American Airlines CEO defends executive bonuses
DALLAS (AP) — Bonuses for about 1,000 executives at American Airlines could be worth more than $70 million at the parent company's current stock price, and the airline's chief executive publicly defended the payments, which drew howls of protest from union leaders this month.
Executives with parent AMR still declined to put a dollar figure on the payments, but they said Wednesday that there are 2.2 million bonus units, valued much like shares of stock.
Each unit will be multiplied by 175% and then multiplied again by the stock price. The 175% multiplier will be used because AMR's stock rose more than other U.S. airline stocks from 2003 through the end of 2005.
On Wednesday, AMR shares closed at $18.71, and the average of high and low prices was $19.32. At that level, Executive Vice President Daniel P.
Garton's 44,000 units would be worth more than $1.5 million, and three other executives would get more than $1 million. The smallest payments, 50 units, would be about $1,700.
Those amounts have declined since the issue erupted into a major controversy at the Fort Worth-based carrier early this month because AMR's stock price has slipped, making each unit less valuable.
Chairman and Chief Executive Gerard Arpey, who did not take part in the current bonus program, said Wednesday that the payments are part of executives' compensation and are designed to base part of their pay on AMR's performance. He said that since 2001, those employees "have seen a substantial reduction in overall compensation" because stock-based payouts were low.
"The payments are much higher (this year) because our stock is much higher,"
Arpey said.
The payouts — company officials don't use the term "bonuses" — bloomed into a controversy early this month when the size of the largest payouts became apparent. They protested that the bonuses were poorly timed because AMR has lost more than $7 billion since the start of 2001.
Members of American's three unions narrowly approved $1.6 billion in annual pay cuts and other concessions in 2003, when the company was on the brink of bankruptcy. As part of the deal, the company gave them stock options that AMR estimated this month to be worth more than $568 million when they vest in April.
Officials for the unions did not immediately return calls for comment on Wednesday.