American’s variable compensation plans demonstrate the company’s commitment that employees will share in the company’s success. Through the 2003 restructuring process, employees elected to keep more of their compensation in the form of base pay. However, American provided employees with a number of opportunities for additional compensation hinged on the airline’s recovery and overall performance.

Broad-Based Stock Program
Employees received 38 million stock options in 2003 through the Broad-Based Stock Program. These options have created more than $1 billion in potential value for employees at recent prices, increasing more than seven-fold since the grant date.

Annual Incentive Payments (AIP)
AIP provides employees with two ways to earn payments based on performance. The customer service component pays out a maximum of $1,200 per eligible employee annually when American performs well in the monthly customer service measures in Survey America or in the A+14 Dependability statistics tracked by the Department of Transportation. Since 2004, American has paid out more than $46 million in AIP payments to employees.

AIP also rewards employees based on the company’s financial results. The financial performance component of the AIP is separate from the Profit Sharing plan and pays out 2.5 percent of wages when American records a five percent annual pre-tax margin. If the pre-tax margin exceeds five percent, these annual awards combined with the customer service component could rise to 10 percent of eligible earnings. The higher the pre-tax margin, up to the maximum of 15 percent, the higher the payout.

Profit Sharing
Employees also participate in the company’s Profit Sharing plan that pays cash awards to eligible employees when American exceeds $500 million in pre-tax earnings. Fifteen percent of the company’s profits above $500 million go to a profit sharing fund. Funds are distributed according to the individual’s eligible wages. Based on current conditions and Wall Street forecasts, the company has started to accrue money for profit sharing payments in 2008 based on this year's performance.

Total Compensation by Airline