Exhibit 10.43

 

2003 INCENTIVE COMPENSATION PLAN

FOR OFFICERS AND KEY EMPLOYEES

 

 

Purpose

 

The purpose of the 2003 American Airlines Incentive Compensation Plan (“Plan”)
for officers and key employees is to provide greater incentive to officers and
key employees of American Airlines, Inc. to achieve the highest level of
individual performance and to meet or exceed specified goals which will
contribute to the success of American.

 

Definitions

 

Capitalized terms not otherwise defined in the Plan will have the meanings set
forth in the 1998 Long Term Incentive Plan, as amended (the “LTIP”).

 

“AMR” is defined as AMR Corporation.

 

“Aggregate Target Awards” is defined as the arithmetic sum of the Target Awards
for all Plan participants.

 

“Affiliate” is defined as a subsidiary of AMR or any entity that is designated
by the Committee as a participating employer under the Plan, provided that AMR
directly or indirectly owns at least 20% of the combined voting power of all
classes of stock of such entity.

 

“American” is defined as AMR less AMR subsidiaries other than American Airlines,
Inc. and its subsidiaries.

 

“Committee” is defined as the Compensation Committee of the AMR Board of
Directors.

 

“Competitors” is defined as Continental Airlines, Delta Air Lines, Northwest
Airlines, United Air Lines and US Airways.

 

“DOT Rank” is defined as American’s relative rank with respect to the
Competitors in the category of arrivals+14 (A+14) as determined by the U.S.
Department of Transportation (DOT).  This cumulative ranking is based on DOT’s
aggregated A+14 data for the period December 1, 2002 through November 30, 2003,
inclusive.  To the extent that at any point during the year a carrier ceases to
participate, it will be excluded from the entire year.

 

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“Engagement Scores” is defined as American’s overall engagement score on the
employee opinion survey and American’s rating versus the National Norm, each
reported as a percent annually.

 

“Fund” is defined as the incentive compensation fund, if any, accumulated in
accordance with this Plan.

 

“Measure” is defined as Net Income, DOT Rank, Survey America Rank, or Engagement
Score.

 

“Named Executive Officers” is defined as the officers of American who are named
in the AMR proxy statement for the year in which awards under the Plan are paid.

 

“National Norm” is defined as a national sample of employees in firms with 1,000
or more employees.

 

“Net Income” is AMR net income including any accounting adjustments or
extraordinary or unusual items which may be added or deducted by the Committee.

 

“Qualified Earnings” is defined as base pay as of December 31 of the Plan year,
holiday pay, sick pay, and vacation pay, but does not include such things as
travel and incidental expenses, moving expenses, relocation allowance (COLA),
payouts from any retirement plan, disability payments, workers compensation
payments, imputed income from certain travel service charges or life insurance,
or other benefits provided by American, nor does it include any special monetary
awards or allowances, lump sum payments, or incentive compensation or profit
sharing payments.

 

“Survey America Rank” is defined as American’s relative rank with respect to its
Competitors in the categories of  “Retained Preference”, “Overall Travel
Experience”, “Overall Ground Service”, and “Overall On-Board Services” in the
coach cabin as reported in Plog Inc.’s Survey America.  The Survey America
ranking is based on cumulative data for American and the Competitors for the
period October 1, 2002 through September 30, 2003, inclusive.  To the extent
that at any point during the year a carrier ceases to participate, it will be
excluded from the entire year.

 

“Target Award” is defined as the award (stated as a percentage of Qualified
Earnings) for an eligible participant when target levels are achieved on all
Measures.  The Target Award is determined by the participant’s job level.

 

Eligibility for Participation

 

In order to be eligible to participate in the Plan, an individual must be an
officer or key employee (as designated by American’s Chairman and CEO) of
American.  Additionally, the individual must have been employed by American or
an Affiliate as an officer or key employee for at least three consecutive months
during the Plan year.  The three months service requirement may be waived in
cases of retirement in accordance

 

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with American’s then applicable pension plan, prior to completing three months
of service.

 

During a Plan year, individuals with less than twelve months eligibility in the
Plan may be eligible to participate in the Plan on a pro rata basis, at the
discretion of the Committee.  In addition, the Committee, at its discretion, may
permit participation by officers and key employees of Affiliates who have been
so employed by the Affiliate for at least three consecutive months during the
Plan year.

 

Notwithstanding the forgoing, however, an officer or key employee will not be
eligible to participate in the Plan if such officer or key employee is, at the
same time, eligible to participate in a commission, incentive, profit sharing or
other bonus compensation program sponsored by American or an Affiliate, unless
the Committee otherwise decides.

 

In order to receive an award under the Plan, an individual must satisfy the
aforementioned eligibility requirements and must be an employee of American or
an Affiliate at the time an award under the Plan is paid.  If at the time awards
are paid under the Plan, an individual has retired from American or an
Affiliate, is on leave of absence with reinstatement rights, is disabled, or has
died, the award which the individual otherwise would have received under the
Plan but for such retirement, leave, disability, or death may be paid to the
individual, or his/her estate in the event of death, at the discretion of the
Committee.

 

The Incentive Compensation Fund

 

The Fund is comprised of three components: financial, employee and customer. 
The employee and customer components have various Measures (see below).  Each
Measure has a threshold (performance below this level earns no award), target
and maximum percentage of Aggregate Target Awards that may be earned, as
follows:

 

Component

 

Threshold

 

Target

 

Maximum

 

Financial

 

16.50

%

66

%

132

%

Employee

 

8.50

%

17

%

34

%

Customer

 

12.75

%

17

%

34

%

 

 

 

 

 

 

 

 

Total

 

37.75

%

100

%

200

%

 

For each Measure, the Fund will accumulate on a linear basis between each of the
points defined in the following tables.

 

Financial Measure:

 

The financial measure is based on Net Income.  At a threshold Net Income of $125
million, the Fund will accumulate 16.50% of Aggregate Target Awards.  Higher Net
Incomes will result in higher percentages of Aggregate Target Awards as follows:

 

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Net Income

 

% of Target Awards Earned

 

$

125

 

16.50

%

$

310

 

33.00

%

$

495

 

49.50

%

$

680

 

66.00

%

$

935

 

99.00

%

$

1,190

 

132.00

% (Max)

 

Employee Measures:

 

The employee measures will depend on Engagement Scores.

 

 

 

Threshold

 

Target

 

Maximum

 

Engagement Score

 

5

%

10

%

20

%

Engagement versus National Norm

 

3.5

%

7

%

14

%

 

 

 

 

 

 

 

 

Total

 

8.5

%

17

%

34

%

 

At a threshold Engagement Score of 74%, the Fund will accumulate 5% of Aggregate
Target Awards.  Higher scores will result in higher percentages of Aggregate
Target Awards, as follows:

 

Engagement Score

 

% of Target Awards Earned

 

74

%

5.00

%

75

%

7.50

%

76

%

10.00

%

77

%

15.00

%

78

%

20.00

% (Max)

 

At a threshold Engagement Score of 5% below National Norm, the Fund will
accumulate 3.5% of Aggregate Target Awards.  Higher scores will result in higher
percentages of Aggregate Target Awards, as follows:

 

Percent below National Norm

 

% of Target Awards Earned

 

5

%

3.50

%

4

%

5.25

%

3

%

7.00

%

2

%

10.50

%

1

%

14.00

% (Max)

 

In the event the Employee Opinion Survey is not conducted during the plan year
measured, AA’s Engagement Score and Engagement versus the National Norm will be
calculated at target.

 

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Customer Measures:

 

Customer Measures will depend on DOT Rank and Survey America Rank.  Each of the
five components (retained preference, overall travel experience, overall ground
service, overall on-board service and DOT A+14 rankings) is measured
separately.  For each Measure, at a threshold rank of fourth, the fund will
accumulate 2.55% of Aggregate Target Awards.  A higher rank will result in
higher percentages of Aggregate Target Awards, as follows:

 

Rank

 

% of Target Awards Earned

 

Fourth

 

2.55

%

Third

 

3.40

%

Second

 

5.10

%

First

 

6.80

% (Max)

 

 

The following scorecard illustrates this.

 

2003 Incentive Plan Scorecard

 

Measures

 

Weight

 

Threshold
25%

 

50%

 

75%

 

Target
100%

 

150%

 

Maximum
200%

 

Example
Score(1)

 

Shareholder

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- AMR net income

 

66

%

$

125M

 

$

310M

 

$

495M

 

$

680M

 

$

935M

 

$

1,190M

 

66.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weight

 

25%

 

Threshold
50%

 

75%

 

Target
100%

 

150%

 

Maximum
200%

 

Example
Score

 

Employee

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- engagement score on opinion survey

 

10

%

n/a

 

74

%

75

%

76

%

77

%

78

%

5.00

%

- AA engagement vs. national norm

 

7

%

n/a

 

5 below

%

4 below

%

3 below

%

2 below

%

1 below

%

5.25

%

 

 

17

%

 

 

 

 

 

 

 

 

 

 

 

 

10.25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weight

 

25%

 

50%

 

Threshold
75%

 

Target
100%

 

150%

 

Maximum
200%

 

Example
Score

 

Customer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- retained preference

 

3.4

%

n/a

 

n/a

 

4th

 

3rd

 

2nd

 

1st

 

3.40

%

- overall travel experience

 

3.4

%

n/a

 

n/a

 

4th

 

3rd

 

2nd

 

1st

 

2.55

%

- overall ground service

 

3.4

%

n/a

 

n/a

 

4th

 

3rd

 

2nd

 

1st

 

2.55

%

- overall on-board services

 

3.4

%

n/a

 

n/a

 

4th

 

3rd

 

2nd

 

1st

 

5.10

%

- DOT A+14 ratings

 

3.4

%

n/a

 

n/a

 

4th

 

3rd

 

2nd

 

1st

 

3.40

%

 

 

17

%

 

 

 

 

 

 

 

 

 

 

 

 

17.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fund as a% of Target

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

93.25

%

 

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(1) Based on performance results in shaded areas

 

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Allocation of Individual Awards

 

The Chairman and CEO of American, in consultation with the COO, executive and
senior vice presidents of American, will determine awards for non-officer
eligible employees based upon the eligible employee’s performance.  Unless
otherwise determined by the Chairman, an award under the Plan to a non-officer
eligible employee, when combined with any other award for the Plan year whether
such other award is under an incentive compensation, commission, profit sharing
or other bonus compensation plan, may not exceed 100% of such eligible
employee’s base salary.

 

The Committee, in consultation with the Chairman and CEO of American, will
determine awards for officers of American, including the Named Executive
Officers.  The awards for officers (other than the Named Executive Officers)
will be equal to the appropriate Target Award, plus or minus any adjustments for
individual performance.  To the extent that an award to a Named Executive
Officer includes a partial payment relating to a Measure (other than Net
Income), such partial payment will be paid from the general operating funds of
American.    An award under the Plan to an officer may not exceed the amount set
forth in Section 11 of the LTIP.

 

The aggregate of all awards paid hereunder will not exceed the lesser of: (2.0
times the Fund at Aggregate Target Awards) or (50% of the total base salaries of
all eligible participants in the Plan).    In the discretion of the Committee,
the Fund may not be fully distributed.

 

Administration

 

The Committee shall have authority to administer and interpret the Plan,
establish administrative rules, approve eligible participants, and take any
other action necessary for the proper and efficient operation of the Plan.  For
participants other than the Named Executive Officers, the Committee reserves the
right to adjust the calculation of each Measure at its discretion. 
Notwithstanding anything to the contrary contained herein, no awards will be
made under the Plan unless awards are also made under the 2003 American Airlines
Employee Profit Sharing Plan and the 2003 Pilot Variable Compensation Plan for
members of the Allied Pilots Association.  The amount, if any, of the Fund shall
be audited by the General Auditor of American based on a certification of Net
Income by AMR’s independent auditors.  A summary of awards under the Plan shall
be provided to the Committee at the first regular meeting following
determination of the awards.  To the extent a Measure is no longer compiled by
the DOT, Survey America, or American as applicable, during a Plan year, the
Committee will substitute a comparable performance measure for the remainder of
the Plan year.

 

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METHOD OF PAYMENT

 

The Committee will determine the method of payment of awards.  Except as
provided herein, awards shall be paid as soon as practicable after audited
financial statements for the year 2003 are available.

 

General

 

Neither this Plan nor any action taken hereunder shall be construed as giving
any employee or participant the right to be retained in the employ of American
or an Affiliate.

 

Nothing in the Plan shall be deemed to give any employee any right,
contractually or otherwise, to participate in the Plan or in any benefits
hereunder, other than the right to receive payment of such incentive
compensation as may have been expressly awarded by the Committee.

 

In the event of any act of God, war, natural disaster, aircraft grounding,
revocation of operating certificate, terrorism, strike, lockout, labor dispute,
work stoppage, fire, epidemic or quarantine restriction, act of government,
critical materials shortage, or any other act beyond the control of American,
whether similar or dissimilar,  (each a “Force Majeure Event”), which Force
Majeure Event affects American or its subsidiaries or its Affiliates, the
Committee in its sole discretion, may (i) terminate or (ii) suspend, delay,
defer (for such period of time as the Committee may deem necessary), or
substitute any payments due currently or in the future under the Plan,
including, but not limited to, any payments that have accrued to the benefit of
participants but have not yet been paid.

 

In consideration of the employee’s privilege to participate in the Plan, the
employee agrees (i) not to disclose any trade secrets of, or other
confidential/restricted information of, American or its Affiliates to any
unauthorized party and (ii) not to make any unauthorized use of such trade
secrets or confidential or restricted information during his or her employment
with American or its Affiliates or after such employment is terminated, and
(iii) not to solicit any current employees of American or any subsidiaries of
AMR to join the employee at his or her new place of employment after his or her
employment with American or its Affiliates is terminated.

 

The Committee may amend, suspend, or terminate the Plan at any time.

 

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