Former American Airlines chief executive Tom Horton will receive almost $17 million in cash and stock compensation for guiding the carrier through its two-year bankruptcy which ended with Monday’s merger with US Airways.
According to a Securities and Exchange Commission filing made late Monday, Horton will receive $12.7 million in cash and 170,722 shares in the new American Airlines Group as part of a transition agreement. Based on Monday’s closing price of $24.60, the stock is worth $4.2 million.
Horton, who will serve the new company as non-executive chairman for a short period, will also receive lifetime flight and travel benefits for himself and his wife, and will be provided an office and office support for the next two years.
In a message to employees, American’s new CEO Doug Parker said that his pay will be determined by the board of directors in January and that he would request his total compensation be at least 15 percent below the CEOs at Delta Air Lines and United Airlines.
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“I won’t be paid as much as my peers at Delta and United until you are,” said Parker, formerly CEO at US Airways.
On Monday, Parker was given 626,637 shares of restricted stock, worth $15.4 million based on Monday’s closing price. However, the stock cannot be sold immediately.
Half of the shares will vest on Dec. 16, 2015, and if the carrier has received its single operating certificate from the Federal Aviation Administration, another 25 percent will vest on that date. If the certificate has not yet been received, that 25 percent will vest on the certificate date or Dec. 9, 2016, whichever comes first. The remaining 25 percent will vest when the board determines that $1 billion in merger synergies have been achieved for fiscal year 2015 and fiscal year 2016.
Several executives at the former US Airways were also given stock grants with the same restrictions as Parker’s. The stock was awarded in return for the executives waiving contract terms that would have allowed them to resign from American and receive large severance packages that could have been worth even more.
President Scott Kirby received 447,598 shares worth approximately $11 million while Chief Operating Officer Robert Isom received 313,318 shares worth $7.7 million. Chief Financial Officer Derek Kerr and Executive Vice Presidents Steve Johnson and Elise Eberwein all received 268,559 shares worth $6.6 million.
Executive pay has been a sore point with American’s unions for years. Former CEOs Don Carty and Gerard Arpey both came under fire for receiving bonuses after employees received pay and benefit cuts, souring labor relations at the company.
Horton’s compensation was the subject of controversy in bankruptcy court. Under the initial merger agreement, Horton was to receive $19.8 million in compensation with $9,937,500 in cash and $9,937,500 in shares of the new company as a severance. However, the U.S. Bankruptcy Trustee filed several objections to the proposed compensation, saying it did not conform to the bankruptcy code. In September, U.S. Bankruptcy Judge Sean Lane declined to approve Horton’s severance although he approved the merger and restructuring plan submitted by AMR to the court.
Horton, 52, took over as CEO when the company filed for bankruptcy court protection in November 2011 and Arpey resigned. He previously was president and chief financial officer at American. He will be chairman until the company’s next shareholders meeting.