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.


 


1

















 


“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 


 


2

















 


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:


 


3

















 


	
  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.


 


4

















 


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

  	
  %

  
																								



 












(1)
Based on performance results in shaded areas


 


5

















 


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.


 


6

















 


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.


 


7