Share-based Compensation

12 Months Ended

Dec. 31, 2015

18. Share-based Compensation

In December 2013, the Board of Directors of AAG approved the 2013 AAG Incentive Award Plan (the 2013 Plan). Awards may be in the form of an option, restricted stock award, restricted stock unit award, performance award, dividend equivalent award, deferred stock award, deferred stock unit award, stock payment award or stock appreciation right. The 2013 Plan authorizes the grant of awards for the issuance of 40 million shares plus any shares underlying awards granted under the 2013 Plan, or any pre-existing US Airways Group plan, that are forfeited, terminate or are cash settled (in whole or in part) without a payment being made in the form of shares. In addition, any shares that were available for issuance under the US Airways Group 2011 Incentive Award Plan (the 2011 Plan) as of the effective date of the Merger may be used for awards under the 2013 Plan; provided, that awards using such available shares under the 2011 Plan shall not be made after the date awards or grants could have been made under the 2011 Plan and shall only be made to individuals who were not providing services to AAG prior to the Merger. Awards granted under the 2013 Plan upon the assumption of, or in substitution for, outstanding awards in connection with a corporate transaction, such as a merger, will not reduce the shares authorized for issuance under the 2013 Plan.

In addition, pursuant to the Plan, and as approved by the Bankruptcy Court, certain officers, directors and employees received share-based incentive awards related to the Merger and future service. Awards issued in conjunction with the Plan are discussed in more detail below.

All outstanding US Airways Group equity awards were converted into equity awards with respect to AAG Common Stock using an exchange ratio of 1 to 1 and had a fair value of approximately $141 million at the Merger, which was included in the purchase price. These awards have the same terms and conditions as were applicable to such equity awards immediately prior to the Merger closing date.

The Company’s net income for the years ended December 31, 2015, 2014 and 2013 included $274 million, $381 million and $92 million, respectively, of share-based compensation costs. Of the 2015, 2014 and 2013 amounts, $198 million, $224 million and $42 million, respectively, were related to the Merger and recorded in special items, net on the accompanying consolidated statements of operations.

During 2015, the Company withheld approximately 7.0 million shares of AAG common stock and paid approximately $306 million in satisfaction of certain tax withholding obligations associated with employee equity awards.

(a) Restricted Stock Unit Awards (RSUs)

The Company has granted RSUs with service conditions (time vested) and performance conditions. The grant-date fair value of RSUs is equal to the market price of the underlying shares of common stock on the date of grant. For time vested awards, the expense is recognized on a straight-line basis over the vesting period for the entire award. For awards with performance conditions, the expense is recognized based on the expected achievement at each reporting period. Stock-settled RSUs are classified as equity awards as the vesting results in the issuance of shares of AAG Common Stock. Cash-settled restricted stock unit awards (CRSUs) are classified as liability awards as the vesting results in payment of cash by the Company. The Company granted certain RSU awards in connection with the Merger as follows:

Alignment Awards

On December 9, 2013, alignment awards were granted in the form of RSUs. The awards were provided to legacy AMR employees in order to align interests and create parity with peers at US Airways Group, and one-third of the awards vested on the Company’s emergence from bankruptcy. The remaining awards vested equally on the one and two year anniversary of emergence. The awards of employees terminated in connection with the Merger became fully vested on the date of termination. Compensation expenses for these awards were recorded in special items, net on the consolidated statements of operations.

Merger Equity Grant

The Merger Equity Grant was granted on the Effective Date to certain officers and directors and employees in the form of RSUs and settled in equity for domestic employees and in cash for international employees. Subject to the executive’s continued employment, each RSU vested on December 16, 2015 with respect to (i) 50% of the RSUs which were time vested; (ii) 25% of the RSUs as the Company was issued a Single Operating Certificate in April 2015; and (iii) 25% of the RSUs as the compensation committee of the Board of Directors determined that the Company had achieved at least $1.0 billion in net synergies with respect to fiscal year 2015. Compensation expenses for these awards were recorded in special items, net on the consolidated statements of operations.

Stock-settled RSU award activity for all plans for the years ended December 31, 2015, 2014 and 2013 is as follows (shares in thousands):


	Number of Shares			Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding at January 1, 2013		—		$	—
Granted		22,101			24.60
Assumed US Airways Group awards		3,164			22.55
Vested and released		(1,386	)		24.58
Forfeited		—			—

Outstanding at December 31, 2013		23,879		$	24.33
Granted		3,467			37.07
Vested and released		(4,193	)		23.84
Forfeited		(1,811	)		25.10

Outstanding at December 31, 2014		21,342		$	26.43
Granted		2,213			46.62
Vested and released		(17,163	)		25.20
Forfeited		(785	)		27.12

Outstanding at December 31, 2015		5,607		$	38.08

As of December 31, 2015, there was $117 million of unrecognized compensation cost related to stock-settled RSUs. These costs are expected to be recognized over a weighted average period of one year. The total fair value of stock-settled RSUs vested during the years ended December 31, 2015, 2014 and 2013 was $750 million, $154 million and $31 million, respectively.

As of December 31, 2015, the Company had a nominal amount of CRSUs outstanding. The total cash paid for CRSUs vested during the years ended December 31, 2015, 2014 and 2013 was $10 million, $12 million and less than $1 million, respectively.

(b) Stock Options and Stock Appreciation Rights

No stock options or stock appreciation rights have been granted subsequent to the Merger closing date. The Company assumed US Airways Group’s outstanding stock options and stock appreciation rights in connection with the Merger. These stock options and stock appreciation rights were granted with an exercise price equal to the underlying common stock’s fair value at the date of each grant, have service conditions, become exercisable over a three-year vesting period and expire if unexercised at the end of their term, which ranges from seven to ten years. Stock options and stock-settled stock appreciation rights (SARs) are classified as equity awards as the exercise results in the issuance of shares of AAG Common Stock. Cash-settled stock appreciation rights (CSARs) are classified as liability awards as the exercise results in payment of cash by the Company. Stock appreciation rights are expensed on a straight-line basis over the vesting period for the entire award. There are no unrecognized compensation costs for stock options.

Stock option and SAR award activity for all plans for the years ended December 31, 2015, 2014 and 2013 is as follows (stock options and SARs in thousands):


	Stock Options and SARS			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In millions)
Assumed US Airways Group awards at December 9, 2013		11,200		$	12.84
Granted		—			—
Exercised		(42	)		14.42
Forfeited		—			—
Expired		—			—

Balance at December 31, 2013		11,158		$	12.84
Granted		—			—
Exercised		(4,109	)		10.74
Forfeited		—			—
Expired		(42	)		41.73

Balance at December 31, 2014		7,007		$	13.90
Granted		—			—
Exercised		(2,985	)		12.09
Forfeited		—			—
Expired		(9	)		45.75

Balance at December 31, 2015		4,013		$	15.17		1.9	$	111
Vested or expected to vest at December 31, 2015		4,013		$	15.17		1.9	$	111
Exercisable at December 31, 2015		3,996		$	15.17		1.9	$	110

CSAR award activity for all plans for the years ended December 31, 2015, 2014 and 2013 is as follows (CSARs in thousands):


	CSARs			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In millions)
Assumed US Airways Group awards at December 9, 2013		2,888		$	6.25
Granted		—			—
Exercised		(23	)		5.10
Forfeited		—			—
Expired		—			—

Balance at December 31, 2013		2,865		$	6.26
Granted		—			—
Exercised		(1,254	)		6.18
Forfeited		—			—
Expired		—			—

Balance at December 31, 2014		1,611		$	6.33
Granted		—			—
Exercised		(760	)		6.31
Forfeited		—			—
Expired		—			—

Balance at December 31, 2015		851		$	6.35		1.4	$	31
Vested or expected to vest at December 31, 2015		851		$	6.35		1.4	$	31
Exercisable at December 31, 2015		851		$	6.35		1.4	$	31

As of December 31, 2015, there were less than a million of total unrecognized compensation costs related to SARs which are expected to be recognized in 2016. The total intrinsic value of stock options and SARs exercised during the years ended December 31, 2015, 2014 and the 23 day period ended December 31, 2013 was $102 million, $105 million and less than $1 million, respectively.

As of December 31, 2015, the weighted average fair value of outstanding CSARs was $35.76 per share and the related liability was $31 million. These CSARs are fully vested and will continue to be remeasured at fair value at each reporting date until all awards are settled. Total cash paid for CSARs exercised during the years ended December 31, 2015, 2014 and the 23 day period ended December 31, 2013 was $31 million, $42 million and less than $1 million, respectively.

American Airlines, Inc. [Member]

Share-based Compensation

16. Share-based Compensation

American’s net income for the years ended December 31, 2015, 2014 and 2013 included $274 million, $381 million and $84 million, respectively, of share-based compensation costs. Of the 2015, 2014 and 2013 amounts, $198 million, $224 million and $44 million, respectively, were related to the Merger and recorded in special items, net on the accompanying consolidated statements of operations.

During 2015, AAG withheld approximately 7.0 million shares of AAG common stock and paid approximately $306 million in satisfaction of certain tax withholding obligations associated with employee equity awards.

(a) Restricted Stock Unit Awards (RSUs)

AAG has granted RSUs with service conditions (time vested) and performance conditions. The grant-date fair value of RSUs is equal to the market price of the underlying shares of common stock on the date of grant. For time vested awards, the expense is recognized on a straight-line basis over the vesting period for the entire award. For awards with performance conditions, the expense is recognized based on the expected achievement at each reporting period. Stock-settled RSUs are classified as equity awards as the vesting results in the issuance of shares of AAG Common Stock. Cash-settled restricted stock unit awards (CRSUs) are classified as liability awards as the vesting results in payment of cash by AAG. AAG granted certain RSU awards in connection with the Merger as follows:

Alignment Awards

On December 9, 2013, alignment awards were granted in the form of RSUs. The awards were provided to legacy AMR employees in order to align interests and create parity with peers at US Airways Group, and one-third of the awards vested on AAG’s emergence from bankruptcy. The remaining awards vested equally on the one and two year anniversary of emergence. The awards of employees terminated in connection with the Merger became fully vested on the date of termination. Compensation expenses for these awards were recorded in special items, net on the consolidated statements of operations.

Merger Equity Grant

The Merger Equity Grant was granted on the Effective Date to certain officers and directors and employees in the form of RSUs and settled in equity for domestic employees and in cash for international employees. Subject to the executive’s continued employment, each RSU vested on December 16, 2015 with respect to (i) 50% of the RSUs which were time vested; (ii) 25% of the RSUs as AAG was issued a Single Operating Certificate in April 2015; and (iii) 25% of the RSUs as the compensation committee of the Board of Directors determined that AAG had achieved at least $1.0 billion in net synergies with respect to fiscal year 2015. Compensation expenses for these awards were recorded in special items, net on the consolidated statements of operations.

Stock-settled RSU award activity for all plans for the years ended December 31, 2015, 2014 and 2013 is as follows (shares in thousands):


	Number of Shares			Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding at January 1, 2013		—		$	—
Granted		22,101			24.60
Assumed US Airways Group awards		3,164			22.55
Vested and released		(1,386	)		24.58
Forfeited		—			—

Outstanding at December 31, 2013		23,879		$	24.33
Granted		3,467			37.07
Vested and released		(4,193	)		23.84
Forfeited		(1,811	)		25.10

Outstanding at December 31, 2014		21,342		$	26.43
Granted		2,213			46.62
Vested and released		(17,163	)		25.20
Forfeited		(785	)		27.12

Outstanding at December 31, 2015		5,607		$	38.08

As of December 31, 2015, AAG had a nominal amount of CRSUs outstanding. The total cash paid for CRSUs vested during the years ended December 31, 2015, 2014 and 2013 was $10 million, $12 million and less than $1 million, respectively.

(b) Stock Options and Stock Appreciation Rights

No stock options or stock appreciation rights have been granted subsequent to the Merger closing date. AAG assumed US Airways Group’s outstanding stock options and stock appreciation rights in connection with the Merger. These stock options and stock appreciation rights were granted with an exercise price equal to the underlying common stock’s fair value at the date of each grant, have service conditions, become exercisable over a three-year vesting period and expire if unexercised at the end of their term, which ranges from seven to ten years. Stock options and stock-settled stock appreciation rights (SARs) are classified as equity awards as the exercise results in the issuance of shares of AAG Common Stock. Cash-settled stock appreciation rights (CSARs) are classified as liability awards as the exercise results in payment of cash by AAG. Stock appreciation rights are expensed on a straight-line basis over the vesting period for the entire award. There are no unrecognized compensation costs for stock options.

Stock option and SAR award activity for all plans for the years ended December 31, 2015, 2014 and 2013 is as follows (stock options and SARs in thousands):


	Stock Options and SARS			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In millions)
Assumed US Airways Group awards at December 9, 2013		11,200		$	12.84
Granted		—			—
Exercised		(42	)		14.42
Forfeited		—			—
Expired		—			—

Balance at December 31, 2013		11,158		$	12.84
Granted		—			—
Exercised		(4,109	)		10.74
Forfeited		—			—
Expired		(42	)		41.73

Balance at December 31, 2014		7,007		$	13.90
Granted		—			—
Exercised		(2,985	)		12.09
Forfeited		—			—
Expired		(9	)		45.75

Balance at December 31, 2015		4,013		$	15.17		1.9	$	111
Vested or expected to vest at December 31, 2015		4,013		$	15.17		1.9	$	111
Exercisable at December 31, 2015		3,996		$	15.17		1.9	$	110

CSAR award activity for all plans for the years ended December 31, 2015, 2014 and 2013 is as follows (CSARs in thousands):


	CSARs			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In millions)
Assumed US Airways Group awards at December 9, 2013		2,888		$	6.25
Granted		—			—
Exercised		(23	)		5.10
Forfeited		—			—
Expired		—			—

Balance at December 31, 2013		2,865		$	6.26
Granted		—			—
Exercised		(1,254	)		6.18
Forfeited		—			—
Expired		—			—

Balance at December 31, 2014		1,611		$	6.33
Granted		—			—
Exercised		(760	)		6.31
Forfeited		—			—
Expired		—			—

Balance at December 31, 2015		851		$	6.35		1.4	$	31
Vested or expected to vest at December 31, 2015		851		$	6.35		1.4	$	31
Exercisable at December 31, 2015		851		$	6.35		1.4	$	31

As of December 31, 2015, there were less than a million of total unrecognized compensation costs related to SARs which are expected to be recognized in 2016. The total intrinsic value of stock options and SARs exercised during the years ended December 31, 2015 and 2014 and the 23 day period ended December 31, 2013 was $102 million, $105 million and less than $1 million, respectively.

As of December 31, 2015, the weighted average fair value of outstanding CSARs was $35.76 per share and the related liability was $31 million. These CSARs are fully vested and will continue to be remeasured at fair value at each reporting date until all awards are settled. Total cash paid for CSARs exercised during the years ended December 31, 2015 and 2014 and the 23 day period ended December 31, 2013 was $31 million, $42 million and less than $1 million, respectively.