-looking statements. These risks and uncertainties
include, but are not limited to, those set forth herein as well as in the
Company'sQuarterly Report on Form 10-Q for the quarter ended March 31, 2024
(especially in Part I, Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations and Part II, Item 1A. Risk
Factors), and other risks anduncertainties listed from time to time in the
Company's other filings with the Securities and Exchange Commission.
Additionally, there may be other factors of which the Company is not currently
aware that may affect matters discussed in theforward-looking statements and
may also cause actual results to differ materially from those discussed. The
Company does not assume any obligation to publicly update or supplement any
forward-looking statement to reflect actual results, changes inassumptions or
changes in other factors affecting these forward-looking statements other than
as required by law. Any forward-looking statements speak only as of the date
hereof or as of the dates indicated in the statement. AVAILABLE INFORMATIONThis
presentation should be read in conjunction with the Company's other filings
with the Securities and Exchange Commission from time to time including, in
particular, the Company's definitive proxy statement filed on April 25,
2024(the "Proxy Statement"). The information set forth on Appendix B
"Reconciliation of Certain GAAP to Non-GAAP Financial Information" to the
Proxy Statement shall be incorporated herein by reference. 2
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January 1, 2020 EXECUTIVE SUMMARY Capable, Diverse and Engaged Board
ofDirectors (pgs. 5-6) . Our Board refreshment efforts, including the addition
of five new and the resignation of four directors since 2020, along with the
appointment of a new Independent Chairman in April 2023, have strengthened the
alignmentof Board composition and skills with our long-term strategic
priorities and bolstered the Board's oversight capabilities Strong Execution
of Strategy (pg. 7) . American has produced exceptionally strong operating
performance, deliveringon-time performance and full-year completion factor
that was record-setting for American and best among the major network airlines
. Made significant progress against our debt reduction goals and achieved
record 2023 revenue of approximately$53B, an increase of more than $22B
compared to 2021 . On a GAAP-basis, reversed our pre-tax loss of over $2.5B in
2021 to pre-tax income of more than $1.1B in 2023 . Excluding pre-tax net
special items, reversed our pre-tax loss ofnearly $7B in 2021 to pre-tax
income of nearly $2.5B in 2023 Thoughtful Approach to Executive Compensation
(pgs. 8-12) . Our 2023 executive compensation program was heavily
performance-based and directly linked with our established goals ofdelivering
record operational results, continuing to close our margin gap with our
largest competitors, and reducing total debt by $15B by the end of 2025 .
Approximately 91% of Mr. Isom's 2023 target annual compensation was at-risk
andhalf of his 2023 LTIP grant was subject to performance-vesting conditions
with a three-year performance period. Mr. Isom's 2023 target direct annual
compensation was significantly below the last-reported target annual
compensation of the CEOsof Delta and United . Mr. Isom's compensation in 2023
reflects several one-time factors that will not continue in 2024, with his
go-forward compensation designed to incentivize and reward performance against
American's long-termstrategic initiatives 3
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January 1, 2020 WE REQUEST YOUR SUPPORT AT THE 2024 ANNUAL MEETING
Votingmatter Board recommendation FOR each 1. Election of directors director
nominee 2. Ratification of public accounting firm FOR 3. A proposal to
approve, on a non-binding, advisory basis, executive compensation FOR 4. A
proposalto amend our Certificate of Incorporation to allow future amendments
to the FOR Bylaws by our stockholders by simple majority vote 5. A proposal
to amend our Certificate of Incorporation to allow all other provisions of the
FORCertificate of Incorporation to be amended in the future by simple
majority vote 4
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January 1, 2020 CAPABLE, DIVERSE AND ENGAGED BOARD OF DIRECTORS CorporateGoverna
nce & Independent Chairman Public Responsibility Chair Compensation Chair
Audit Chair Finance Chair Safety Chair Gregory D. Smith Martin H. Nesbitt
Denise M. O'Leary Matthew J. Hart Doug Steenland Adriane M. Brown (Director
since2022) (Director since 2015) (Director since 2013) (Director since 2013)
(Director since 2020) (Director since 2021) Former EVP and CFO, Co-CEO,
Private Venture Former President & COO, Former President & CEO, Managing
Partner, Boeing VistriaGroup Capital Investor Hilton Hotels Northwest Airlines
Flying Fish Partners John T. Cahill Michael J. Embler Robert D. Isom Jr. Susan
D. Kronick Vicente Reynal (Director since 2013) (Director since 2013)
(Director since 2022) (Director since 2015)(Director since 2022) Vice
Chairman, Former CIO, CEO, Former Vice Chair, Chairman, President & Kraft
Heinz Franklin Mutual Advisors American Airlines Macy's CEO, Ingersoll Rand 5
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January 1, 2020 BOARD COMPOSITION AND SKILLS ENSURING ROBUST OVERSIGHT
AGEGENDER DIVERSITY TENURE 2 2 3 3 Over 45% 27% 6.1 years 64 years 1 of
directors of directors 6 5 average 6 average age identify as are female tenure
diverse 2 8 6 <60 60-69 70+ Female Male Female Female and racially diverse
Racially diverse 0-5years 6-10 years K E Y D I R E C T O R E X P E R I E N C E
International Airline / Travel / Consumer / Financial / Investment Safety
Leadership Transportation Customer Service Accounting Senior Information Human
Capital / Risk ManagementSustainability Leadership Technology Union Relations
We remain focused on aligning our diverse board capabilities to our evolving
strategy 6
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January 1, 2020 STRONG PERFORMANCE AGAINST OUR STRATEGIC PRIORITIES
Tosuccessfully lead American through the critical post-pandemic chapter, we
established a targeted list of primary goals to improve the reliability,
profitability and accountability of our operations to yield long-term value R
E L I A B I L I T Y P RO F I T A B I L I T Y A C C O U N T A B I L I T Y .
Operated nearly 2 million flights with . Achieved record 2023 revenue of
Enhanced liquidity: an average load factor of 83.5% ~$53B, an increase of more
than . Generated GAAPoperating cash flow $22B compared to 2021 of $3.8B and
the airline's highest full- . Delivered on-time performance that (2) year free
cash flow of $1.8B in 2023 was record-setting for American and . On a GAAP
basis, reversed ourpre- the best among the major network tax loss in 2021 of
over $2.5B and . Ended 2023 with ~$10.4B of total (3) airlines, including
during the summer produced pre-tax income of $186M available liquidity peak
travel period in 2022 and more than$1.1B in 2023 Strengthened the balance
sheet: (1) . Produced our best-ever full-year . Excluding pre-tax net special
items , (4) . Reduced total debt by $3.2B in 2023 completion factor, with the
lowest reversed our pre-tax loss in2021 of . Achieved more than 75% of the way
number of cancellations since the nearly $7B and produced pre-tax towards our
2025 total debt reduction merger with US Airways income of $458M in 2022 and
nearly goal of $15B $2.5B in 2023 .Reached new, long-term collective Improved
credit ratings: bargaining agreements with three of . Fitch and S&P provided
double-notch our workgroups, providing those upgrades, and Moody's provided a
team members with significantlysingle-notch upgrade improved wages and other
benefits (1) See Appendix B of 2024 Proxy Statement for details on the
components of pre-tax net special items and for a reconciliation of pre-tax
net income (loss) excluding net special items, anon-GAAP measure. (2) See
Appendix B of 2024 Proxy Statement for a reconciliation of free cash flow, a
non-GAAP measure. 7 (3) Total available liquidity includes unrestricted cash
and short-term investments, and undrawn capacity under our creditfacilities.
(4) Total debt includes debt, finance and operating lease liabilities and
pension obligations.
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January 1, 2020 EXECUTIVE COMPENSATION PROGRAM ALIGNED TO STRATEGY Our
2023compensation program emphasized delivering record operational results,
closing our margin gap and attaining our debt reduction goals. Our 2024
compensation program continues to incentivize performance against our
strategic priorities to drivelong-term stockholder value creation Key
strategic priorities determining Pay Vehicle 2023 metrics and features our
performance metrics element P R O F I T A B I L I T Y Fixed pay that
compensates executives for (1) Base salary Cash scope ofresponsibility,
competence and . Adjusted pre-tax income performance . Relative pre-tax income
margin improvement (2) vs. peers . Adjusted pre-tax income: 60% Short-term
Cash. Operational reliability measures: 30% R E L I A BI L I T Y Incentive
(STIP) . Diversity, equity, & inclusion: 10% . Mainline and regional
controllable completion (3) factor (CCF) Restricted Time vested in alignment
with shareholder . Mainline and regional on-time departure(D-0) stock: 50%
value creation A C C O U N T A B I L I T Y Long-term . Relative margin
improvement: 50% Incentive (LTIP) (strengthening the balance sheet)
Performance . Total debt reduction: 50% . Debt reduction over three
yearsshares: 50% Performance assessed and awards vest after 3 years (1)
Excludes net special items and performance pay. 8 (2) Excludes net special
items, third-party activities and performance pay. (3) Excludes Air Traffic
Control (ATC) and weathercancellations.
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January 1, 2020 CEO'S COMPENSATION REFLECTS PROMOTION AND INDUSTRYDISRUPTIONS
The compensation delivered to our CEO in 2023 reflects the challenging
circumstances of the past few years 2020 - 2022 The most challenging time in
our industry's history, as the COVID-19 pandemic causes drastic disruptionsin
global demand for air travel; American's executive officers take a significant
pay reduction in Q2 2020 at the onset of the pandemic and do not receive STIP
payouts in 2020 or 2021; American executives take a leadership role working
withCongress to ensure the survival of the airline industry amid a crippling
environment; (1) American reverses pre-tax loss of nearly $7B in 2021 to
pre-tax income of $458M in 2022 March 2022 Robert Isom is promoted to CEO,
culminating a robustleadership team succession planning process that began
prior to the pandemic; due to CARES Act caps, his 2022 compensation remains
capped at $5.0 million, considerably below what his CEO peers at Delta and
United earned in 2022 and well below whathe received as President in 2019
($7.1 million) April 2023 CARES Act restrictions lapse September 2023
Following a year-long process in close consultation with its independent
compensation consultant, the Compensation Committee revises Mr.Isom's
compensation to compensate him fairly and appropriately for his service as
CEO, including relative to his peers at Delta and United, and to appropriately
incentivize his leadership in overseeing the positive business momentum
followingthe Company's successful post-pandemic transformation American took a
leadership role in securing support for the airline industry during the
pandemic; the Company grappled with how to incentivize and reward our leaders
as they led the Companythrough the most challenging period in airline history
9 (1) Excluding pre-tax net special items.
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January 1, 2020 CEO'S 2023 ANNUAL COMPENSATION PROGRAM DESIGN RobertIsom was
promoted to CEO in March 2022, culminating a thoughtful, multi-year succession
planning process that began prior to the COVID-19 pandemic. In September 2023,
the Compensation Committee revised Mr. Isom's compensation program torecognize
his promotion and incentivize his continued leadership. When establishing Mr.
Isom's annual compensation, the Compensation Committee, in close consultation
with its independent compensation consultant, worked to design aperformance-base
d program that was aligned with broader market practice and would effectively
incentivize him to lead American's critical next chapter. . Mr. Isom's 2023
$15.2M target annual compensation was comparable to CEO Mr.Isom's target
compensation at companies of American's size and complexity across the market
annual direct . More than 90% of Mr. Isom's compensation is at-risk and
incentive-based, with more compensation is than 74% deliveredin time- and
performance-vested equity. Half of the 2023 LTIP significantly below grant is
subject to performance-vesting conditions over a three-year performance that
of the CEOs of period Delta and United, American's closest . Mr. Isomreceived
$16.5M in actual annual compensation in 2023, due to (1) peers overperformance
against our short-term incentive targets 10 (1) Based on Delta's and United's
2024 proxy statements.
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January 1, 2020 COMPENSATION ADJUSTMENTS MADE TO ALIGN WITH BUSINESSRECOVERY
During the pandemic, we suspended our company profit sharing program for front
line employees and our short-term incentive program for executives. We waited
to reinstate those programs until after the passing of the worst of
thepandemic's impact on the airline industry 2022 2023 2 0 2 2 S T I P
Adjusted performance period to better align with our Performance period:
business recovery Apr. 1, 2022 - Apr. 1, 2023 2 0 2 3 S T I P Re-established
on Performanceperiod: annual cycle Jan. 1, 2023 - Dec. 31, 2023 Both STIP
payouts are reflected in the Summary Compensation Table as compensation for
2023 even though the 2022 (1) STIP payout was almost entirely attributed to
2022 11 (1) See page 64 of our2024 proxy statement for the full Summary
Compensation Table.
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January 1, 2020 FY 2023 DECISIONS ASSOCIATED WITH CEO PROMOTION AND CARESACT
(in $, MM) 2023 Actual Total Direct Compensation $16.5 Base Salary Cash $1.3
Regular 91.5% 2023 Annual at-risk Short Term Incentive Cash $3.9 Compensation
compensation Reflects market Long Term Incentive 50% PSUs | $11.2 and is
highly 50% RSUsperformance- based 67.9% All Other $0.1 2022 Short Term
Incentive $3.9 (1) Non-Recurring CEO Award $11.0 Considerations for the
Non-Recurring CEO Award Non-Recurring . Recognizes Mr. Isom's promotion to CEO
and leadership throughout theCOVID-19 25% pandemic Cash $2.8 Reflects timing
Short Term of 2022 STIP and . Reflects the difference between what Mr. Isom
was paid during 2022, when his Mr. Isom's compensation was limited by CARES
Act restrictions, and what he wouldhave been paid elevation to CEO if his CEO
compensation had been set in March 2022 when he was promoted to CEO RSUs (1/3)
$2.7 role during the . Increases Mr. Isom's ownership in AAL stock to further
align with shareholders pandemic 75%Long Term . Two-thirds of the long-term
incentive award is subject to performance-vesting PSUs (2/3) $5.5 conditions
over a three-year performance period, incentivizing a continued focus on
improving profitability and establishing astrengthened financial position
Total Reported in 2023 Summary Compensation Table $31.4 12 (1) Includes
restrictive covenants, which is 24-month non-competition and non-solicitation
period following departure from American, regardless of whether heis entitled
to severance.
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