Apr 18, 2008 1:00 pm US/Central
American Airlines CEO Got $6.6 Million In 2007
(AP)
The chief executive of American Airlines, the nation's largest carrier, got a 21 percent increase to $6.6 million in compensation in 2007, the company's best year since 2000, according to information disclosed in a regulatory filing Friday.
Gerard Arpey, the chairman and CEO of both American and parent AMR Corp., got most of his compensation in stock and option grants that AMR valued at $5.9 million when they were issued.
Arpey was paid a salary of $656,500 and $36,146 in other compensation, mostly an allowance to cover perks such as vehicles, club memberships and financial and tax advice. He didn't get a cash bonus and received only $50 in non-equity incentive payments, according to AMR's proxy statement.
Almost all the increase in Arpey's compensation over 2006 came from his stock and option grants. In 2006, he received grants valued at $4.8 million.
The Associated Press calculates compensation by including executives' salary, bonus, incentives, perks, above-market returns on deferred compensation and the estimated value of stock and options awards granted during the year. The calculations don't include changes in the value of pension benefits or AMR's cost of stock and options granted before 2006, so the figures can differ from the total the company lists in the proxy's summary compensation table.
Fort Worth-based AMR, which also owns the American Eagle commuter airline, earned $504 million last year, its second straight profitable year after it lost more than $8 billion in the previous five years.
But record fuel costs are taking a heavy toll on airlines this year. AMR reported this week that it lost $328 million in the first three months of 2008, and spending on fuel jumped 45 percent, an increase of $665 million.
American has also been hurt by canceling flights to inspect the electrical wiring on many of its planes. Most of the effect of those cancellations will be reported in second-quarter results, and they will run into the "high tens of millions of dollars," the company's chief financial officer said this week.
Analysts believe AMR won't turn an annual profit again until at least 2011.
Arpey faces other tough challenges in 2008, including contract negotiations with the company's three unions, which are expected to demand more pay.
Union leaders have bitterly protested stock bonuses paid to about 900 managers, including Arpey. Company officials said the payments, which are tied to the performance of AMR stock over a three-year period, were needed to bring managers' compensation in line with that of peers at similarly sized companies.
Arpey will also have to steer his company through a changing landscape in the airline business. American could lose its ranking as the largest U.S. airline if Delta Air Lines Inc. completes its announced purchase of Northwest Airlines Corp.
American could drop to No. 3 if Continental Airlines Inc. and UAL Corp.'s United Airlines combine. Sources close to the situation say the two companies have discussed a deal.
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