Share Based Compensation

12 Months Ended

Dec. 31, 2013

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

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 are 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 2011 Plan and shall only be made to individuals who were not providing services to AAG prior to the Merger. Award 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, Alignment and Equity Incentive, 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.

In 2013, share-based compensation expense of $42 million, related to the Merger, was recorded under Special items, net and $50 million was recorded under Salaries, wages and benefits. In 2012 and 2011 the total charge for share-based compensation expense, included in Salaries, wages, and benefits expense, was $29 million and $40 million, respectively.

Restricted Stock Unit (RSU) Awards

As of December 31, 2013, the Company has outstanding restricted stock unit awards with service conditions (time vested) and performance conditions. The grant-date fair value of restricted stock unit awards 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 restricted stock unit awards (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.

Alignment Awards

On December 9, 2013, alignment awards were granted in the form of RSUs and are expected to be settled in AAG Common Stock subject to potential NOL restrictions. The awards were provided to legacy AMR employees in order to align interests and create parity with peers at US Airways and one-third of the awards vested on the Company's emergence from bankruptcy. The remaining awards vest equally on the one and two year anniversary of emergence. Employees terminated in connection with the Merger fully vest in their awards on the termination date. Compensation expenses recorded in connection with these awards have been and will be charged to Merger related expenses.

Activity during 2013 for the alignment awards is presented below:



	Number of Shares		Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding at January 1, 2013	—		$	—
Granted	4,095		24.60
Vested and released	(1,375	)	24.60
Forfeited	—		—
Outstanding at December 31, 2013	2,720		$	24.60

As of December 31, 2013, there was $47 million of total unrecognized compensation cost related to the alignment awards that is expected to be recognized over a weighted average period of 1.9 years. The total fair value of awards settled during the year ended December 31, 2013 was $31 million.

Equity Incentive Awards

Equity incentive awards granted pursuant to the Plan have a vesting commencement date of April 10, 2013 and were granted in the form of RSUs that are expected to be settled in AAG Common Stock subject to potential NOL restrictions. Vesting dates are April 2014, April 2015 and April 2016 with pro-rata vesting based on the number of days served from April 10, 2013. In addition, as mentioned above, AAG assumed the outstanding equity awards of US Airways at the Merger Effective Date. Generally these awards vest over a three year period. Related expense has been and will be charged to Salaries, Wages and benefits.

Activity during 2013 for equity incentive awards is presented below:



	Number of Shares		Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding at January 1, 2013	—		$	—
Granted	2,407		24.60
Assumed US Airways awards	3,164		22.55
Vested and released	(11	)	22.55
Forfeited	—		—
Outstanding at December 31, 2013	5,560		$	23.44

As of December 31, 2013, there was $92 million of total unrecognized compensation cost related to equity incentive share awards that is expected to be recognized over a weighted average period of 1.3 years. The total fair value of equity incentive RSUs vested during the 23 day period ending December 31, 2013 was less than a million.

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 will be settled in equity for domestic employees and in cash for international employees. Each restricted stock unit award granted will vest, subject to the executive’s continued employment, with respect to (i) 50% of the restricted stock units on December 16, 2015; (ii) 25% of the restricted stock units on the earlier to occur of (a) December 16, 2015, if the Company is issued a Single Operating Certificate prior to or on that date or (b) the date on which the Company is issued a Single Operating Certificate, provided that such date is prior to or on December 9, 2016; and (iii) 25% of the restricted stock units on the date the board of directors or compensation committee of the board of directors determines that the Company has achieved at least $1 billion in net synergies with respect to fiscal year 2015 or 2016. Compensation expenses recorded in connection with these awards have been and will be charged to Merger related expenses.



	Number of Shares	Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding at January 1, 2013	—	$	—
Granted	15,599	24.60
Vested and released	—	—
Forfeited	—	—
Outstanding at December 31, 2013	15,599	$	24.60

As of December 31, 2013, there was $362 million of total unrecognized compensation cost related to the Merger RSUs. These costs are expected to be recognized over a weighted average period of 1.9 years.

Cash-settled restricted stock

CRSU award activity during 2013 for all plans is as follows (shares in thousands):



	Number of Shares		Weighted Average Grant Date Fair Value
	(In thousands)
Assumed US Airways awards at December 9, 2013	320		$	22.55
Granted	309		24.60
Vested and released	(3	)	25.25
Forfeited	—		—
Nonvested balance at December 31, 2013	626		$	25.25

As of December 31, 2013, the liability related to CRSUs was $6 million, which will continue to be remeasured at fair value at each reporting date until all awards are vested. As of December 31, 2013, the total unrecognized compensation expense for CRSUs was $10 million and is expected to be recognized over a weighted average period of 1.5 years.

US Airways Stock Options and Stock Appreciation Rights

Stock options and stock appreciation rights are granted with an exercise price equal to the underlying common stock’s fair value at the date of each grant. Stock options and stock appreciation rights 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 option and SAR award activity for all plans effective with the Merger date is as follows:



	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 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		3.3	$	162
Vested or expected to vest at December 31, 2013	11,135		12.85		3.3	$	162
Exercisable at December 31, 2013	8,729		$	14.20	2.8	$	120

CSAR award activity for all plans effective with the Merger Date is as follows:



	CSARs		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(In thousands)				(In years)	(In millions)
Assumed US Airways 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		3.3	$	54
Vested or expected to vest at December 31, 2013	2,864		6.26		3.3	$	54
Exercisable at December 31, 2013	2,415		$	5.91	3.1	$	47

The fair value of stock options and stock appreciation rights is determined at the grant date using a Black-Scholes option pricing model, which requires several assumptions. The risk-free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the award at the time of grant. The dividend yield is assumed to be zero as the Company does not pay dividends. The volatility is based on the historical volatility of the Company’s common stock over a time period equal to the expected term of the award. The expected term of the award is based on the historical experience of the Company. Stock options and stock appreciation rights are expensed on a straight-line basis over the vesting period for the entire award. There were no stock options or stock appreciation rights granted subsequent to the Merger closing date.

As of December 31, 2013, there were $22 million of total unrecognized compensation costs related to SARs. These costs are expected to be recognized over a weighted average period of 0.7 years. The total intrinsic value of stock options and SARs exercised during the 23 day period ending December 31, 2013 was $0.5 million.

As of December 31, 2013, the weighted average fair value of outstanding CSARs was $19.11 per share and the related liability was $52 million. These CSARs will continue to be remeasured at fair value at each reporting date until all awards are settled. As of December 31, 2013, the total unrecognized compensation expense for CSARs was $2 million and is expected to be recognized over a weighted average period of 0.3 years. Total cash paid for CSARs exercised during the during the 23 day period ending December 31, 2013 was $0.5 million.

AMR Incentive Awards

Prior to the Petition Date, AMR adopted certain plans which provided for the issuance of common stock in connection with the exercise of stock options and other share-based awards. AMR granted stock compensation under three plans: the 1998 Long Term Incentive Plan (the 1998 Plan), the 2003 Employee Stock Incentive Plan (the 2003 Plan) and the 2009 Long Term Incentive Plan (the 2009 Plan). Collectively, the 1998 Plan and the 2009 Plan are referred to as the LTIP Plans. No awards were made under AMR's plans in 2012 or 2013. AMR had share-based incentive awards including stock options/stock appreciation rights granted under the LTIP Plans and the 2003 Plan, performance share awards granted under the LTIP plans and based upon a requisite service period and contingently issuable based upon the AMR's relative stock price performance compared to certain of its competitors over a three year period, deferred share awards granted under the LTIP plans and based solely on a requisite service period and career equity awards granted to certain employees of AMR vesting upon the retirement of those individuals. Deferred share and career equity awards totaling 5,899,500 shares vested in AMR common stock pursuant to the Plan. These plan participants become holders of interest in AMR Corporation and will receive distributions of AAG common stock in accordance with the Plan (See Note 2 to AAG's Consolidated Financial Statements for information regarding the Plan). All remaining outstanding awards were canceled in accordance with the Plan upon emergence from Chapter 11.

Activity of all previous AMR awards is as follows:



	SARS/Options		Stock Awards
	(In thousands)
Outstanding awards at January 1, 2011	28,593		18,015
Granted	2,556		1,864
Settled or exercised	(90	)	(2,809	)
Forfeited or expired	(4,166	)	(3,457	)
Outstanding at December 31, 2011	26,893		13,613
Granted	—		—
Settled or exercised	—		(25	)
Forfeited or expired	(2,943	)	(679	)
Outstanding at December 31, 2012	23,950		12,909
Granted	—		—
Settled or exercised	(6,589	)	(5,900	)
Forfeited or expired	(13,346	)	—
Canceled upon emergence	(4,015	)	(7,009	)
Outstanding at December 9, 2013	—		—

AA [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Share Based Compensation

In 2013, share-based compensation expense of $37 million, related to the Merger, was recorded under Special items, net and $28 million was recorded under Salaries, wages and benefits. In 2012 and 2011 the total charge for share-based compensation expense, included in Salaries, wages, and benefits expense, was $26 million and $35 million, respectively.

Restricted Stock Unit (RSU) Awards

As of December 31, 2013, American has outstanding restricted stock unit awards with service conditions (time vested) and performance conditions. The grant-date fair value of restricted stock unit awards 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 restricted stock unit awards (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 American.

Alignment Awards

On December 9, 2013, Alignment awards were granted in the form of restricted stock units (RSUs) and are expected to be settled in AAG Common Stock subject to potential NOL restrictions. The awards were provided to legacy AMR employees in order to align interests and create parity with peers at US Airways and one-third of the awards vested on the Company's emergence from bankruptcy. The remaining awards vest equally on the one and two year anniversary of emergence. Employees terminated in connection with the Merger fully vest in their awards on the termination date. Compensation expenses recorded in connection with these awards have been and will be charged to Merger related expenses.

Activity during 2013 for the alignment awards is presented below:



	Awards		Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding at January 1, 2013	—		$	—
Granted	3,729		24.60
Vested and released	(1,253	)	24.60
Forfeited or Expired	—		—
Outstanding at December 31, 2013	2,476		$	24.60

As of December 31, 2013, there was $43 million of total unrecognized compensation cost related to the alignment awards that is expected to be recognized over a weighted average period of 1.9 years. The total fair value of awards settled during the year ended December 31, 2013 was $28 million.

Equity Incentive Awards

Equity incentive awards granted Pursuant to the Plan have a vesting commencement date of April 10, 2013 and were granted in the form of RSUs that are expected to be settled in AAG Common Stock subject to potential NOL restrictions. Payment dates are April 2014, April 2015 and April 2016 with pro-rata vesting based on the number of days served from April 10, 2013. Related expense has been and will be charged to Salaries, Wages and benefits.

Activity during 2013 for equity incentive awards is presented below:



	Awards	Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding at January 1, 2013	—	$	—
Granted	2,186	24.60
Vested and released	—	—
Forfeited	—	—
Outstanding at December 31, 2013	2,186	$	24.60

The weighted-average grant date fair value per share of equity incentive share awards granted during 2013 was $24.60. As of December 31, 2013, there was $41 million of total unrecognized compensation cost related to equity incentive share awards that is expected to be recognized over a weighted average period of 1.6 years.

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 will be settled in equity for domestic employees and in cash for international employees. Each restricted stock unit award granted under the program will vest, subject to the executive’s continued employment, with respect to (i) 50% of the restricted stock units on December 16, 2015; (ii) 25% of the restricted stock units on the earlier to occur of (a) December 16, 2015, if the Company is issued a Single Operating Certificate prior to or on that date or (b) the date on which the Company is issued a Single Operating Certificate, provided that such date is prior to or on December 9, 2016; and (iii) 25% of the restricted stock units on the date the board of directors or compensation committee of the board of directors determines that the Company has achieved at least $1 billion in net synergies with respect to fiscal year 2015 or 2016. Compensation expenses recorded in connection with these awards have been and will be charged to Merger related expenses.



	Awards	Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding at January 1, 2013	—	$	—
Granted	7,712	24.60
Vested and released	—	—
Forfeited	—	—
Outstanding at December 31, 2013	7,712	$	24.60

As of December 31, 2013, there was $184 million of total unrecognized compensation cost related to RSUs. These costs are expected to be recognized over a weighted average period of 1.9 years.

Cash-settled restricted stock

CRSU award activity for all plans is as follows (shares in thousands):



	Number of Shares	Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding at January 1, 2013	—	$	—
Granted	291	24.60
Vested and released	—	—
Forfeited	—	—
Outstanding at December 31, 2013	291	$	25.25

As of December 31, 2013, the liability related to CRSUs was less than a million and will continue to be remeasured at fair value at each reporting date until all awards are vested. As of December 31, 2013, the total unrecognized compensation expense for CRSUs was $7 million and is expected to be recognized over a weighted average period of 1.9 years.

Prior to the Petition Date, American adopted certain plans which provided for the issuance of common stock in connection with the exercise of stock options and other share-based awards. American granted stock compensation under three plans: the 1998 Long Term Incentive Plan (the 1998 Plan), the 2003 Employee Stock Incentive Plan (the 2003 Plan) and the 2009 Long Term Incentive Plan (the 2009 Plan). Collectively, the 1998 Plan and the 2009 Plan are referred to as the LTIP Plans. No awards were made under American's plans in 2012 or 2013. American had share-based incentive awards including stock options/stock appreciation rights granted under the LTIP Plans and the 2003 Plan, performance share awards granted under the LTIP plans and based upon a requisite service period and contingently issuable based upon the AMR's relative stock price performance compared to certain of its competitors over a three year period, deferred share awards granted under the LTIP plans and based solely on a requisite service period and career equity awards granted to certain employees of the Company vesting upon the retirement of those individuals. Deferred share and career equity awards totaling 5,899,500 shares vested in AMR common stock pursuant to the Plan. These plan participants become holders of interest in AMR Corporation and will receive distributions of AAG common stock in accordance with the Plan (See Note 2 to American's Consolidated Financial Statements for information regarding the Plan). All remaining outstanding awards were canceled in accordance with the Plan upon emergence from Chapter 11.

Activity of all previous AMR awards is as follows:



	SARS/Options		Stock Awards
	(In thousands)
Outstanding awards at January 1, 2011	28,593		18,015
Granted	2,556		1,864
Settled or exercised	(90	)	(2,809	)
Forfeited	(4,166	)	(3,457	)
Outstanding at December 31, 2011	26,893		13,613
Granted	—		—
Settled or exercised	—		(25	)
Forfeited	(2,943	)	(679	)
Outstanding at December 31, 2012	23,950		12,909
Granted	—		—
Settled or exercised	(6,589	)	(5,900	)
Forfeited	(13,346	)	—
Canceled upon emergence	(4,015	)	(7,009	)
Outstanding at December 9, 2013	—		—

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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