The top five officers of AMR Corp., American Airlines’ parent, shared a compensation package worth about $16.5 million last year, according to a financial report filed Friday afternoon.
Gerard Arpey, the airline’s chief executive, received a total package worth about $6.6 million in 2007, according to the report filed with the Securities and Exchange Commission. That’s up 21 percent from his 2006 compensation, valued at about $5.4 million.
The compensation, which included base salaries, bonuses and the value of stock awards granted during the year, came during American’s best year since 2000. The Fort Worth-based airline earned a profit of $504 million last year, up from $231 million in 2006. From 2001 to 2005, the airline lost more than $8 billion.
But the financial disclosure came after several rocky weeks at the airline. Earlier this month, American was forced to ground its fleet of MD-80 airplanes for new inspections, which resulted in about 3,300 flight cancellations nationwide. The cancellations impacted hundreds of thousands of travelers, many of whom were stranded for days before they could reach their destinations.
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Wednesday, AMR reported a $328 million loss for the first quarter of 2008, driven primarily by a surge in jet fuel prices since the beginning of the year. And earlier this week, the airline’s pilots demonstrated at the headquarters of large American corporate customers nationwide, including the executive offices of the Dallas Cowboys in Irving, criticizing the airline’s management.
Unions have also blasted a slate of stock bonuses, worth about $38 million, which were awarded this week to about 900 of American’s top executives and managers. The Transport Workers Union ran newspaper ads accusing the company of being greedy, and the Association of Professional Flight Attendants called on Arpey and the rest of his executive team to resign.
Those bonuses are in addition to the 2007 compensation detailed in the financial report.
Karl Schricker, a spokesman for the Allied Pilots Association, said Friday that the executive pay package sends the wrong message to employees, who accepted steep cuts in wages and benefits in 2003.
“This sends a very poor message, and it’s a failure of leadership,” he said. He noted that Gary Kelly, the chief executive of Southwest Airlines, received a compensation package worth $1.9 million last year.
“To recognize how inflated this compensation package is, you just have to look across the Metroplex to Southwest, where their CEO made one-third of what ours did,” he said.
But an American spokesman pointed out that compensation for the airline’s officers is based on the performance of the company. He noted that the stock bonuses were 70 percent less than what they received a year ago, because the value of AMR shares have declined.
“These plans strongly link executive compensation to performance, and align the interests of the shareholders with those in management,” said Andy Backover. He said more than 75 percent of executive compensation is “at risk,” and pointed out that none of the top five officers has received a cash bonus since 2000.
Arpey, for example, was paid a base salary of $656,500, and he received other miscellaneous compensation worth $36,146. He was granted stock awards worth $5.9 million when they were approved by AMR’s board in July, but he won’t receive all the benefit of those until future years.
The final value of those stock awards could vary considerably depending on the performance of the company and its stock price.
The Star-Telegram analysis of the financial report included the salary, bonus, incentives and the estimated value of stock options and awards granted during the year. The calculations are similar to those used by several other news organizations, including The Associated Press and the Wall Street Journal.
They are different from the totals listed in the report’s summary tables. Those tables, for example, list Arpey’s total 2007 compensation as about $4.6 million. That figure, however, reflects the accounting charge the company recorded on stock awards during the year, rather than new compensation that was granted to the executive during 2007.
Shares of AMR (ticker: AMR) rose 23 cents in trading Friday, to close at $8.77 per share.
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AA EXECUTIVE PAY
The top five officers at American airlines received pay packages with a total value of about $16.5 million in 2007.*
(*) Includes base salary, bonus, other compensation, and the market value of stock grants and awards approved during the year.
Source: AMR Corp.