April 22, 2010 -
The Allied Pilots Association (APA), certified collective bargaining
agent for the 11,500 pilots of American Airlines described the timing of
bonuses that airline management is receiving this week as “particularly
disappointed that management continues to adjust their bonus plans year
after year to ensure a payout occurs regardless of how well or poorly
the airline performs,” said APA President Captain Lloyd Hill. “The time
and energy spent devising these ‘sure-fire’ executive compensation
schemes could be devoted to more productive pursuits, such as improving
the airline’s labor relations and addressing operational issues.
describes this type of variable compensation as ‘at risk,’ but there
doesn’t appear to be much risk involved, given the steps taken to ensure
a payout year after year.”
Hill reported that
management has refused to help pilots recoup any portion of the pay many
have lost because of volcano-related flight cancellations.
“The bonus timing this year is particularly ironic, given that hundreds
of our pilots are losing pay because of the large number of flights to
and from Europe that have been canceled,” Hill said. “Management always
seems able to ensure they’ll get paid, while line employees’ already
depressed income is truly at risk.”
Beginning with next year’s executive bonuses, there will no longer be
any corresponding relationship between progress toward achieving the
airline’s “corporate objectives” listed in the proxy statement—which
include operational performance and employee satisfaction goals—and the
amounts executives receive. Also, the stock performance threshold
required to trigger a portion of executives’ “target” bonus amounts will
be relaxed for next year’s payouts.
Unlike management’s stock-based bonuses, front-line workers’ variable
compensation plan consists primarily of a profit-sharing plan that
begins paying out only after the airline has generated a minimum of $500
million in annual pre-tax earnings. Because of that high threshold which
the airline has only achieved twice in its entire history the plan has
never paid out since its inception in 2003.
profit-sharing plan is seriously flawed, assuming its actual purpose is
to share profits with the workers,” Hill said. According to Hill,
management compensation could increase dramatically as soon as next year
based on recent changes to the executive bonus plans.
AMR’s stock performance relative to its airline peers (a metric commonly
referred to as “total shareholder return” reflecting stock price
appreciation and reinvestment of dividends) has historically played a
major role in the size and makeup of management bonuses.
For next year’s
executive bonuses, the portion comprised of “performance shares” will
shrink, with the difference made up by an increased number of “deferred
shares.” Unlike performance shares, the number of deferred shares
awarded will not vary depending on total shareholder return.
next year will likely dwarf what just got paid out, which is a poor
prescription for what ails this airline,” he said.
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