UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
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DELTA AIR LINES, INC. | ||||
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Delta Air Lines, Inc.
P.O. Box 20706
Atlanta, GA 30320
DELTA AIR LINES, INC.
Notice of Annual Meeting
Dear Stockholder:
On behalf of the Board of Directors, it is a pleasure to invite you to attend the 2015 Annual Meeting of Stockholders of Delta Air Lines, Inc. The meeting will be held at 7:30 a.m. Eastern Daylight Time on Thursday, June 25, 2015, at the offices of Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, New York 10019. At the meeting, stockholders will vote on the following matters:
| the election of directors for the next year; |
| an advisory vote on executive compensation (also known as say on pay); |
| the ratification of the appointment of Ernst & Young LLP as Deltas independent auditors for the year ending December 31, 2015; |
| a stockholder proposal (if the proposal is properly presented at the meeting); and |
| any other business that may properly come before the meeting. |
If you were a holder of record of Delta common stock at the close of business on May 1, 2015, you will be entitled to vote at the meeting. A list of stockholders entitled to vote at the meeting will be available for examination during normal business hours for ten days before the meeting at Deltas Investor Relations Department, 1030 Delta Boulevard, Atlanta, Georgia 30354. The stockholder list will also be available at the meeting.
Because space at the meeting is limited, admission will be on a first-come, first-served basis. Stockholders without appropriate documentation may not be admitted to the meeting. If you plan to attend the meeting, please see the instructions on page 8 of the attached proxy statement. If you will need special assistance at the meeting because of a disability, contact Investor Relations toll free at (866) 715-2170.
We encourage stockholders to sign up to receive future proxy materials electronically, including the Notice Regarding the Availability of Proxy Materials. Using electronic communication significantly reduces our printing and postage costs and helps protect the environment. To sign up, visit http://enroll.icsdelivery.com/dal.
Please read our attached proxy statement carefully and submit your vote as soon as possible. Your vote is important. You can ensure that your shares are voted at the meeting by using our Internet or telephone voting system, or by completing, signing and returning a proxy card.
Sincerely,
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Richard H. Anderson | Daniel A. Carp | |
Chief Executive Officer | Chairman of the Board |
Atlanta, Georgia
May 7, 2015
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Meeting Agenda and Board Recommendations | ||||
Matter | Board Recommendation | Page Reference | ||
Management Proposals |
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Item 1: Election of Directors |
FOR each director nominee | 15 | ||
Item 2: Advisory Vote on Executive Compensation |
FOR | 64 | ||
Item 3: Ratification of the Appointment of Independent Auditors |
FOR | 65 | ||
Stockholder Proposal |
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Item 4: Senior Executive Stock Retention Requirement |
AGAINST | 67 |
ITEM 1. Election of Directors: We ask you to elect 16 directors. Each of the directors listed in the chart below is standing for election to hold office until the next annual meeting of stockholders or until his or her successor is elected and qualified. The following chart provides summary information about each director nominee. Additional information may be found beginning on page 15.
Director | Age | Director Since |
Occupation | Independent | Other Public Boards |
Current Delta Committees | ||||||||||||||
Richard H. Anderson |
60 | 2007 | CEO of Delta | 1 | n/a | |||||||||||||||
Edward H. Bastian |
57 | 2010 | President of Delta | 1 | n/a | |||||||||||||||
Francis S. Blake |
65 | 2014 | Former Chairman and CEO of The Home Depot, Inc. | X | 1 | A, CG | ||||||||||||||
Roy J. Bostock |
74 | 2008 | Principal, Sealedge Investments; Former Chairman and CEO of McManus Group | X | 0 | CG, S&S | ||||||||||||||
John S. Brinzo |
73 | 2007 | Former Chairman, President and CEO of Cliffs Natural Resources | X | 1 | A, P&C | ||||||||||||||
Daniel A. Carp |
67 | 2007 | Former Chairman and CEO of Eastman Kodak | X | 2 | CG,* S&S | ||||||||||||||
David G. DeWalt |
51 | 2011 | Chairman and CEO of FireEye | X | 1 | F, P&C* | ||||||||||||||
Thomas E. Donilon |
59 | 2015 | Vice Chair of OMelveny & Myers | X | 0 | F, S&S | ||||||||||||||
William H. Easter III |
65 | 2012 | Former Chairman, President and CEO of DCP Midstream | X | 2 | CG, F | ||||||||||||||
Mickey P. Foret |
69 | 2008 | Former CFO of Northwest Airlines | X | 2 | A, S&S | ||||||||||||||
Shirley C. Franklin |
69 | 2011 | CEO of Purpose Built Communities; Former Mayor of the City of Atlanta | X | 1 | A, P&C | ||||||||||||||
David R. Goode |
74 | 1999 | Former Chairman and CEO of Norfolk Southern | X | 0 | F, P&C | ||||||||||||||
George N. Mattson |
49 | 2012 | Private Investor; Former Partner of Goldman Sachs | X | 0 | F,* P&C | ||||||||||||||
Douglas R. Ralph |
60 | N/A | Pilot B767ER, Delta | 0 | n/a | |||||||||||||||
Sergio A.L. Rial |
54 | 2014 | Chairman of Banco Santander Brasil | X | 0 | A, P&C | ||||||||||||||
Kenneth B. Woodrow |
70 | 2004 | Former Vice Chairman and President of Target | X | 0 | F, P&C |
DELTA AIR LINES, INC. | 1 | PROXY STATEMENT SUMMARY |
PROXY STATEMENT SUMMARY |
ITEM 2: | Advisory Vote on Executive Compensation |
We ask you to approve, on an advisory basis, compensation awarded to our named executive officers. Additional information regarding executive compensation may be found in the summary section below and on page 64.
ITEM 3: | Ratification of the Appointment of Independent Auditors |
We ask you to ratify the appointment of Ernst & Young LLP as independent auditors for 2015. Additional information may be found on page 65.
ITEM 4: | Senior Executive Stock Retention Requirement |
We ask you to vote against a stockholder proposal requesting the Board of Directors adopt a stock retention policy in which senior executives would be required to retain at least seventy-five percent of net after-tax shares received through Deltas equity compensation plans until retirement age is reached or employment is terminated. Additional information may be found beginning on page 67.
2014 Performance Highlights* |
We had a successful 2014, a year in which we reported record financial performance. Deltas performance was recognized when we were named one of the top 50 worlds most admired companies for 2015 and the most admired airline in 2013, 2014 and 2015 by Fortune magazine. Our closing stock price at December 31, 2014 increased more than 79% over the year-end 2013 price and was in the top ten in stock price performance in the S&P 500 in 2014. Key accomplishments in 2014 include:
Strong Financial Results
Excluding special items, earned pre-tax income of $4.5 billion, a $1.9 billion increase over 2013 and Deltas fifth consecutive year of solid profitability. |
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Returned $1.35 billion to stockholders through a combination of quarterly cash dividends and share repurchases; reduced adjusted net debt to $7.3 billion, a $2.1 billion reduction from 2013. |
* See Supplemental Information about Financial Measures at the end of this proxy statement for a reconciliation of non-GAAP financial measures to the corresponding GAAP financial measures, and the reasons we use non-GAAP financial measures. On a GAAP basis for 2014, pre-tax income was $1.1 billion and debt and capital lease obligations were $9.8 billion. Our Annual Report on Form 10-K for 2014 is available at http://ir.delta.com/shareholder-resources/annual-meetings/default.aspx but is not incorporated into this proxy statement.
PROXY STATEMENT SUMMARY | 2 | DELTA AIR LINES, INC. |
PROXY STATEMENT SUMMARY |
Continued Revenue Momentum
Expanded operating revenue by $2.6 billion to $40.4 billion, a 7% increase over 2013.
Increased passenger unit revenue 3.0% and generated a unit revenue premium to the industry for the fourth year in a row. |
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Excellent Operating Performance
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Another year of strong operating performance, resulting in an on-time arrival rate of 84%, a flight completion factor of 99.2%, and continued our 1st place performance in Department of Transportation customer complaints among the major network carriers. |
Executive Compensation Program |
Pay for performance is the foundation of our executive compensation philosophy, as the following highlights reflect:
| Under our pay for performance philosophy, our executive compensation program places a substantial portion of total compensation at risk (i.e., value received is contingent upon Deltas financial, operational and stock performance), emphasizing variable over fixed compensation. Ninety-five percent of Deltas Chief Executive Officers target compensation opportunity for 2014 was at risk. Eighty-five percent of Mr. Andersons total compensation is concentrated in equity-based opportunities and his cash-based compensation (base salary and annual bonus) is below the 25th percentile of Deltas custom peer group. |
| Our annual and long-term incentive plans utilize stretch financial, operational and customer service-related performance goals to drive Deltas business strategy, deliver value to our stockholders and align the interests of management with frontline employees. |
| We continue to focus on long-term compensation opportunities. The Personnel & Compensation Committee of the Board of Directors continued to grant all awards under long-term incentive plans with vesting schedules of three years. For further information see the Compensation Discussion and Analysis section of the proxy statement under Elements of Compensation Long-Term Incentives. |
| We do not provide any supplemental executive retirement plans to our executive officers. They participate in the same on-going retirement plans as our frontline employees. |
DELTA AIR LINES, INC. | 3 | PROXY STATEMENT SUMMARY |
PROXY STATEMENT SUMMARY |
Governance Highlights |
Our values and culture are the foundation of our success. We regularly assess our governance practices and highlights include:
| Independent chairman |
| Directors elected annually |
| Majority voting for directors in uncontested elections |
| 13 of 16 director-nominees are independent |
| Executive sessions without management directors at Board of Directors and Board Committee meetings |
| Meaningful stock ownership and retention guidelines for members of the Board of Directors and executive officers |
| Active Board oversight of risk management |
| Regular succession planning |
| All members of the Audit Committee of the Board of Directors are designated financial experts under the rules of the Securities and Exchange Commission |
| Anti-hedging and anti-pledging policy for all employees and Board members |
| No stockholder rights plan (poison pill) or super-majority voting |
| Commitment to sustainability (inclusion in Dow Jones Sustainability Index) |
| Annual advisory vote to approve executive compensation |
| Regular outreach to institutional stockholders |
| Clawback policy |
| No employment contracts, supplemental executive retirement plans, company cars or other significant perquisites |
PROXY STATEMENT SUMMARY | 4 | DELTA AIR LINES, INC. |
Internet Availability of Proxy Materials
Under rules adopted by the Securities and Exchange Commission (SEC), we are furnishing proxy materials (including our 2014 Form 10-K) to our stockholders on the Internet, rather than mailing paper copies to each stockholder. If you received a Notice Regarding the Availability of Proxy Materials (the Notice) by U.S. or electronic mail, you will not receive a paper copy of these proxy materials unless you request one. Instead, the Notice tells you how to access and review the proxy materials and vote your shares on the Internet. If you would like to receive a paper copy of our proxy materials free of charge, follow the instructions in the Notice. The Notice will be distributed to our stockholders beginning on or about May 7, 2015.
The Board of Directors set May 1, 2015 as the record date for determining the stockholders entitled to notice of and to vote at the annual meeting. On April 15, 2015, 816,301,878 shares of Delta common stock, par value $0.0001 per share, were outstanding. Delta expects the number of outstanding shares will not change materially as of the record date. The common stock is the only class of securities entitled to vote at the meeting. Each outstanding share entitles its holder to one vote.
Voting Shares of Common Stock Registered in Your Name or Held under Plans
The control number you receive in your Notice covers shares of common stock in any of the following forms:
| common stock registered in your name (registered shares); |
| common stock held in your account under the Delta Pilots Savings Plan (Pilot Plan); |
| common stock allocated to your account under the Delta Family-Care Savings Plan (Savings Plan); or |
| unvested restricted common stock granted under the Delta Air Lines, Inc. 2007 Performance Compensation Plan. |
Special Note About Employee Stock Purchase Plan Shares. The control number you receive in your Notice does not cover shares of common stock purchased pursuant to the Employee Stock Purchase Plan. These shares are held for your benefit by Fidelity in street name. For information about voting those shares, see Voting Shares Held in Street Name below.
Your submission of voting instructions for registered shares results in the appointment of a proxy to vote those shares. In contrast, your submission of voting instructions for common stock held in your Pilot Plan account or allocated to your Savings Plan account, or for unvested restricted common stock granted under the Delta Air Lines, Inc. 2007 Performance Compensation Plan, instructs the applicable plan trustee or administrator how to vote those shares, but does not result in the appointment of a proxy. You may submit your voting instructions regarding all shares covered by the same control number before the meeting by using our Internet or telephone system or by completing and returning a proxy card, as described below:
| Voting by the Internet or Telephone. You may vote using the Internet or telephone by following the instructions in the Notice to access the proxy materials and then following the instructions provided to allow you to record your vote. After accessing the proxy materials, to vote by telephone, call 1-800-690-6903 or to vote by the Internet, go to www.proxyvote.com and follow the instructions. The Internet and telephone voting procedures are designed to authenticate votes cast by using a personal identification number. These procedures enable stockholders to confirm their instructions have been properly recorded. |
| Voting by Proxy Card. If you obtained a paper copy of our proxy materials, you may also vote by signing, dating and returning your instructions on the proxy card in the enclosed postage-paid envelope. Please sign the proxy card exactly as your name appears on the card. If shares are owned jointly, each joint owner should sign the proxy card. If a stockholder is a corporation or partnership, the proxy card should be signed in the full corporate or partnership name by a duly authorized person. If the proxy card is signed pursuant to a power of attorney or by an executor, administrator, trustee or guardian, state the signers full title and provide a certificate or other proof of appointment. |
DELTA AIR LINES, INC. | 5 | GENERAL INFORMATION |
To be effective, instructions regarding shares held in your Pilot Plan account or allocated to your Savings Plan account must be received by 5:00 p.m. Eastern Daylight Time on June 23, 2015. Instructions regarding registered shares or unvested restricted common stock must be received by 5:00 p.m. Eastern Daylight Time on June 24, 2015.
You may also vote registered shares by attending the annual meeting and voting in person by ballot; this will revoke any proxy you previously submitted.
Note that you may not vote shares of unvested restricted common stock, shares held in your Pilot Plan account or shares allocated to your Savings Plan account in person at the meeting. If you do not submit voting instructions in a timely manner regarding shares of unvested restricted common stock, shares held in your Pilot Plan account or shares allocated to your Savings Plan account, they will not be voted. See Voting Shares Held in Street Name below for information about voting Employee Stock Purchase Plan shares.
All properly submitted voting instructions, whether submitted by the Internet, telephone or U.S. mail, will be voted at the annual meeting according to the instructions given, provided they are received prior to the applicable deadlines described above. All properly submitted proxy cards not containing specific instructions will be voted in accordance with the Board of Directors recommendations set forth on page 1. The members of Deltas Board of Directors designated to vote the proxies returned pursuant to this solicitation are Richard H. Anderson, Roy J. Bostock and Daniel A. Carp.
Revoking a Proxy or Voting Instructions
If you hold registered shares, unvested restricted common stock, shares in your Pilot Plan account or shares allocated to your Savings Plan account, you may revoke your proxy or voting instructions prior to the meeting by:
| providing written notice to Deltas Legal Department at Delta Air Lines, Inc., Dept. No. 981, 1030 Delta Boulevard, Atlanta, Georgia 30354, Attention: Assistant Corporate Secretary; or |
| submitting later-dated instructions by the Internet, telephone or U.S. mail. |
To be effective, revocation of instructions regarding shares held in your Pilot Plan account or allocated to your Savings Plan account must be received by 5:00 p.m. Eastern Daylight Time on June 23, 2015. Revocation of instructions regarding registered shares or unvested restricted common stock must be received by 5:00 p.m. Eastern Daylight Time on June 24, 2015.
You may also revoke your proxy covering registered shares by attending the annual meeting and voting in person by ballot. Attending the meeting will not, by itself, revoke a proxy. Note that you may not vote shares of unvested restricted common stock, shares held in your Pilot Plan account or shares allocated to your Savings Plan account in person at the meeting.
Voting Shares Held in Street Name
If your shares are held in the name of a broker, bank or other record holder (that is, in street name), refer to the instructions provided by the record holder regarding how to vote your shares or to revoke your voting instructions. This includes any shares purchased through the Employee Stock Purchase Plan. You may also obtain a proxy from the record holder permitting you to vote in person at the annual meeting. Without a proxy from the record holder, you may not vote shares held in street name by returning a proxy card or by voting in person at the annual meeting. If you hold your shares in street name, it is critical that you provide instructions to, or obtain a proxy from, the record holder if you want your shares to count in the election of directors (Proposal 1), the advisory vote on executive compensation (Proposal 2) and the stockholder proposals (Proposal 4 and 5). As described in the next section of this proxy statement, regulations prohibit your bank or broker from voting your shares in the election of directors (Proposal 1) and Proposals 2, 4 and 5 if you do not provide voting instructions.
Limitation on Brokers Authority to Vote Shares
Under New York Stock Exchange (NYSE) rules, brokerage firms may vote in their discretion on certain matters on behalf of clients who do not provide voting instructions at least 15 days before the date of the annual meeting. Generally, brokerage firms may vote to ratify the appointment of independent auditors and on other
GENERAL INFORMATION | 6 | DELTA AIR LINES, INC. |
discretionary items, but brokers are not permitted to vote your shares for the election of directors (Proposal 1) and Proposals 2 and 4 unless you provide voting instructions. Accordingly, if your shares are held in a brokerage account and you do not return voting instructions to your broker by its deadline, your shares may be voted by your broker on Proposal 3, but not the other proposals described in this proxy statement. Broker non-votes will not be considered in connection with Proposals 1, 2 and 4. Therefore, we urge you to give voting instructions to your broker on all proposals.
The quorum at the annual meeting will consist of a majority of the votes entitled to be cast by the holders of all shares of common stock that are outstanding and entitled to vote. Abstentions from voting and broker non-votes, if any, will be counted in determining whether a quorum is present. The meeting will not commence if a quorum is not present.
Votes Necessary to Act on Proposals
At an annual meeting at which a quorum is present, the following votes will be necessary on each of the proposals:
| Each director shall be elected by the vote of a majority of the votes cast with respect to the director. For purposes of this vote, a majority of the votes cast means that the number of shares voted for a director must exceed 50% of the votes with respect to that director (excluding abstentions). |
| The advisory vote to approve executive compensation (say on pay) requires the affirmative vote of the majority of shares present and entitled to vote at the meeting. Abstentions have the same effect as votes against the proposal. Even though the outcome of the vote is advisory and therefore will not be binding on Delta, the Personnel & Compensation Committee of the Board of Directors will review and consider the voting results when making future decisions regarding executive compensation. |
| Ratification of the appointment of Ernst & Young LLP as independent auditors for the year ending December 31, 2015 requires the affirmative vote of the majority of shares present and entitled to vote at the meeting. Abstentions have the same effect as votes against the proposal. |
| Approval of the stockholder proposal described in this proxy statement requires the affirmative vote of the majority of shares present and entitled to vote. Abstentions have the same effect as votes against the proposal. |
Broker non-votes, if any, will be handled as described under Limitation on Brokers Authority to Vote Shares.
Recommendations of the Board of Directors
The Board of Directors recommends that you vote:
| FOR the election of the director-nominees named in this proxy statement; |
| FOR the approval, on an advisory basis, of the compensation of Deltas named executive officers; |
| FOR the ratification of the appointment of Ernst & Young LLP as Deltas independent auditors for the year ending December 31, 2015; and |
| AGAINST the stockholder proposal described in this proxy statement. |
All properly submitted proxy cards not containing specific instructions will be voted in accordance with the Boards recommendations.
Presentation of Other Business at the Meeting
Delta is not aware of any business to be transacted at the annual meeting other than as described in this proxy statement. If any other item or proposal properly comes before the meeting (including, but not limited to, a proposal to adjourn the meeting in order to solicit votes in favor of any proposal contained in this proxy statement), the proxies received will be voted at the discretion of the directors designated to vote the proxies.
DELTA AIR LINES, INC. | 7 | GENERAL INFORMATION |
To attend the annual meeting, you will need to show you are either a Delta stockholder as of the record date, or hold a valid proxy from such a Delta stockholder.
| If your shares are registered in street name, or are held in your Pilot Plan account or your Savings Plan account, please bring evidence of your stock ownership, such as your most recent account statement. |
| If you own unvested restricted common stock, please bring your Delta-issued identification card; we will have a list of the holders of unvested restricted common stock at the meeting. |
All stockholders should also bring valid picture identification; employees may use their Delta-issued identification card. If you do not have valid picture identification and proof that you own Delta stock, you may not be admitted to the meeting.
GENERAL INFORMATION | 8 | DELTA AIR LINES, INC. |
Delta believes that sound governance practices are essential to enhance long-term value for our stockholders. We operate under governance practices that are transparent and consistent with best practices.
You may view the charters of the Audit, Corporate Governance, Finance, Personnel & Compensation and Safety and Security Committees, the Certificate of Incorporation, the Bylaws, Deltas corporate governance principles, our codes of ethics and business conduct, and our director independence standards on our Corporate Governance website at http://ir.delta.com/governance/governance-documents/default.aspx. You may obtain a copy of these materials by contacting Deltas Assistant Corporate Secretary at the address on the next page.
Independence of Audit, Corporate Governance and Personnel & Compensation Committee Members
For many years, Deltas Board of Directors has been composed of a substantial majority of independent directors. Deltas Board established the Audit Committee, the Corporate Governance Committee, the Finance Committee, the Personnel & Compensation Committee and the Safety and Security Committee to focus on particular Board responsibilities.
The Board of Directors has affirmatively determined that all current directors are independent under the NYSE listing standards and Deltas director independence standards, except Richard Anderson and Ed Bastian, who are not independent because each is an executive officer of Delta, and Ken Rogers, who is not independent because he is a Delta pilot. Similarly, Doug Ralph, who is being nominated to replace Ken Rogers, will not be independent as he is also a Delta pilot. In making these independence determinations, the Board of Directors considered information submitted by the directors in response to questionnaires, information obtained from Deltas internal records and advice from counsel.
The Audit, Corporate Governance and Personnel & Compensation Committees consist entirely of non-employee directors who are independent, as defined in the NYSE listing standards and Deltas director independence standards. The members of the Audit Committee also satisfy the additional independence requirements set forth in rules under the Securities Exchange Act of 1934 (the 1934 Act). In addition, each member has been designated an Audit Committee Financial Expert. The members of the Personnel & Compensation Committee also satisfy the additional independence requirements set forth in rules under the 1934 Act.
Directors Elected Annually; Majority Voting for Directors
Deltas Certificate of Incorporation and Bylaws provide that all directors are elected annually. Under the Bylaws, a director in an uncontested election is elected by a majority of votes cast (excluding abstentions) at a stockholders meeting at which a quorum is present. In an election for directors where the number of nominees exceeds the number of directors to be elected a contested election the directors are elected by the vote of a plurality of the shares represented at the meeting and entitled to vote on the matter.
Identification and Selection of Nominees for Director
The Corporate Governance Committee recommends to the Board of Directors nominees for election to the Board who have the skills and experience to assist management in the operation of Deltas business. In accordance with Deltas corporate governance principles, the Corporate Governance Committee and the Board of Directors assess potential nominees (including incumbent directors) based on factors such as the individuals business experience, character, judgment, diversity of experience, international background and other matters relevant to the Boards needs and objectives at the particular time. Independence, financial literacy and the ability to devote significant time to Board activities and to the enhancement of the nominees knowledge of Deltas business are also factors considered for Board membership. The Corporate Governance Committee retains third-party search firms from time to time to assist in identifying and preliminarily screening potential Board members.
DELTA AIR LINES, INC. | 9 | GOVERNANCE MATTERS |
The Corporate Governance Committee evaluates potential nominees suggested by stockholders on the same basis as all other potential nominees. To recommend a potential nominee, you may:
| e-mail nonmgmt.directors@delta.com or |
| send a letter addressed to Deltas Legal Department at Delta Air Lines, Inc., Dept. No. 981, 1030 Delta Boulevard, Atlanta, Georgia 30354, Attention: Assistant Corporate Secretary. |
Each potential nominee is reviewed and screened by the Corporate Governance Committee, which decides whether to recommend a candidate for consideration by the full Board.
Audit Committee Financial Experts
The Board of Directors has designated Ms. Reynolds, Mr. Blake, Mr. Brinzo, Mr. Foret, Ms. Franklin and Mr. Rial as Audit Committee Financial Experts. Mr. Easter is expected to join the Audit Committee immediately following the annual meeting and be designated as the Committee chair. The Board of Directors is also expected to designate Mr. Easter as an Audit Committee Financial Expert.
Compensation Committee Interlocks and Insider Participation
None of the members of the Personnel & Compensation Committee is a former or current officer or employee of Delta or has any interlocking relationships as set forth in applicable SEC rules.
Stockholders and other interested parties may communicate with our non-management directors by sending an e-mail to nonmgmt.directors@delta.com. We have established a link to this address on our Investor Relations website. Communications with directors may also be mailed to Deltas Legal Department at the address listed above. Communications will be sent directly to the non-executive Chairman of the Board, as representative of the non-management directors, other than communications pertaining to customer service, human resources, accounting, auditing, internal control and financial reporting matters. Communications regarding customer service and human resources matters will be forwarded for handling by the appropriate Delta department. Communications regarding accounting, auditing, internal control and financial reporting matters will be brought to the attention of the Audit Committee Chair.
During 2014, the Board of Directors met seven times. Each director who served on the Board during 2014 attended at least 75% of the meetings of the Board of Directors and the committees on which he or she served that were held during his or her tenure on the Board. It is the Boards policy that directors are encouraged to attend the annual meeting. All of Deltas directors attended the annual meeting in 2014.
The Board routinely holds executive sessions without the Chief Executive Officer or any other management director. Mr. Carp, who serves as the non-executive Chairman of the Board, presides at these executive sessions. In his role as Chairman of the Board, Mr. Carps responsibilities also include those described below under Board of Directors Leadership Structure.
Board of Directors Leadership Structure
Because we believe operating pursuant to sound governance practices benefits the long-term interests of our stockholders, since 2003 we have chosen to elect an independent, non-executive chairman separate from our Chief Executive Officer. Governance commentators, proxy voting advisory firms, and institutional stockholders generally conclude the separation of the two roles is a best practice. We believe the non-executive Chairman of the Board plays an important governance leadership role that enhances long-term stockholder value. His responsibilities include:
| chairing meetings of non-management directors (executive sessions); |
| presiding at the Annual Stockholders Meeting; |
GOVERNANCE MATTERS | 10 | DELTA AIR LINES, INC. |
| briefing the Chief Executive Officer on issues raised in executive sessions; |
| in collaboration with the Corporate Governance Committee of the Board, committee chairs and the Chief Executive Officer, scheduling Board meetings, setting Board agendas and strategic discussions and providing a review of pre-meeting materials delivered to directors; |
| overseeing Board, committee and senior management evaluations and succession planning; |
| managing the Boards oversight of risks; |
| recommending appropriate governance policies and practices; |
| overseeing the avoidance of conflicts of interests; |
| recommending Board committee and committee chair assignments; |
| facilitating director discussions inside and outside the boardroom, managing the relationship between the Chief Executive Officer and the Board, consulting with the Chief Executive Officer and serving as a counterweight as appropriate; |
| overseeing the process for selecting new Board members; |
| calling meetings of the Board and stockholders; |
| chairing the Corporate Governance Committee; |
| conducting/overseeing the annual evaluation of the Committees and the Board; and |
| carrying out other duties requested by the Chief Executive Officer and the Board as a whole. |
Governance commentators, proxy advisory firms and institutional stockholders advise companies without a separation of the Chief Executive Officer and chairman to elect a lead director having the very same specific responsibilities as our non-executive chairman listed above. The goal of both the non-executive chairman and the lead director is the same to provide engaged directors with the appropriate resources and structure to enhance stockholder value, without delegating all responsibilities to the Chief Executive Officer.
The Board of Directors has established the following committees to assist it in discharging its responsibilities:
Audit Committee
The Audit Committee members are Ms. Reynolds, Chair, Mr. Blake, Mr. Brinzo, Mr. Foret, Ms. Franklin and Mr. Rial. Ms. Reynolds is retiring from the Board immediately following the annual meeting. Mr. Easter is expected to join the Committee immediately after the annual meeting and become the chair of the Committee. The Committee met nine times in 2014. Among other matters, the Committee:
| Appoints (subject to stockholder ratification) our independent auditors; |
| represents and assists the Board in its oversight of: |
| the integrity of our financial statements |
| legal and regulatory matters, including compliance with applicable laws and regulations |
| our independent auditors qualifications, independence and performance |
| the performance of our internal audit department; |
| reviews audits and other work product of the independent auditors and internal audit department; |
| discusses the adequacy and effectiveness of our internal control over financial reporting; |
| oversees our compliance with procedures and processes pertaining to corporate ethics and standards of business conduct; |
DELTA AIR LINES, INC. | 11 | GOVERNANCE MATTERS |
| reviews and, if appropriate, approves or ratifies: |
| possible conflicts of interest involving members of the Board or executive officers |
| transactions that would be subject to disclosure under Item 404 of SEC Regulation S-K; |
| considers complaints concerning accounting, auditing, internal control and financial reporting matters; |
| reviews the enterprise risk management process by which management identifies, assesses and manages Deltas exposure to risk; discusses major risk exposures with management; apprises the Board of Directors of risk exposures and managements actions to monitor and manage risk; and reviews the Companys insurance programs; and |
| focuses on tone at the top and chooses key topics for detailed review. |
Corporate Governance Committee
The Corporate Governance Committee members are Mr. Carp, Chairman, Mr. Blake, Mr. Bostock, Mr. Easter and Ms. Reynolds. The Committee met five times in 2014. Among other matters, the Committee:
| leads the search and recruiting process for new outside directors and identifies and recommends qualified individuals to the Board of Directors for nomination as directors; considers stockholder nominations of candidates for election as directors; and |
| considers, develops and makes recommendations to the Board regarding matters related to corporate governance, including: |
| governance standards |
| qualifications and eligibility requirements for Board members, including director independence standards |
| the Boards size, composition, organization and processes |
| the type, function, size, membership and chairs of Board committees |
| evaluation of the Boards performance |
| legal and regulatory changes in corporate governance |
| political contributions reports. |
Finance Committee
The Finance Committee members are Mr. Mattson, Chairman, Mr. DeWalt, Mr. Donilon, Mr. Easter, Mr. Goode, Mr. Rogers and Mr. Woodrow. Mr. Easter is expected to leave the Committee and become a member of the Audit Committee immediately after the annual meeting. Mr. Rogers is retiring from the Board immediately after the annual meeting. The Committee met seven times in 2014. Among other matters, the Committee:
| reviews and makes recommendations, where appropriate, to the Board regarding: |
| financial planning and financial structure |
| financings and guarantees |
| capital expenditures, including fleet acquisition |
| annual and longer-term operating plans |
| capital structure, including issuances and repurchases of capital stock and other securities |
| risk management practices and policies concerning investments and hedging, both financial and non-financial, including swaps |
| balance sheet strategies |
GOVERNANCE MATTERS | 12 | DELTA AIR LINES, INC. |
| derivatives management, fuel hedging and oversight of Deltas oil and fuel management; and |
| approves commitments, capital expenditures and debt financings and re-financings, subject to certain limits. |
Personnel & Compensation Committee
The Personnel & Compensation Committee members are Mr. DeWalt, Chairman, Mr. Brinzo, Ms. Franklin, Mr. Goode, Mr. Mattson, Mr. Rial and Mr. Woodrow. The Committee met seven times in 2014. Among other matters, the Committee:
| establishes general compensation philosophy and oversees the development and implementation of compensation programs; |
| performs an annual performance evaluation of the Chief Executive Officer and determines and approves the Chief Executive Officers compensation; |
| reviews and approves compensation programs for executive officers and recommends to the Board the compensation of non-employee directors; |
| reviews and regularly approves the management succession plan; |
| makes recommendations to the Board regarding election of officers; and |
| selects, retains, terminates, and approves fees of compensation advisors to the Committee. |
Safety and Security Committee
The Safety and Security Committee members are Mr. Rogers, Chairman, Mr. Bostock, Mr. Carp, Mr. Donilon and Mr. Foret. Mr. Rogers is retiring from the Board immediately after the annual meeting. The Board expects to appoint Mr. Foret as the chair of the Committee and to appoint Mr. Ralph to this Committee upon his election to the Board. The Committee met six times in 2014. Among other matters, the Committee:
| oversees and consults with management regarding customer, employee and aircraft operating safety and security, including related goals, performance and initiatives by: |
| reviewing current and proposed safety and security-related programs, policies and compliance matters |
| reviewing matters with a material effect on Deltas flight safety operations and security |
| establishing and approving annual safety and security goals |
| reviewing the safety and security programs and performance of the Delta Connection carriers |
| reviewing the security of the Companys information technology systems and operations, including defenses against cyber threats to the airline. |
Board Oversight of Risk Management
The Board of Directors has ultimate responsibility to oversee Deltas enterprise risk management program (ERM). The Board discusses risk throughout the year, particularly when reviewing operating and strategic plans and when considering specific actions for approval. Depending on the nature of the risk, the responsibility for oversight of selected risks may be delegated to appropriate Committees of the Board of Directors, with material findings reported to the full Board. Delegations of risk oversight by the Board include:
| The Audit Committee reviews the ERM framework at the enterprise level; reviews managements process for identifying, managing and assessing risk; and oversees the management of risks related to the integrity of the consolidated financial statements, internal control over financial reporting, the internal audit function and related matters. |
DELTA AIR LINES, INC. | 13 | GOVERNANCE MATTERS |
| The Finance Committee oversees the management of risks related to aircraft fuel price and fuel hedging; foreign currency and interest rate hedging; Deltas financial condition and capital structure; its financing, acquisition and investment transactions and related matters. |
| The Personnel & Compensation Committee reviews risks related to management succession and Deltas executive compensation program. |
| The Corporate Governance Committee reviews risks related to Board of Directors succession and Deltas corporate governance matters. |
| The Safety and Security Committee oversees the management of risks related to customer, employee, aircraft and airport operating safety and security and information technology safety and security. |
The Board of Directors receives reports from the committee chairs at regularly scheduled Board meetings. Management reports to the Board and the committees with oversight of specific risks concerning matters such as compliance with regulations, business strategies, proposed changes in laws and regulations and any other matter deemed appropriate by the Board or the committees.
Under Deltas ERM process, management is responsible for setting risk tolerance levels; defining organizational responsibilities for risk management; determining the significant risks to Delta; developing risk mitigation and management strategies, based on Deltas risk tolerance levels; and monitoring the business to determine that risk mitigation activities are in place and operating. Management periodically updates its assessment of risks to Delta as emerging risks are identified.
Deltas internal audit function, which is led by the Vice President Corporate Audit and Enterprise Risk Management, is responsible for supporting and coordinating managements ERM process and activities; documenting risk assessments using a consistent approach; identifying and validating controls to mitigate risk; and reporting on results of risk evaluations. The Vice President Corporate Audit and Enterprise Risk Management reports to the Audit Committee regarding ERM activities.
The Board of Directors believes that Deltas leadership structure, combined with the roles of the Board and its committees, provides the appropriate leadership for effective risk oversight.
GOVERNANCE MATTERS | 14 | DELTA AIR LINES, INC. |
PROPOSAL 1 ELECTION OF DIRECTORS
All Delta Directors are elected annually. At the annual meeting, each director will be elected by the vote of a majority of the votes cast. This means the number of votes cast for a director must exceed 50% of the votes with respect to that director (excluding abstentions). Each director elected will hold office until the next annual meeting of stockholders and the election of his or her successor.
Deltas Bylaws provide that any director not elected by a majority of the votes cast at the annual meeting must offer to tender his or her resignation to the Board of Directors. The Corporate Governance Committee will make a recommendation to the Board of Directors whether to accept the resignation. The Board of Directors will consider the recommendation and publicly disclose its decision within 90 days after the certification of the election results.
The Board of Directors recommends a vote FOR the following nominees:
(1) Richard H. Anderson |
(9) William H. Easter III | |
(2) Edward H. Bastian |
(10) Mickey P. Foret | |
(3) Francis S. Blake |
(11) Shirley C. Franklin | |
(4) Roy J. Bostock |
(12) David R. Goode | |
(5) John S. Brinzo |
(13) George N. Mattson | |
(6) Daniel A. Carp |
(14) Douglas R. Ralph | |
(7) David G. DeWalt |
(15) Sergio A. L. Rial | |
(8) Thomas E. Donilon |
(16) Kenneth B. Woodrow |
All of the nominees, except Douglas R. Ralph, are currently serving on the Board of Directors. The Board of Directors believes each nominee for director will be able to stand for election. If any nominee becomes unable to stand for election, the Board may name a substitute nominee or reduce the number of directors. If a substitute nominee is chosen, the directors designated to vote the proxies will vote FOR the substitute nominee.
Delta, the Air Line Pilots Association, International, the collective bargaining representative for Delta pilots (ALPA), and the Delta Master Executive Council, the governing body of the Delta unit of ALPA (Delta MEC), have an agreement whereby Delta agrees (1) to cause the election to the Board of Directors of a Delta pilot designated by the Delta MEC who is not a member or officer of the Delta MEC or an officer of ALPA (Pilot Nominee); (2) at any meeting of stockholders at which the Pilot Nominee is subject to election, to re-nominate the Pilot Nominee or nominate another qualified Delta pilot designated by the Delta MEC to be elected to the Board of Directors and to use its reasonable best efforts to cause such person to be elected to the Board; and (3) in the event of the Pilot Nominees death, disability, resignation, removal or failure to be elected, to elect promptly to the Board a replacement Pilot Nominee designated by the Delta MEC to fill the resulting vacancy. Pursuant to this provision, the Delta MEC has designated Douglas R. Ralph to be nominated for election to the Board at the annual meeting. If elected, Mr. Ralph would succeed Kenneth C. Rogers, who will retire from the Board after the annual meeting.
The compensation of Mr. Rogers and Mr. Ralph as Delta pilots is determined under the collective bargaining agreement between Delta and ALPA. During 2014, Mr. Rogers received $315,592 in compensation (which includes: $248,216 in flight earnings, $32,876 in shared rewards/profit sharing payments and $34,500 in Delta contributions to a defined contribution plan) and Mr. Ralph received $290,803 in compensation (which includes: $224,937 in flight earnings, $31,366 in shared rewards/profit sharing payments and $34,500 in Delta contributions to a defined contribution plan). As Delta pilots, Mr. Rogers is not and Mr. Ralph will not be separately compensated for their service as a director.
Certain Information About Nominees
Delta believes each nominee has a reputation for integrity, honesty and adherence to high ethical standards; demonstrated business acumen and the exercise of sound judgment; and a track record of service as a leader in
DELTA AIR LINES, INC. | 15 | PROPOSAL 1 ELECTION OF DIRECTORS |
business or governmental settings. Delta also believes it is important for directors and nominees for director to have experience in one or more of the following areas:
| As a chief executive or member of senior management of a large public or private company or in a leadership position in a governmental setting |
| Airline or other transportation industries |
| Marketing |
| Financial and/or accounting |
| Risk management |
| Energy industry |
| International business |
| Information technology expertise |
| Global security and government affairs experience |
| As a board member of a large public or private company |
The Board of Directors fixed the size of the Board at sixteen members effective at the annual meeting. The following section provides information about each nominee for director, including the experience that led the Board of Directors to conclude the nominee should serve as a director of Delta.
Richard H. Anderson | Age 60 | Joined Deltas Board April 30, 2007 |
Mr. Anderson has been Chief Executive Officer of Delta since 2007.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Anderson should serve as a director include Mr. Andersons experience serving as the Chief Executive Officer of Delta and Northwest Airlines, Inc. and over 20 years of business and operational experience in the airline industry. He has also served as a senior executive of a Fortune 20 healthcare company, as well as on the board of directors of public companies other than Delta.
| |
Directorships: |
Medtronic, Inc.; Cargill, Inc.
| |
Affiliations: |
Member, Board of Airlines for America; Member, Board of International Air Transport Association; Chair, Board of Metro Atlanta Chamber |
Edward H. Bastian | Age 57 | Joined Deltas Board February 5, 2010 |
Mr. Bastian has been President of Delta since 2007. He was President of Delta and Chief Executive Officer of Northwest Airlines, Inc. from 2008 to 2009. Mr. Bastian was President and Chief Financial Officer of Delta from 2007 to 2008; Executive Vice President and Chief Financial Officer of Delta from 2005 to 2007; Chief Financial Officer of Acuity Brands from June 2005 to July 2005; Senior Vice President Finance and Controller of Delta from 2000 to 2005 and Vice President and Controller of Delta from 1998 to 2000.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Bastian should serve as a director include Mr. Bastians over ten years of experience as a Delta executive, including serving as Deltas President, Deltas Chief Restructuring Officer during its Chapter 11 bankruptcy proceeding and Northwest Airlines Inc.s Chief Executive Officer after the merger. Mr. Bastians accounting and finance background provides financial and strategic expertise to the Board of Directors.
| |
Directorships: |
GOL Linhas Aéreas Inteligentes, S.A.; Grupo Aeroméxico, S.A.B. de C.V.
| |
Affiliations: |
Member, Board of Woodruff Arts Center |
PROPOSAL 1 ELECTION OF DIRECTORS | 16 | DELTA AIR LINES, INC. |
Francis S. Blake | Age 65 | Joined Deltas Board July 25, 2014 |
Mr. Blake served as the Chairman of The Home Depot from 2007 until his retirement in February 2015. He was the CEO of The Home Depot from 2007 to November 2014. Prior to his appointment to this position, he served as Vice Chairman of the Board of Directors and Executive Vice President of The Home Depot. He joined The Home Depot in 2002 as Executive Vice PresidentBusiness Development and Corporate Operations. Mr. Blake was previously the deputy secretary for the U.S. Department of Energy and served in a variety of executive positions at General Electric Company, including as Senior Vice President, Corporate Business Development in charge of all worldwide mergers, acquisitions and dispositions worldwide.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Blake should serve as a director include his experience as the Chairman and Chief Executive Officer of a complex retail organization and prior leadership positions in business and government. He has also served on boards of directors of public companies in the energy industry. At other public companies, Mr. Blake has experience as a member of the audit committee.
| |
Committees: |
Audit; Corporate Governance
| |
Directorships: |
Procter & Gamble; The Southern Company (2004-2009) |
Roy J. Bostock | Age 74 | Joined Deltas Board October 29, 2008 |
Mr. Bostock has served as non-executive Vice Chairman of Deltas Board of Directors since 2008 and was Chairman of the Board of Yahoo! Inc. from 2008 through 2012. He served as non-executive Chairman of Northwest Airlines Corporation following its emergence from bankruptcy in 2007 until the merger of Delta and Northwest in 2008. He has also served as a principal of Sealedge Investments, LLC, a diversified private investment company, since 2002. Mr. Bostock was Chairman of B/Com3 from 2000 to 2002, and Chairman and Chief Executive Officer of the McManus Group from 1996 to 2000. Prior to 1996, Mr. Bostock served in a variety of senior executive positions in the advertising agency business, including Chairman and Chief Executive Officer of DArcy Masius Benton & Bowles, Inc. from 1990 to 1996.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Bostock should serve as a director include the business and marketing expertise that Mr. Bostock brings to the Board of Directors, having served in senior executive positions in the advertising industry for many years. He has also served on boards of directors of public companies in the airline, financial services and internet services industries, including as chairman of the board of two companies. At other public companies, Mr. Bostock has experience as a member of the governance committees of two boards and the risk committee of another board.
| |
Committees: |
Corporate Governance; Safety and Security
| |
Directorships: |
Morgan Stanley (2005-2013); Northwest Airlines Corporation (2005-2008); Yahoo! Inc. (2003-2012) |
John S. Brinzo | Age 73 | Joined Deltas Board April 30, 2007 |
Mr. Brinzo was Chairman of the Board of Directors of Cliffs Natural Resources, Inc. (formerly known as Cleveland-Cliffs Inc.) from 2000 until his retirement in 2007. He also served as President and Chief Executive Officer of Cliffs Natural Resources, Inc. from 1997 until 2005, and as Chairman and Chief Executive Officer from 2000 until his retirement as Chief Executive Officer in 2006, and as Chairman in 2007.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Brinzo should serve as a director include Mr. Brinzos service as the Chairman, Chief Executive Officer and Chief Financial Officer of a public company, where his career spanned more than 35 years, as well as his extensive background in finance and his experience serving on the audit committees of the boards of directors of three other public companies and the compensation committee of one other public company.
|
DELTA AIR LINES, INC. | 17 | PROPOSAL 1 ELECTION OF DIRECTORS |
Committees: |
Audit; Personnel & Compensation
| |
Directorships: |
AK Steel Holding Corporation; Brinks Home Security Holdings, Inc. (2008-2010); Alpha Natural Resources, Inc. (2006-2009)
| |
Affiliations: |
Chairman, Business Advisory Council, School of Business, Kent State University |
Daniel A. Carp | Age 67 | Joined Deltas Board April 30, 2007 |
Mr. Carp has served as non-executive Chairman of Deltas Board of Directors since 2007. He was Chief Executive Officer and Chairman of the Board of Eastman Kodak Company from 2000 to 2005. Mr. Carp was President of Eastman Kodak Company from 1997 to 2003.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Carp should serve as a director include Mr. Carps substantial business experience as Chairman and Chief Executive Officer of a multinational public company in the consumer goods and services sector, where he was employed for over 35 years. As a member of the board of directors of large public companies other than Delta, Mr. Carp has experience on audit, compensation, finance and governance committees.
| |
Committees: |
Corporate Governance (Chair); Safety and Security
| |
Directorships: |
Norfolk Southern Corporation; Texas Instruments Inc.; Liz Claiborne Inc. (2006-2009) |
David G. DeWalt | Age 51 | Joined Deltas Board November 22, 2011 |
Mr. DeWalt has been the Chief Executive Officer of FireEye, Inc., a global network cyber security company, since November 2012 and Chairman of its board since June 2012. Mr. DeWalt was President and Chief Executive Officer of McAfee, Inc., a security technology company, from 2007 until 2011 when McAfee, Inc. was acquired by Intel Corporation. From 2003 to 2007, Mr. DeWalt held executive positions with EMC Corporation, a provider of information infrastructure technology and solutions, including serving as Executive Vice President and President-Customer Operations and Content Management Software.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. DeWalt should serve as a director include Mr. DeWalts substantial expertise in the information technology security industry and his strategic and operational experience as the current Chief Executive Officer of FireEye, Inc. and former Chief Executive Officer of McAfee, Inc. As a member of the board of directors of public companies other than Delta, Mr. DeWalt has served on the audit and compensation committees.
| |
Committees: |
Personnel & Compensation (Chair); Finance
| |
Directorships: |
FireEye, Inc.; Jive Software, Inc. (2011-2013); Polycom Inc. (2005-2013)
| |
Affiliations: |
National Security & Technology Advisory Committee |
Thomas E. Donilon | Age 59 | Joined Deltas Board February 20, 2015 |
Mr. Donilon is a partner and vice chair of the international law firm of OMelveny & Myers. Prior to rejoining OMelveny in 2014, Mr. Donilon served in the administration of President Barack Obama, most recently as national security advisor. In that capacity, he oversaw the U.S. National Security Council staff, chaired the cabinet-level National Security Principals Committee, and was responsible for the coordination and integration of the administrations foreign policy, intelligence and military efforts. Mr. Donilon also served as the Presidents personal emissary to a number of world leaders. Over the past three decades, Mr. Donilon has worked closely with and advised two other U.S. presidents.
PROPOSAL 1 ELECTION OF DIRECTORS | 18 | DELTA AIR LINES, INC. |
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Donilon should serve as a director include his extensive experience and unique expertise and insight into global security and international strategic matters, his service at the highest levels of the U.S. government and his role as a legal advisor to public company boards and a range of other sophisticated business clients.
| |
Committees: |
Finance; Safety and Security
| |
Affiliations: |
Distinguished Fellow, Council on Foreign Relations; Non-resident Senior Fellow; Harvard Kennedy Schools Belfer Center for Science and International Affairs; Distinguished Fellow, Asia Society Policy Institute; Honorary Trustee at the Brookings Institution; Member, Aspen Strategy Group; Member, the Trilateral Commission; Member, the Center on Global Energy Policy Advisory Board at Columbia University; Member, U.S. Defense Policy Board; Member, Central Intelligence Agencys External Advisory Board. |
William H. Easter III | Age 65 | Joined Deltas Board December 3, 2012 |
Mr. Easter was Chairman, President and CEO of DCP Midstream LLC (formerly Duke Energy Field Services, LLC) from 2004 until his retirement in 2008. Previously employed by ConocoPhillips for 32 years, Mr. Easter served as Vice President of State Government Affairs from 2002 to 2004 and as General Manager of the Gulf Coast Refining, Marketing and Transportation Business Unit from 1998 to 2002. Since his retirement from DCP Midstream, LLC, Mr. Easter has been involved in private investments.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Easter should serve as a director include over 36 years of leadership and operational experience in natural gas, crude oil and refined product supply, transportation, refining and marketing with ConocoPhillips and DCP Midstream LLC. Additionally, Mr. Easter has experience as a member of the board of directors of other public companies where he served on the audit, corporate governance, compensation and finance committees.
| |
Committees: |
Corporate Governance; Finance (expected to move from Finance to Audit immediately after the annual meeting and become chair of Audit)
| |
Directorships: |
BakerHughes, Inc.; Concho Resources, Inc.; Sunoco, Inc. (2011-2012)
| |
Affiliations: |
Member, Board of Memorial Hermann Hospital System, Houston, Texas |
Mickey P. Foret | Age 69 | Joined Deltas Board October 29, 2008 |
Mr. Foret was Executive Vice President and Chief Financial Officer of Northwest Airlines, Inc. from 1998 to 2002, and also served as Chairman and Chief Executive Officer of Northwest Cargo from 1999 to 2002. Mr. Foret served as President and Chief Operating Officer of Atlas Air, Inc. from 1996 to 1997 and as Executive Vice President and Chief Financial Officer of Northwest Airlines, Inc. from 1993 to 1996.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Foret should serve as a director include Mr. Forets
experience in the airline industry, where he held numerous senior executive positions for over 35 years, particularly in the finance area. He served as Chief Financial Officer of Northwest Airlines, Inc. for seven years. Mr. Foret has also served on
the audit, compensation, finance and governance committees of the board of directors of other public companies.
| |
Committees: |
Audit; Safety and Security (expected to become Chair immediately after the annual meeting)
| |
Directorships: |
SpartanNash; URS Corporation (2003-2014); Nash Finch Company (2005-2013); ADC Telecommunications, Inc. (2003-2010); Northwest Airlines Corporation (2007-2008) |
DELTA AIR LINES, INC. | 19 | PROPOSAL 1 ELECTION OF DIRECTORS |
Shirley C. Franklin | Age 69 | Joined Deltas Board July 20, 2011 |
Ms. Franklin has been Chair of the Board and Chief Executive Officer of Purpose Built Communities, Inc., a national non-profit organization established to transform struggling neighborhoods into sustainable communities, since 2011. Since 2013, Ms. Franklin has also served as the Barbara Jordan Visiting Professor at the University of Texas-Austin, LBJ School of Public Affairs. Ms. Franklin served as Mayor of the City of Atlanta from 2002 to 2010 and served in cabinet positions in the City of Atlanta, including Chief of Operations and Chief Administrative Officer, from 1978 to 1991, prior to her election as mayor in 2001.
Experience: |
The qualifications that led the Board of Directors to conclude that Ms. Franklin should serve as a director include Ms. Franklins extensive executive leadership experience, business experience and financial expertise. She has over 38 years of leadership experience in various positions in city government and other organizations, including her eight years as Mayor of Atlanta. She has also served on the audit committee of a board of directors of a public company other than Delta.
| |
Committees: |
Audit; Personnel & Compensation
| |
Directorships: |
Mueller Water Products, Inc.
| |
Affiliations: |
Atlanta Regional Commission on Homelessness (Co-Chair); National Center for Civil and Human Rights (Co-Chair); United Way of Metropolitan Atlanta Endowment Foundation; The Volcker Alliance |
David R. Goode | Age 74 | Joined Deltas Board April 22, 1999 |
Mr. Goode was Chairman of the Board of Norfolk Southern Corporation from 1992 until his retirement in 2006; Chairman and Chief Executive Officer of that company from 2004 through 2005; and Chairman, President and Chief Executive Officer of that company from 1992 to 2005. He held other executive officer positions with Norfolk Southern Corporation from 1985 to 1992.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Goode should serve as a director include Mr. Goodes over 25 years of experience in the transportation industry, including many years as Chairman, Chief Executive Officer and President of a large public railroad company. As a member of the board of directors of other public companies, Mr. Goode served on compensation committees.
| |
Committees: |
Finance; Personnel & Compensation
| |
Directorships: |
Caterpillar Inc. (1993-2013); Texas Instruments Inc. (1996-2011) |
George N. Mattson | Age 49 | Joined Deltas Board October 1, 2012 |
Mr. Mattson is a private investor focused on acquiring middle market industrial businesses. Mr. Mattson was a partner and co-head of the Global Industrials Group in Investment Banking at Goldman, Sachs & Co. from 2002 through August 2012, where he served in a variety of positions from 1994 to 2002. Mr. Mattson was an Associate at Credit Suisse First Boston from 1993 to 1994, and he held various sales and marketing positions at IBM from 1987 to 1993.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Mattson should serve as a director include Mr. Mattsons experience in the areas of mergers and acquisitions, corporate finance and capital markets. In addition, Mr. Mattson has knowledge of the airline industry and other global industries acquired during his 18 years at Goldman, Sachs & Co., including as co-head of the Global Industrials Group in Investment Banking, which had responsibility for a diverse set of industry sectors, including companies in the transportation industry.
| |
Committees: |
Finance (Chair); Personnel & Compensation
| |
Affiliations: |
Member, Board of The Boys Club of New York; Member, Board of Visitors of the Pratt School of Engineering at Duke University |
PROPOSAL 1 ELECTION OF DIRECTORS | 20 | DELTA AIR LINES, INC. |
Douglas R. Ralph | Age 60 |
Mr. Ralph has been a Delta pilot since 1991 and is currently a pilot of a Boeing 767ER aircraft. He was an active duty pilot in the U.S. Marine Corps for six years prior to joining Delta. He was then a pilot in the U.S. Naval Reserves for 17 years, retiring with the rank of Captain in 2001. Mr. Ralph has been designated by the Delta MEC as the Pilot Nominee. Mr. Ralph is also the Chair of the Investor Relations Committee of the Delta MEC and a member of the Government Affairs Committee of the Delta MEC.
Experience: |
As a pilot designated by the Delta MEC to serve on the Board of Directors, Mr. Ralph provides a unique perspective into the airline industry and related labor relations matters.
| |
Committees: |
Safety & Security; Finance (expected appointments upon election to the Board) |
Sergio A. L. Rial | Age 54 | Joined Deltas Board December 9, 2014 |
Mr. Rial is Chairman of the Board of Banco Santander Brasil, the largest international financial conglomerate in Brazil and a member of Santander Group headquartered in Spain. From 2012 to February 2015, Mr. Rial was Chief Executive Officer of Marfrig Global Foods, a multinational company based in Brazil with operations in the food and food service sectors in Brazil and 15 other countries. Prior to joining Marfrig in 2012, Rial served in various leadership capacities with Cargill, Inc., a Minneapolis-based global provider of food, agriculture, financial and industrial products and services. At Cargill, Rial served as Chief Financial Officer from 2009 to 2011 and Executive Vice President from 2011 to 2012. He was also a member of Cargills board of directors from 2010 to 2012. From 2002 to 2004, Rial was a senior managing director and co-head of the Investment Banking Division at Bear Stearns & Co. in New York after serving at ABN AMRO Bank for 18 years.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Rial should serve as a director include his experience as a chief executive officer in global business, particularly in the key market of Latin America, and his extensive financial experience as a chief financial officer of a global corporation. He has also served on boards of directors of public companies in the food and agricultural industry.
| |
Committees: |
Audit; Personnel & Compensation
| |
Directorships: |
Cyrela Brazil Realty S.A.; The Mosaic Company (2010-2011) |
Kenneth B. Woodrow | Age 70 | Joined Deltas Board July 1, 2004 |
Mr. Woodrow was Vice Chairman of Target Corporation from 1999 until his retirement in December 2000. He served as President of Target Corporation from 1994 until 1999 and held other management positions in that company from 1971 until 1994.
Experience: |
The qualifications that led the Board of Directors to conclude that Mr. Woodrow should serve as a director include Mr. Woodrows nearly 30 years of experience in marketing, operations and finance at a public company with a large number of general merchandise retail stores throughout the United States. Mr. Woodrow held positions during that time that included Vice Chairman, President and Chief Financial Officer. Mr. Woodrow has experience as a member of the board of directors of two other public companies where he served on audit, finance and governance committees.
| |
Committees: |
Finance; Personnel & Compensation
| |
Directorships: |
Visteon Corporation (2004-2010); Duane Reade, Inc. (2002-2004)
| |
Affiliations: |
Former Chairman of the Board and Current Life Trustee, Hamline University |
DELTA AIR LINES, INC. | 21 | PROPOSAL 1 ELECTION OF DIRECTORS |
BENEFICIAL OWNERSHIP OF SECURITIES
Directors, Nominees for Director and Executive Officers
The following table sets forth the number of shares of Delta common stock beneficially owned as of April 15, 2015, by each director and director-nominee, each person named in the Summary Compensation Table in this proxy statement, and all directors and executive officers as a group. Unless otherwise indicated by footnote, the owner exercises sole voting and investment power over the shares.
Name of Beneficial Owner |
Amount and Nature of Beneficial Ownership (1) |
|||
Directors and Nominees: |
||||
Richard H. Anderson |
3,390,731 | (2) | ||
Edward H. Bastian |
1,352,732 | (2)(3) | ||
Francis S. Blake |
9,390 | |||
Roy J. Bostock |
96,514 | (2)(4) | ||
John S. Brinzo |
59,413 | |||
Daniel A. Carp |
54,603 | |||
David G. DeWalt |
37,240 | |||
Thomas E. Donilon |
3,380 | |||
William H. Easter III |
33,690 | |||
Mickey P. Foret |
69,318 | (2) | ||
Shirley C. Franklin |
36,190 | |||
David R. Goode |
69,413 | |||
George N. Mattson |
32,180 | |||
Douglas R. Ralph |
0 | |||
Paula Rosput Reynolds |
73,313 | |||
Sergio A.L. Rial |
3,460 | |||
Kenneth C. Rogers |
4,159 | |||
Kenneth B. Woodrow |
69,413 | |||
Named Executive Officers: |
||||
Glen W. Hauenstein |
397,478 | (2) | ||
Paul A. Jacobson |
534,322 | (2)(5) | ||
W. Gil West |
125,775 | (2) | ||
Directors and Executive Officers as a Group (25 Persons) |
7,186,856 | (2) |
(1) | Each of the individuals listed in the table and the directors and executive officers as a group beneficially owned less than 1% of the shares of common stock outstanding on April 15, 2015. |
(2) | Includes the following number of shares of common stock which a director or named executive officer has the right to acquire upon the exercise of stock options that were exercisable as of April 15, 2015, or that will become exercisable within 60 days after that date: |
Name |
Number of Shares | |||
Richard H. Anderson |
2,480,071 | |||
Edward H. Bastian |
1,000,611 | |||
Roy J. Bostock |
9,146 | |||
Mickey P. Foret |
9,146 | |||
Glen W. Hauenstein |
204,100 | |||
Paul A. Jacobson |
234,000 | |||
Directors & Executive Officers as a Group |
4,286,397 |
(3) | Includes 2,000 shares held by a family foundation, of which Mr. Bastian and his wife are the directors. |
(4) | Includes 23,618 shares held by a family foundation, of which Mr. Bostock, his wife and children and their spouses are directors. |
(5) | Includes 10,000 shares held by a family foundation, of which Mr. Jacobson and his wife are the trustees. |
BENEFICIAL OWNERSHIP OF SECURITIES | 22 | DELTA AIR LINES, INC. |
Beneficial Owners of More than 5% of Voting Stock
The following table provides information about the following entity known to Delta to be the beneficial owner of more than five percent of Deltas outstanding common stock.
Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership |
Percentage of Class on April 15, 2015 |
||||||
The Vanguard Group |
41,982,553 | (1) | 5.14 | % | ||||
100 Vanguard Blvd |
||||||||
Malvern, PA 19355 |
(1) | Based on Schedule 13G/A filed February 10, 2015, in which The Vanguard Group reported that, as of December 31, 2014, it had sole voting power over 1,212,755 of these shares, sole dispositive power over 40,797,198 of these shares, and shared dispositive power over 1,185,355 of these shares. |
DELTA AIR LINES, INC. | 23 | BENEFICIAL OWNERSHIP OF SECURITIES |
Compensation Discussion and Analysis
This section of the proxy statement provides an overview and analysis of our executive compensation program. It discusses our executive compensation philosophy and objectives, the administration of the executive compensation program, and the material elements of the program. It also reviews the actions taken by the Personnel & Compensation Committee of the Board of Directors (the P&C Committee) in 2014 and the compensation of our named executive officers, who were:
| Richard H. Anderson Chief Executive Officer |
| Edward H. Bastian President |
| Glen W. Hauenstein Executive Vice President & Chief Revenue Officer |
| Paul A. Jacobson Executive Vice President & Chief Financial Officer |
| W. Gil West Executive Vice President & Chief Operating Officer |
Our performance in 2014. Delta had a successful 2014, with strong financial results, continued revenue momentum, excellent operational performance, and investments in network, airports, fleet and technology. The following key accomplishments in 2014 helped make Delta the carrier of choice for passengers and position the Company for further success in 2015:
| Strong financial results* |
| Excluding special items, earned pre-tax income of $4.5 billion, an increase of 70% over 2013 and Deltas fifth consecutive year of solid profitability, with 4.2 points of pre-tax margin expansion. |
| Free cash flow of $3.7 billion and the return of $1.35 billion to stockholders through dividends and share repurchases. |
| Reduced adjusted net debt to $7.3 billion, a $2.1 billion reduction from 2013 and an overall $9.7 billion reduction from 2009. |
| Generated over 20% return on invested capital, the fifth year in a row we had returns that met or exceeded our cost of capital. |
| Continued revenue momentum |
| Expanded operating revenue by $2.6 billion to $40.4 billion, a 7% increase over 2013. |
| Grew passenger unit revenue 3.0% and generated a unit revenue premium relative to the industry for the fourth year in a row. |
| Excellent operating performance |
| Maintained strong operating performance with an on-time arrival rate of 84.2%, a flight completion factor of 99.2% achieving a record 95 days of zero cancellations and continued our 1st place performance in Department of Transportation (DOT) customer complaints among the major network carriers. |
| Based on DOT measures, these results put Delta at the top of the industry in operational reliability and customer service for major network carriers. |
* See Supplemental Information about Financial Measures at the end of this proxy statement for a reconciliation of non-GAAP financial measures to the corresponding GAAP financial measures, and the reasons we use non-GAAP financial measures. On a GAAP basis for 2014, pre-tax income was $1.1 billion and debt and capital lease obligations were $9.8 billion.
EXECUTIVE COMPENSATION | 24 | DELTA AIR LINES, INC. |
| Investments in network, airports, fleet and technology |
| Began our joint venture with Virgin Atlantic, increasing our presence at Londons Heathrow Airport. |
| In New York, we are renovating and expanding our facilities at LaGuardia to support our expanded domestic operations and we opened the expanded and thoroughly enhanced Terminal 4 at New Yorks JFK International Airport and announced an additional expansion of Terminal 4. |
| Focused on growing Seattle into a major international gateway, with expanded service and investments in airport facilities. |
| Continued our fleet restructuring to replace 50-seat regional jets and other older, less cost effective aircraft with newer, more efficient Boeing 737-900, Boeing 717 and CRJ-900 aircraft; announced plans to purchase 50 new Airbus aircraft. |
| Continued to make significant functionality and performance improvements to delta.com and upgraded our award-winning mobile applications to add more customer-focused functions, such as baggage tracking and enhanced mobile check-in. |
| Other company highlights |
| Received recognition from leading organizations and publications, including being named Air Transport Worlds 2014 Airline of the Year and, for the fourth time in five years, Fortunes Most Admired Airline; won numerous airline industry awards sweeping the major corporate travel surveys, including Business Travel News, Travel Weekly and TravelAge West. |
| Recognized as a national leader in our commitment to anti-human trafficking efforts and provided training to all customer-facing employees to help identify and report suspected instances of human trafficking. |
Our employee commitment. Deltas employees are critical to the Companys success. Our strong financial, operational and customer service results in 2014 would not have been possible without the dedication and determination of our employees. During 2014, we continued our commitment to promoting a culture of open, honest and direct communications, making Delta a great place to work, and building an environment that encourages diversity, integrity and respect. Key actions in 2014 include:
| Paying over $1 billion under Deltas broad-based profit sharing program (the Profit Sharing Program) in recognition of the achievements of our employees in meeting Deltas financial targets for the year, providing each eligible employee with a payout of 16.58% of eligible earnings. |
| Awarding $84 million under Deltas broad-based shared rewards program (the Shared Rewards Program) based on the hard work of our employees in meeting on-time arrival, baggage handling and flight completion factor performance goals during 2014. |
| Contributing almost $1.5 billion to Deltas broad-based defined contribution and defined benefit retirement plans, including $250 million in excess contributions to our defined benefit plans. |
| Implementing base salary increases for our frontline and merit employees in April 2014. |
| Investing over $9 billion in our people, which includes salaries, pension funding, health insurance, 401(k) contributions, Profit Sharing Program, Shared Rewards Program, life insurance, disability and survivor benefits, travel benefits and training. |
Pay for performance. Pay for performance is the foundation of our executive compensation philosophy. Our executive compensation program places a substantial portion of total compensation for 2014 at risk: 95% of our Chief Executive Officers and 89% of our other named executive officers total compensation. Furthermore, the majority of total compensation is paid in the form of Delta stock, which, together with our stock ownership and retention guidelines, aligns the interests of management to those of stockholders. We believe our stockholders recognize this alignment as shown by the significant approval of our executive compensation program through an advisory vote at our 2012, 2013 and 2014 annual meetings.
DELTA AIR LINES, INC. | 25 | EXECUTIVE COMPENSATION |
2014 Compensation Mix (at target)
* | Represents At-Risk Compensation |
The P&C Committee sets stretch performance goals under our annual and long-term incentive plans to drive Deltas business strategy and to deliver value to our stockholders. Consistent with these principles:
| The vast majority of the compensation opportunity for our executive officers is earned contingent upon Deltas achieving its financial, operational and customer services goals and stock price performance. |
| Based on our strong performance in 2014, we paid out 193.13% of target under our annual incentive plan and 200% of target under the one-time Transition Award Program. |
| The P&C Committee designs our incentive plans to closely align the interests of management with frontline employees by using many of the same financial and operational performance measures in both our executive and broad-based employee compensation programs. If there is no payout under Deltas broad-based employee Profit Sharing Program for the year: |
| There will be no payment under the annual incentive plans financial performance measure. |
| Any payment to executive officers for other performance measures may not exceed the target level. |
| All payments will be made in restricted stock rather than in cash, which will not vest until there is a subsequent profit sharing payment. |
The Profit Sharing Program paid out a record $1.085 billion for 2014.
2014 compensation decisions. The P&C Committee reviews our executive compensation program annually. In 2014, few changes were made to the program. These changes are described in this Compensation Discussion and Analysis.
Corporate governance and compensation initiatives. Our executive compensation program reflects corporate governance policies and compensation practices that are transparent, consistent with best practices and aligned with the interests of our stockholders, customers and employees.
EXECUTIVE COMPENSATION | 26 | DELTA AIR LINES, INC. |
The executive compensation practices we consider instrumental in driving Company performance while mitigating risk, as well as practices we avoid, are illustrated in the following chart:
Corporate Governance Policies and Other Practices: | Compensation Programs Not Offered | |
Compensation clawback policy applicable to all officers
Stock ownership and retention guidelines for executive officers and directors
Equity award grant policy that establishes objective, standardized criteria for the timing of the grant of equity awards
Double trigger vesting of incentive awards upon a change in control
Anti-hedging and anti-pledging policy
Equity compensation policy that prohibits repricing or cash buyouts of stock options and stock appreciation rights and requires a one-year minimum vesting period for performance-based awards
Full disclosure of incentive plan performance measures
Engagement with institutional investors regarding our executive compensation program
|
Excise tax reimbursement for payments made in connection with a change in control
Tax reimbursement for several officer benefits, including supplemental life insurance and home security services
Loss on sale on residence relocation protection for named executive officers
Employment contracts
Supplemental executive retirement plans, company cars, club memberships, private jet travel for personal use or other significant perquisites |
To further align our executive compensation program with best practices, in February 2015, the P&C Committee amended the Delta Air Lines 2007 Performance Compensation Plan to prohibit share recycling with respect to stock options and stock appreciation rights.
Executive Compensation Philosophy and Objectives
Our executive compensation philosophy and objectives are directly related to our business strategy. In 2014 our primary business goals included maintaining top-tier financial and operational performance; reducing our non-fuel costs; controlling our fuel expense; increasing profitable revenue; and earning and maintaining customer loyalty.
To achieve these goals, the P&C Committee continued the executive compensation philosophy and objectives from the previous year, concluding this approach remained important to deliver value to stockholders, customers and employees. Our principle objectives are to promote a pay for performance culture which:
| Places a substantial majority of total compensation at risk and utilizes stretch performance measures that provide incentives to deliver value to our stockholders. As discussed below, the payout opportunities for executive officers under our annual and long-term incentive plans depend on Deltas financial, operational and customer service performance as well as the price of our common stock. |
| Closely aligns the interests of management with frontline employees by using many of the same performance measures in both our executive and broad-based compensation programs. Consistent with this objective, the goals that drive payouts to frontline employees under our broad-based Profit Sharing and Shared Rewards Programs are some of the metrics included in our annual incentive plan. |
| Provides compensation opportunities that assist in motivating and retaining existing talent and attracting new talent to Delta when needed. |
DELTA AIR LINES, INC. | 27 | EXECUTIVE COMPENSATION |
At our 2014 annual meeting, we asked stockholders for a non-binding advisory vote to approve the 2013 compensation of our named executive officers as disclosed in the prior years proxy statement, which we referred to as a say on pay advisory vote.
Similar to previous years, the holders of approximately 98% of the shares represented and entitled to vote at the 2014 annual meeting voted for approval of the compensation of our named executive officers. We believe our stockholders continue to confirm our executive compensation philosophy, policies and programs. The P&C Committee took these results into account by continuing to emphasize our pay for performance philosophy by utilizing stretch performance measures that provide incentives to deliver value to our stockholders.
Administration of the Executive Compensation Program
The following table summarizes the roles and responsibilities of the key participants related to the executive compensation program.
Key Participants | Role and Responsibilities | |
P&C Committee |
The P&C Committee oversees the development of, reviews and approves the executive compensation program. In this role, the P&C Committee:
Approves Deltas executive compensation philosophy and objectives
Ensures that Deltas executive compensation program is designed to link pay with Company performance
Approves the peer group used to assess the executive compensation program
Determines the design and terms of the annual and long-term incentive compensation plans
Establishes the compensation of the CEO and other executive officers
Performs an annual evaluation of the CEO
Reviews and advises the Board of Directors regarding management succession planning
Operates under a written charter that requires the P&C Committee to consist of three or more directors. Each member must:
be independent under NYSE listing standards and Deltas independence standards
qualify as a non-employee director under SEC rules
be an outside director under Section 162(m) of the Internal Revenue Code
Retains, terminates and approves the fees of executive compensation consultant and conducts independence assessments of all executive compensation advisors
Meets regularly in executive session without management |
EXECUTIVE COMPENSATION | 28 | DELTA AIR LINES, INC. |
Key Participants | Role and Responsibilities | |
Compensation Consultant |
In 2014, after considering the six factors provided under the NYSE listing standards and Item 407(e)(3)(iii) of SEC Regulation S-K, the P&C Committee retained Meridian Compensation Partners, LLC (Meridian) as its executive compensation consultant. In this role, Meridian:
Provides advice regarding:
Deltas executive compensation strategy and programs
the compensation of the CEO and other executive officers
the selection of the peer group used to assess the executive compensation program
general compensation program design
the impact of regulatory, tax, and legislative changes on Deltas executive compensation program
executive compensation trends and best practices
the compensation practices of competitors
Conducts risk assessments with respect to the executive compensation program
Meets regularly with the P&C Committee in executive session without management
Provides no other services to Delta
May work directly with management on behalf of the P&C Committee but this work is always under the control and supervision of the P&C Committee
The P&C Committee considered Meridians advice when determining executive compensation plan design and award levels in 2014.
| |
Management |
Under the supervision of the P&C Committee, Deltas human resources department is responsible for the ongoing administration of the executive compensation program.
The Executive Vice President & Chief Human Resource Officer and her staff serve the P&C Committee and, in cooperation with the compensation consultant, prepare proposed compensation programs and policies for review by the P&C Committee at the request of the P&C Committee and the CEO
The following individuals also are involved in the administration of our executive compensation program:
The CEO makes recommendations to the P&C Committee regarding the compensation of executive officers other than himself
The Chief Financial Officer and his staff evaluate the financial implications of executive compensation proposals and financial performance measures in incentive compensation arrangements
The Chief Legal Officer and his staff evaluate the legal implications of executive compensation proposals and prepare plan and program documents
The Vice President Corporate Audit and Enterprise Risk Management confirms the proposed payouts to executive officers under our annual and long-term incentive plans are calculated correctly and comply with the terms of the applicable performance-based plan
|
DELTA AIR LINES, INC. | 29 | EXECUTIVE COMPENSATION |
The P&C Committee considers a number of factors, including competitive market data, internal equity, role and responsibilities, business and industry conditions and individual experience and performance in determining executive compensation. When making compensation decisions, the P&C Committee also reviews compensation tally sheets prepared by the compensation consultant. The tally sheets detail the total compensation and benefits for each executive officer, including the compensation and benefits the officer would receive under hypothetical termination of employment scenarios.
Comparative Market Data; Peer Group
In 2011, the P&C Committee modified the peer group it uses for executive compensation purposes to reflect Deltas increased size, complexity, global presence and business. This custom peer group consists of three major U.S. airlines and eighteen other companies with revenue and other business characteristics similar to Delta in the hotel/leisure, transportation/distribution, machinery/aerospace/defense, and retail industries. The industries selected have aspects of operations that are similar to Delta. In expanding the peer group beyond the airline industry, the P&C Committee had considered the ongoing merger activity in the industry and recognized that the number of comparably-sized airlines is too small to provide stable and reliable market data for executive compensation purposes. In addition, Delta competes for management talent with companies both inside and outside the airline industry, and the other major airlines use broader industry peer groups to assess their executive compensation programs. The P&C Committee continued to be satisfied with the composition of the custom peer group and made no changes to it in 2014.
EXECUTIVE COMPENSATION | 30 | DELTA AIR LINES, INC. |
The companies in the custom peer group are:
Company Name | Revenue(1) ($) |
Market Capitalization(2) ($) |
International (%) |
|||||||||
Airlines |
| |||||||||||
American Airlines Group Inc. |
42,650 | 38,467 | 40 | |||||||||
Southwest Airlines Co. |
18,605 | 28,724 | 1 | |||||||||
United Continental Holdings, Inc. |
38,901 | 24,687 | 43 | |||||||||
Hotel/Leisure |
| |||||||||||
Carnival Corporation |
15,884 | 26,865 | 50 | |||||||||
Marriott International, Inc. |
13,456 | 22,111 | 12 | |||||||||
Transportation/Distribution |
||||||||||||
The Coca-Cola Company |
46,166 | 184,928 | 58 | |||||||||
FedEx Corporation |
46,763 | 49,200 | 28 | |||||||||
Norfolk Southern Corporation |
11,614 | 33,918 | N/A | |||||||||
PepsiCo, Inc. |
66,853 | 141,519 | 49 | |||||||||
Sysco Corporation |
47,248 | 23,333 | 13 | |||||||||
Union Pacific Corporation |
23,988 | 105,918 | 10 | |||||||||
United Parcel Service, Inc. |
57,313 | 79,095 | 25 | |||||||||
Machinery/Aerospace/Defense |
| |||||||||||
The Boeing Company |
90,762 | 92,667 | 57 | |||||||||
Honeywell International Inc. |
40,306 | 78,218 | 41 | |||||||||
L-3 Communications Corporation |
12,124 | 10,745 | 22 | |||||||||
Textron Inc. |
13,848 | 11,624 | 38 | |||||||||
United Technologies Corporation |
64,270 | 104,841 | 43 | |||||||||
Retail |
| |||||||||||
Best Buy Co., Inc. |
41,781 | 13,673 | 16 | |||||||||
The Home Depot, Inc. |
81,710 | 138,332 | 11 | |||||||||
Lowes Companies, Inc. |
55,342 | 66,936 | N/A | |||||||||
Target Corporation |
73,703 | 48,352 | N/A | |||||||||
75th Percentile |
57,313 | 92,667 | 43 | |||||||||
Median |
42,650 | 48,352 | 33 | |||||||||
25th Percentile |
18,605 | 24,687 | 14 | |||||||||
Delta Air Lines |
40,362 | 41,169 | 35 |
Source: Standard & Poors Research Insight®
(1) | Last 12 months from most recent quarter ended on or before December 31, 2014. In millions. |
(2) | As of December 31, 2014. In millions. |
(3) | As of the most recent fiscal year end. N/A indicates either data was not available or no significant foreign revenues were reported. |
DELTA AIR LINES, INC. | 31 | EXECUTIVE COMPENSATION |
We believe peer group data should be used as a point of reference, not as the sole factor in our executive officers compensation. In general, the P&C Committees objective is to bring target total direct compensation opportunities to be competitive with the custom peer group, with individual variation based on the individuals role within Delta, performance and experience. Delta does not have a specific compensation target for each element of compensation, but historically has emphasized long-term incentive opportunities over base salaries, which are a fixed cost.
When compared to these businesses, Deltas total compensation opportunities in 2014 for the named executive officers group in aggregate, approximate the median of our custom peer group. As stated above, the P&C Committee uses this data as a point of reference, not as the determining factor in setting compensation.
Compensation elements for our executive officers include:
Component | Objective | Characteristics | ||
Base Salary |
Provides a fixed amount of cash compensation for performing day-to-day functions based on level of responsibility, experience and individual performance |
Most companies target base salary at market median; however, the base salaries of our executive officers are below the median of base salaries of those in our peer group
There is no set schedule for base salary increases. Base salary increases are periodically provided based on competitive concerns or in connection with an increase in responsibilities | ||
Annual Incentive Plan |
Rewards short-term financial, operational and revenue performance
Aligns with the broad-based Profit Sharing and Shared Rewards Programs in which our employees participate |
Annual incentive awards for our executive officers are based on objective, pre-established performance criteria that aligns with corporate business strategy
Award targets are set as a percentage of base salaries
Award payment amounts will be limited if no profit sharing is paid to Delta employees; plus any amounts payable to executive officers will be paid in restricted stock (rather than in cash) with restrictions that do not lapse until a profit sharing payment is made (with certain exceptions) |
EXECUTIVE COMPENSATION | 32 | DELTA AIR LINES, INC. |
Long-Term Incentive Plan |
Rewards long-term Company performance based on internal performance goals and those relative to airline peers
Aligns with interests of stockholders
Facilitates executive officer stock ownership
Encourages retention of our management employees |
Except for the CEO and President, awards are provided through equal portions of performance awards and restricted stock
Performance awards are earned based on achievement of objective, pre-established performance measures, including average annual operating income margin, customer service and return on invested capital over a three-year performance period payable to executive officers in stock
Restricted stock is subject to a three-year vesting period
In addition to performance awards and restricted stock, awards to the CEO and President also include performance stock options which vest over a three-year period upon the achievement of performance measures linked to employees receiving a payout under the Profit Sharing Program
| ||
Benefits |
Attracts and retains highly qualified executives with competitive benefit plans |
Participation in health, welfare and retirement benefit plans on the same terms as all Delta employees
Certain additional benefits are provided to our executive officers, such as financial planning and supplemental disability and life insurance coverage |
As shown previously in the compensation mix charts on page 26, at-risk compensation is the largest portion of the total compensation opportunity for the CEO and the other named executive officers. The P&C Committee believes this is the appropriate approach for aligning the interests of our named executive officers and stockholders.
Base Salary. The base salaries of our executive officers remain below the median of similarly situated executives at companies in our custom peer group as described above. In recognition of this and the accomplishments of our executive officers, the P&C Committee, based on the CEOs recommendations for executive officers other than himself and input from the compensation consultant, approved increased base salaries for executive officers, effective February 16, 2014, as follows: Mr. Anderson $800,000; Mr. Bastian $625,000; Mr. Hauenstein $525,000; and Mr. Jacobson$500,000. Even with these increases, the base salaries of our executive officers remain below the median of the custom peer group.
DELTA AIR LINES, INC. | 33 | EXECUTIVE COMPENSATION |
Annual Incentives. The 2014 Management Incentive Plan (the 2014 MIP) links pay and performance by providing approximately 2,400 management employees with a compensation opportunity based on Deltas achieving key business plan goals in 2014 (which includes the same goals for the CEO, executive officers and substantially all management employees). It also aligns the interests of Delta management and employees because the goals that drive payouts under Deltas broad-based Profit Sharing and Shared Rewards Programs are some of the metrics included in the 2014 MIP.
The 2014 MIP annual incentive opportunity for executive officers is based on Deltas performance in the following areas, which remain unchanged from 2013:
Performance Category |
Weighting | Performance Measure | Performance Measure Objectives |
Characteristics | ||||
Financial |
50% | Deltas 2014 pre-tax income* based on 2014 business plan targets approved by the Board of Directors as part of the Annual Operating Plan |
Measures Deltas profitability
Aligns executive incentives with Profit Sharing Program |
Same measure used in the Profit Sharing Program for Delta employees
No payment may be made for this performance metric unless there is a payout for 2014 under the Profit Sharing Program | ||||
Operational |
25% | Number of monthly goals met under Shared Rewards Program (75% weighting)
Number of monthly goals met by Delta Connection Carriers (25% weighting) |
Supports strategic focus on operational performance and therefore customer experience
Aligns executive incentives with Shared Rewards Program |
Same measure used in the Shared Rewards Program for Delta employees
Measures operational performance against internal goals and DOT rankings among other airlines
| ||||
Revenue |
25% | Achievement of Total Revenue per Available Seat Mile (TRASM) goals year-over-year relative to an Industry Group average TRASM for the same period |
Supports strategic focus on profitable growth in revenue |
Reflects capacity discipline and successful implementation of 2014 revenue growth initiatives, including growth of Deltas ancillary businesses
Payment of this revenue performance measure will not be less than target level if the financial performance measure equals or exceeds the maximum level |
* | Pre-tax income as defined in Deltas broad-based Profit Sharing Program, means Deltas annual consolidated pre-tax income calculated in accordance with GAAP and as reported in Deltas SEC filings, but excluding (a) asset write downs related to long-term assets; (b) gains or losses with respect to employee equity securities; (c) gains or losses with respect to extraordinary, one-time or non-recurring events; and (d) expense accrued with respect to the broad-based employee Profit Sharing Program and the 2014 MIP. |
| For purposes of the 2014 MIP, the Industry Group consists of: Alaska Airlines, American Airlines/ US Airways, JetBlue Airlines, Southwest Airlines and United Airlines. |
EXECUTIVE COMPENSATION | 34 | DELTA AIR LINES, INC. |
To ensure that executive officers are aligned with our employees, the executive officers 2014 MIP awards are subject to the following conditions if there is no Profit Sharing Program payout to employees for 2014:
| The actual MIP award, if any, is capped at the target award opportunity, even if Deltas performance for operational and revenue meets or exceeds the maximum level. |
| Any awards earned by executive officers under the 2014 MIP are made in restricted stock (MIP Restricted Stock) |
The MIP Restricted Stock will vest when (1) there is a payout under the Profit Sharing Program or (2) the executive officers employment is terminated by Delta without cause, or due to the officers death or disability. If the executive officer voluntarily resigns or retires, the MIP Restricted Stock will vest when there is a payout under the Profit Sharing Program, as if the officers employment continued. The MIP Restricted Stock will be forfeited if, prior to vesting, the executive officers employment is terminated by Delta for cause. Since there was a payout under the Profit Sharing Program for 2014, the executive officers received their 2014 MIP award in cash.
The following chart shows the performance measures for executive officers under the 2014 MIP and the actual performance for each measure in 2014.
Performance Measure |
Performance Measure Weighting |
Performance Levels | 2014 Actual Performance |
Percentage of Target Earned* |
||||||||||
Threshold (50% of Target |
Target (100% of Target |
Maximum (200% of Target |
||||||||||||
Financial |
50% | |||||||||||||
2014 Pre-tax income | $2,456 million | $3,581 million | $4,109 million | $5,853 million | 100% | |||||||||
Operational |
25% | |||||||||||||
Number of monthly goals met under Shared Rewards Program | 75% | 16 Shared Rewards goals achieved |
21 Shared Rewards goals achieved |
26 Shared Rewards goals achieved |
32 Shared Rewards goals achieved |
37.5% | ||||||||
Number of monthly goals met by Delta Connection Carriers | 25% | 9 Delta Connection goals achieved |
14 Delta Connection goals achieved |
19 Delta Connection goals achieved |
13 Delta Connection goals achieved |
5.63% | ||||||||
Revenue |
25% | |||||||||||||
Improvement of TRASM year-over-year relative to Industry Group average TRASM for the same period | 107.7% | 108.2% | 108.7% | 109.1% | 50% | |||||||||
* This column reflects the percentage of target earned after application of the performance measure weightings. |
Total Percentage of Target Award Earned |
193.13 | % |
DELTA AIR LINES, INC. | 35 | EXECUTIVE COMPENSATION |
The target award opportunities under the 2014 MIP are expressed as a percentage of the participants base salary. The P&C Committee determined the target award opportunities taking into consideration the custom peer group comparison, the CEOs recommendations for executive officers other than himself and input from the compensation consultant. The P&C Committee maintained the 2013 target award opportunities (as shown in the table below) for each of the named executive officers, except for Mr. Jacobson, whose 2014 target award opportunity was increased from 125% to 150% to deliver a more competitive total target cash compensation opportunity (base salary plus target 2014 MIP award). The target cash compensation opportunities for our named executive officers remain below the custom peer group median.
Payments under the 2014 MIP could have ranged from zero to 200% of the target award opportunity depending on the performance achieved. The P&C Committee sets performance targets at threshold, target and maximum levels for each performance measure, with (1) no payment for performance below the threshold level and (2) a potential payment of 50% of target for threshold performance, 100% of target for target performance and 200% of target for maximum performance.
Summarized in the table below are the 2014 MIP awards earned by each named executive officer:
Named Executive
Officer |
Base Salary | Target Award (as % of base salary) |
Target Award (in dollars) |
Percentage of Target Award Earned |
Total 2014 MIP Award |
|||||||||||||||
Mr. Anderson |
$ | 800,000 | 200 | % | $ | 1,600,000 | 193.13 | % | $ | 3,090,000 | ||||||||||
Mr. Bastian |
$ | 625,000 | 175 | % | $ | 1,093,750 | 193.13 | % | $ | 2,112,305 | ||||||||||
Mr. Hauenstein |
$ | 525,000 | 150 | % | $ | 787,500 | 193.13 | % | $ | 1,520,859 | ||||||||||
Mr. Jacobson |
$ | 500,000 | 150 | % | $ | 750,000 | 193.13 | % | $ | 1,448,438 | ||||||||||
Mr. West |
$ | 500,000 | 150 | % | $ | 750,000 | 193.13 | % | $ | 1,448,438 |
Because Delta was profitable in 2014, there was a $1.085 billion payout under the Profit Sharing Program to approximately 80,000 employees. Accordingly, payments earned by named executive officers under the 2014 MIP were made in cash.
Long-Term Incentives.
2014 Long-Term Incentive Program. Beginning with awards made in 2013, the P&C Committee increased the length of the performance and vesting periods of our long-term incentive program from two years to three years to further align the interests of management and stockholders over a longer period.
The 2014 Long-Term Incentive Program (2014 LTIP) links pay and performance by providing approximately 350 management employees with a compensation opportunity that aligns the interest of management and stockholders, with a large portion contingent upon Deltas financial, customer service and stock performance over a three-year period. The performance measures and goals are the same for the CEO, executive officers and all other participants in this plan.
Under the 2014 LTIP, Mr. Anderson and Mr. Bastian received an award opportunity consisting of approximately 34% performance awards, 33% restricted stock and 33% performance stock options, and our other executive officers received an award opportunity consisting of 50% performance awards and 50% restricted stock. In addition, Mr. Andersons 2014 LTIP award included the remaining value of his total one-time Transition Award Program award, consisting of 50% performance awards and 50% restricted stock. These allocations were selected to balance the incentive opportunity between Deltas financial performance relative to other airlines, internal Company performance and its stock price performance. The inclusion of performance-based stock options for the CEO and President was intended to further enhance the alignment of their compensation opportunities with stockholders. This mix and the other terms of the 2014 LTIP are intended to balance the performance and retention incentives with the high volatility of airline stocks.
EXECUTIVE COMPENSATION | 36 | DELTA AIR LINES, INC. |
Performance awards are a dollar-denominated long-term incentive opportunity payable in common stock to executive officers and in cash to other participants. The payout, if any, of the performance award is based on the following three measures over the three-year period ending December 31, 2016:
Performance Measure | Weighting | Measurement | ||
Average Annual Operating Income Margin |
50% | Delta relative to composite performance of an Industry Group* | ||
Customer Service Performance (Net Promoter Score) Domestic |
15% | Deltas absolute performance | ||
Customer Service Performance (Net Promoter Score) International |
10% | Deltas absolute performance | ||
Return on Invested Capital (ROIC) |
25% | Deltas absolute performance |
* | For purposes of the 2014 LTIP, the Industry Group consists of: Alaska Airlines, American Airlines/ US Airways, JetBlue Airlines, Southwest Airlines and United Airlines. |
The P&C Committee retained these performance measures from 2013 because superior rankings in these areas should, over time, produce positive stockholder returns.
The following chart shows the range of potential payments of the performance awards based on the 2014 LTIPs three performance measures. The potential payments may range from zero to 200% of the target award.
Performance Measures | ||||||||||||
Performance Level | Percentage of Target Earned |
Average Annual Operating Income Margin |
Customer Service Performance (Net Promoter Score) |
Return on
Invested Capital | ||||||||
Domestic | International | |||||||||||
Maximum |
200 | % | 20.0% above Composite Performance of Industry Group | +4.5 percentage points or higher |
+5.5 percentage points or higher |
14.0% or Higher | ||||||
Target |
100 | % | Composite Performance of Industry Group | +2.5 percentage points |
+3.5 percentage points |
12.0% | ||||||
Threshold |
50 | % | 20.0% below Composite Performance of Industry Group |
+0 percentage points |
+2.0 percentage points |
10.0% |
Restricted stock is common stock that may not be sold or otherwise transferred for a period of time, and is subject to forfeiture in certain circumstances. The 2014 LTIP generally provides that restricted stock will vest (which means the shares may then be sold) in three equal installments on February 1, 2015, February 1, 2016 and February 1, 2017. Restricted stock is eligible for dividends, but such dividends will not become payable until such time as the restrictions lapse. The value of a participants restricted stock award will depend on the price of Delta common stock when the award vests.
A performance stock option is the right to purchase our common stock at a certain price per share during a designated period, but only if certain performance measures are achieved. The 2014 LTIP generally provides that
DELTA AIR LINES, INC. | 37 | EXECUTIVE COMPENSATION |
the performance stock options will become exercisable on the vesting dates described in the chart below, subject to the achievement of the following performance measures:
Performance Measure | Vesting Dates | |||
Employees receive a payout under the Profit Sharing Program for 2014 | 1/3 of performance stock option award | February 1, 2015 | ||
1/3 of performance stock option award | February 1, 2016 | |||
1/3 of performance stock option award | February 1, 2017 | |||
If there is no Profit Sharing Program payout for 2014, but employees receive a payout under the Profit Sharing Program for 2015 | 2/3 of performance stock option award | February 1, 2016 | ||
1/3 of performance stock option award | February 1, 2017 | |||
Employees receive no Profit Sharing Program payout for either 2014 or 2015 | The entire performance stock option award will be forfeited (regardless of whether employees receive a payout under the Profit Sharing Program for 2016) |
These performance stock options have an exercise price of $30.89, which is equal to the closing price of our common stock on the grant date and will expire on February 5, 2024.
Because employees received a payout under the Profit Sharing Program for 2014, one-third of Mr. Andersons and Mr. Bastians performance stock options vested and became exercisable on February 5, 2015 (the date on which the P&C Committee certified the performance measure was satisfied), and the remaining two-thirds will vest in equal installments on each of February 1, 2016 and February 1, 2017, subject to forfeiture in certain circumstances.
The 2014 LTIP target awards are the largest component of each executive officers compensation opportunity, reflecting the P&C Committees focus on longer-term compensation, Deltas financial results relative to peer airlines, return on invested capital and customer service performance, as well as on Deltas common stock price performance. The P&C Committee determined the target award opportunities so the participants total direct compensation opportunity is competitive with our custom peer group.
For additional information about the vesting and possible forfeiture of the 2014 LTIP awards, see Post Employment Compensation Other Benefits The 2014 Long-Term Incentive Program in this proxy statement.
The One-Time Transition Award Program. In 2013, in order to ensure consistency of award opportunity levels during the transition from a two-year to three-year long-term incentive program, the P&C Committee granted executive officers performance awards under a one-time Transition Award Program (the TAP). Delta reported these award opportunities in its proxy statement for the applicable year.
The performance awards were denominated in cash but paid in shares of common stock to executive officers. The payout of these award opportunities is based on the average annual operating income margin relative to the composite performance of an industry peer group and Deltas customer service performance and return on invested capital over the two-year performance period ending December 31, 2014. The potential payout ranged from zero to 200% of the target award.
EXECUTIVE COMPENSATION | 38 | DELTA AIR LINES, INC. |
Summarized in the chart below are the performance results certified by the P&C Committee for the performance awards under the one-time TAP and the resulting percentage of target award opportunity earned:
Performance Measure |
Performance Measure Weighting |
Performance Levels | Actual Performance for Performance Period ending December 31, 2014 |
Percentage
of Target Earned* | ||||||||
Threshold (50% of Target |
Target (100% of Target |
Maximum (200% of Target |
||||||||||
Average Annual Operating Income Margin | 50% | 6.3% | 9.4% (Composite Performance of Industry |
12.5% | 13.3% | 100% | ||||||
Customer Service Performance (Net Promoter Score) |
||||||||||||
Domestic | 15% | +0 percentage points |
+1.5 percentage points | +3.0 percentage points or higher |
+5.1 percentage points |
30% | ||||||
International | 10% | +1 percentage points |
+2.5 percentage points | +5.0 percentage points or higher |
+11.0 percentage points | 20% | ||||||
Return on Invested Capital | 12.5% | 8.0% | 10.0% | 12.0% or Higher | 15.1% for 2013 | 25% | ||||||
12.5% | 8.0% | 10.0% | 12.0% or Higher | 20.8% for 2014 | 25% | |||||||
* This column reflects the percentage of target earned after application of the performance measure weightings. Return on Invested Capital performance was measured independently each calendar year during the two-year performance period. |
Total Percentage of Target Award Earned |
200% |
Benefits. The named executive officers receive the same health, welfare and other benefits provided to all Delta employees, except Delta requires officers to regularly complete a comprehensive physical examination. Delta pays the cost of this examination, which is limited to a prescribed set of preventive procedures based on the persons age and gender. Mr. Anderson is eligible to receive certain medical benefits under a 2001 agreement with his former employer, Northwest Airlines, but Mr. Anderson has voluntarily waived these benefits while employed by Delta. For additional information regarding the 2001 agreement, see Post-Employment Compensation Other Benefits Pre-existing Medical Benefits Agreement with Northwest in this proxy statement.
The named executive officers are also eligible for supplemental life and disability insurance, financial planning services (capped at a maximum annual amount), home security services and flight benefits (for the executive officer, immediate family members and other designees and, in certain circumstances, the executive officers surviving spouse or domestic partner). Delta provides certain flight benefits to all employees and eligible retirees and survivors. These benefits are a low-cost, highly valued tool for attracting and retaining talent, and are consistent with industry practice. The perquisites received by named executive officers represent a small part of the overall compensation for executives and are offered to provide competitive compensation. See the Summary Compensation Table and the related footnotes for information regarding benefits received in 2014 by the named executive officers.
We do not provide any supplemental executive retirement plans (officers participate in the same on-going retirement plans as our frontline employees), club memberships, company cars or private jet travel for personal use for any named executive officer.
DELTA AIR LINES, INC. | 39 | EXECUTIVE COMPENSATION |
The P&C Committee requested Meridian conduct a risk assessment of Deltas executive compensation program. Based on this review, Meridian determined that Deltas executive compensation program does not incent unnecessary risk taking, and the P&C Committee and Delta management agree with this assessment. In this regard, the P&C Committee notes the executive compensation program includes:
| a compensation clawback policy for officers; |
| stock ownership and retention guidelines for executive officers; |
| incentive compensation capped at specified levels; |
| an emphasis on longer-term compensation; |
| use of multiple performance measures, both annual and long-term; and |
| an anti-hedging and anti-pledging policy for all employees. |
These features are designed to align executives with preserving and enhancing stockholder value. The clawback policy, the stock ownership guidelines and anti-hedging and anti-pledging policy are discussed below.
Executive Compensation Policies
The P&C Committee monitors the continuing dialogue among corporate governance experts, securities regulators and related parties regarding best practices for executive compensation. Over the last few years, the P&C Committee has refined the corporate governance features of the executive compensation program to better align the program with stockholder interests and incent responsible behavior by adopting a compensation clawback policy for officers, stock ownership guidelines for executive officers, an equity award grant policy and a supplemental equity compensation plan policy to reflect current best practices. Additionally, Deltas compliance program under the federal securities laws prohibits all employees from engaging in securities hedging and pledging transactions. A brief discussion of these policies follows.
Clawback Policy. The compensation clawback policy holds officers accountable should any of them ever engage in wrongful conduct. Under this policy, if the P&C Committee determines an officer has engaged in fraud or misconduct that requires a restatement of Deltas financial statements, the P&C Committee may recover all incentive compensation awarded to or earned by the officer for fiscal periods materially affected by the restatement. For these purposes, incentive compensation includes annual and long-term incentive awards and all forms of equity compensation.
Stock Ownership Guidelines. Deltas stock ownership guidelines strengthen the alignment between executive officers and stockholders. Under these guidelines, which were significantly enhanced in 2013, the current executive officers are required to own the shares of Delta common stock equal or greater to:
Shares Equal to a Multiple of Base Salary |
OR | Shares | ||||||||
CEO |
8x | 400,000 | ||||||||
President |
6x | 200,000 | ||||||||
Executive Vice Presidents |
4x | 150,000 |
In addition, each executive officer must hold at least 50% of all net shares received through restricted stock vesting or realized through stock option exercises until the stock ownership guidelines applicable to the executive officer are achieved. For these purposes, net shares means all shares retained after applicable withholding of any shares for tax purposes, and stock ownership includes restricted stock; restricted stock units; shares owned directly or by a spouse or dependent children of the executive officer; shares owned in trust by or for the executive officer, the executive officers spouse or immediate family member residing in the same household; and shares owned by an entity wholly-owned by the executive officer or immediate family members residing in the same household. It does not include shares an executive officer has the right to acquire through the exercise
EXECUTIVE COMPENSATION | 40 | DELTA AIR LINES, INC. |
of stock options. The stock ownership of our executive officers is measured based on the three-month average of the closing price of Delta common stock on the NYSE. As of December 31, 2014, all of our executive officers exceeded their required stock ownership level.
Equity Award Grant Policy. Deltas equity award grant policy provides objective, standardized criteria for the timing, practices and procedures used in granting equity awards. Under this policy, the P&C Committee will consider approval of annual equity awards for management employees in the first quarter of the calendar year. Once approved, the grant date of these awards will be the later of (1) the date the P&C Committee approves the awards and (2) the third business day following the date on which Delta publicly announces its financial results for the most recently completed fiscal year. Equity awards for new hires, promotions or other off-cycle grants may be approved as appropriate and, once approved, these awards will be made on the later of (1) the date on which the grant is approved and (2) the third business day following the date on which Delta publicly announces its quarterly or annual financial results if this date is in the same month as the grant.
Supplemental Equity Compensation Plan Policy. The P&C Committee adopted this policy to supplement the Delta 2007 Performance Compensation Plan. The policy reaffirms the prohibition against the repricing of stock options and stock appreciation rights under the Delta 2007 Performance Compensation Plan without stockholder approval, except in connection with certain corporate events; and clarifies that this repricing prohibition includes cash buyouts. In addition, the policy provides that all performance-based awards granted under the plan must be subject to a one year minimum vesting period, with certain limited exceptions.
Anti-Hedging and Anti-Pledging Policy. As part of an update to its insider trading policy in 2012, Delta expanded and clarified prohibitions related to transactions in short-term or highly leveraged transactions. Under the updated policy, Delta prohibits employees from engaging in transactions in Delta securities involving publicly traded options, short sales and hedging transactions because they may create the appearance of unlawful insider trading and, in certain circumstances, present a conflict of interest. In addition, Delta expanded its insider trading policy to prohibit employees from holding Delta securities in a margin account or otherwise pledging Delta securities as collateral for a loan.
The P&C Committee determines the compensation of Mr. Anderson consistent with the approach used for our other executive officers. In accordance with our executive compensation philosophy and to further align the interests of Mr. Anderson and our stockholders, the vast majority of Mr. Andersons compensation opportunity is at risk and dependent on Company and stock price performance.
To reward Mr. Andersons outstanding performance and bring his total compensation more in line with the CEOs of our custom peer group, the P&C Committee increased Mr. Andersons base salary from $725,000 to $800,000 and his long-term incentive plan target opportunity for 2014. No change was made to Mr. Andersons annual incentive plan target opportunity for 2014. In addition, as noted in last years proxy statement, Mr. Anderson received the remaining half of the one-time Transition Award Program award, consisting of 50% performance awards and 50% restricted stock.
Mr. Andersons total compensation is competitive when compared to the CEOs at the 100 largest U.S. public companies and to the CEOs at companies with revenues comparable to Delta, as reported by the New York Times on April 10, 2015.
See the Summary Compensation Table and the related footnotes in this proxy statement for additional information about Mr. Andersons compensation. The amounts reported in the columns for Stock Awards include the 2014 LTIP and represent the aggregate fair value of the awards computed in accordance with FASB ASC Topic 718 on the applicable grant date. The amounts do not reflect the risk there will be no payout of the performance awards or, in the case of performance stock options, there is no vesting, because the performance conditions are not met.
The P&C Committee designed Mr. Andersons compensation arrangements to provide incentive for him to focus on long-term improvements in Company performance that will lead to greater stockholder value. For example,
DELTA AIR LINES, INC. | 41 | EXECUTIVE COMPENSATION |
the following chart illustrates that a substantial percentage of Mr. Andersons total compensation is concentrated in equity-based award opportunities.
Taken in total with the other elements of Deltas executive compensation program, the P&C Committee believes the right balance is struck between annual operating performance and long-term investments in the Companys operations.
Our executive officers do not have employment contracts, supplemental executive retirement plans, deferred compensation plans or change in control agreements. They are eligible to receive certain benefits in the event of specified terminations of employment, including as a consequence of a change in control. The P&C Committee believes these provisions strengthen the alignment of the executives compensation with future company performance.
The severance benefits and the forfeiture provisions under our long-term incentive plans for our named executive officers are described in Post-Employment Compensation Potential Post-Employment Benefits upon Termination or Change in Control in this proxy statement.
Tax and Accounting Impact and Policy
The financial and tax consequences to Delta of the elements of the executive compensation program are important considerations for the P&C Committee when analyzing the overall design and mix of compensation. The P&C Committee seeks to balance an effective compensation program with an appropriate impact on reported earnings and other financial measures.
In making compensation decisions, the P&C Committee considers that Internal Revenue Code Section 162(m) limits deductions for certain compensation to any covered executive to $1 million per year. Under Section 162(m), compensation may be excluded from the $1 million limit if required conditions are met. The 2014 MIP and the performance awards under the 2014 LTIP meet the conditions for exclusion. From time to time, in order to ensure competitive levels of compensation for our executive officers, the P&C Committee may approve compensation, including base salary and benefits that are not deductible under Section 162(m).
Equity awards granted under our executive compensation program are expensed in accordance with Statement of Financial Accounting Standards Codification Topic 718, Stock Compensation.
EXECUTIVE COMPENSATION | 42 | DELTA AIR LINES, INC. |
The P&C Committee has reviewed and discussed with Delta management the Compensation Discussion and Analysis and, based on such review and discussion, the P&C Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
THE PERSONNEL & COMPENSATION COMMITTEE
David G. DeWalt, Chairman
John S. Brinzo
Shirley C. Franklin
David R. Goode
George N. Mattson
Sergio A. L. Rial
Kenneth B. Woodrow
DELTA AIR LINES, INC. | 43 | EXECUTIVE COMPENSATION |
Information about Summary Compensation Table and Related Matters
The table below contains information about the compensation of the following executive officers during 2014: (1) Mr. Anderson, Deltas principal executive officer; (2) Mr. Jacobson, Deltas principal financial officer; and (3) Mr. Bastian, Mr. Hauenstein and Mr. West, who were Deltas three other most highly compensated executive officers on December 31, 2014.
Name and Principal Position |
Year | Salary ($) |
Bonus ($) |
Stock Awards ($) (1)(2)(3) |
Option Awards ($)(1)(4) |
Non- Equity Incentive Plan Compen- sation ($)(5) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) |
All Other Compensation ($)(7) |
Total ($)(8) |
|||||||||||||||||||||||||||
Richard H. Anderson |
2014 | 790,625 | 0 | 9,576,901 | 3,833,459 | 3,090,001 | 0 | 298,881 | 17,589,867 | |||||||||||||||||||||||||||
Chief Executive Officer |
2013 | 725,000 | 0 | 8,910,176 | 2,000,000 | 2,446,876 | 0 | 293,850 | 14,375,902 | |||||||||||||||||||||||||||
2012 | 652,083 | 0 | 7,000,052 | 2,000,054 | 2,749,926 | 0 | 173,457 | 12,575,572 | ||||||||||||||||||||||||||||
Edward H. Bastian President |
2014 | 618,750 | 0 | 4,000,128 | 2,000,013 | 2,112,305 | 67,075 | 211,059 | 9,009,330 | |||||||||||||||||||||||||||
2013 | 575,000 | 0 | 5,340,193 | 1,000,000 | 1,698,047 | 0 | 231,966 | 8,845,206 | ||||||||||||||||||||||||||||
2012 | 531,250 | 0 | 3,500,026 | 1,000,027 | 1,908,354 | 43,405 | 139,435 | 7,122,497 | ||||||||||||||||||||||||||||
Glen W. Hauenstein |
2014 | 523,750 | 0 | 3,500,227 | 0 | 1,520,859 | 0 | 166,933 | 5,711,769 | |||||||||||||||||||||||||||
Executive Vice President & |
2013 | 487,292 | 0 | 3,340,264 | 0 | 1,139,942 | 0 | 156,018 | 5,123,516 | |||||||||||||||||||||||||||
Chief Revenue Officer |
2012 | 420,833 | 0 | 3,150,145 | 0 | 1,066,781 | 0 | 104,272 | 4,742,031 | |||||||||||||||||||||||||||
Paul A. Jacobson Executive Vice President & Chief Financial Officer |
2014 | 496,875 | 0 | 2,550,139 | 0 | 1,448,438 | 30,186 | 139,487 | 4,665,125 | |||||||||||||||||||||||||||
2013 | 467,708 | 0 | 2,820,065 | 0 | 1,001,953 | 0 | 118,781 | 4,408,507 | ||||||||||||||||||||||||||||
2012 | 408,333 | 0 | 800,044 | 0 | 1,066,781 | 19,136 | 57,183 | 2,351,477 | ||||||||||||||||||||||||||||
W. Gil West (9) Executive Vice President & |
2014 | 496,875 | 0 | 2,550,139 | 0 | 1,448,438 | 0 | 128,264 | 4,623,716 |
(1) | The amounts in the Stock Awards and Option Awards columns do not represent amounts the named executive officers received or are entitled to receive. Rather, the reported amounts represent the aggregate fair value of awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation (FASB ASC Topic 718), on the applicable grant date or, if earlier, the service inception date. The reported amounts do not reflect the risk the stock awards may be forfeited in certain circumstances; for awards subject to performance conditions, the risk there is no payout; or in the case of performance stock options, that there is no vesting because the performance conditions are not met. The fair value of restricted stock awards is based on the closing price of Delta common stock on the grant date. |
The reported amounts for 2014, 2013 and 2012 in the Stock Awards column reflect award opportunities under Deltas long-term incentive plans. Because Mr. Anderson only received fifty percent of his One Time Transition Award Program (One Time TAP) award value in 2013, $1.9 million of the reported amounts for the 2014 LTIP in the Stock Awards column include the remaining value of his One Time TAP award. For additional information, see footnotes 2 and 3 below.
(2) | The 2014 Long-Term Incentive Program (2014 LTIP) links pay and performance and aligns the interests of Delta management and stockholders. As discussed in Compensation Discussion and Analysis Elements of Compensation, the long-term incentive opportunity for executive officers under these programs consists of performance awards and restricted stock, and with respect to Mr. Anderson and Mr. Bastian, performance stock options. |
The performance awards under the 2014 LTIP are denominated in dollars. The payouts, if any, earned by a named executive officer will be made in stock based on Deltas average annual operating income margin relative to other airlines, on Deltas return on invested capital and Deltas customer service performance based on the percentage point improvement in Deltas net promoter scores.
The restricted stock granted under the 2014 LTIP vests in equal installments on February 1, 2015, 2016 and 2017. All restricted stock is subject to forfeiture in certain circumstances.
The reported amounts for 2014 in the Stock Awards column include the fair value of the performance awards and restricted stock under the 2014 LTIP, computed in accordance with FASB ASC Topic 718 on February 6, 2014 the date the 2014 LTIP awards became effective.
EXECUTIVE COMPENSATION | 44 | DELTA AIR LINES, INC. |
See footnote 4 below for additional information regarding the performance stock options.
(3) | For awards in the Stock Awards column that are subject to performance conditions, the fair value is computed in accordance with FASB ASC Topic 718 based on the probable outcome of the performance condition as of the applicable grant date or, if earlier, the service inception date. For these purposes, the fair value of the performance awards under the 2014 LTIP is computed based on performance at the target level. |
If the performance awards were assumed to pay out at the maximum level, the aggregate fair value of such awards, which does not include the restricted stock component of the 2014 LTIP, for the named executive officers would be as follows:
Name | 2014($) | 2013($) | 2012($) | |||||||||
Richard H. Anderson |
9,576,666 | 8,910,000 | 7,000,000 | |||||||||
Edward H. Bastian |
4,000,000 | 5,340,000 | 3,500,000 | |||||||||
Glen W. Hauenstein |
3,500,000 | 3,340,000 | 2,150,000 | |||||||||
Paul A. Jacobson |
2,550,000 | 2,820,000 | 800,000 | |||||||||
W. Gil West |
2,550,000 | | |
(4) | The stock options granted to Mr. Anderson and Mr. Bastian under the 2014 LTIP are subject to performance conditions. Because the conditions for vesting have been met, the stock options vest in equal installments on each of February 5, 2015 and February 1, 2016 and 2017. We determined the grant date fair value of stock options based on achievement of the target level under an option pricing model using the following assumptions: (1) a 1.85% risk-free interest rate, (2) a 55% expected volatility of common stock and (3) a six year expected life. |
(5) | The 2014 Management Incentive Plan (2014 MIP) is an annual incentive plan that links pay and performance, and aligns the interest of Delta management and employees. As discussed in Compensation Discussion and Analysis Elements of Compensation, the annual incentive opportunity for executive officers under the 2014 MIP is based on Deltas financial, operational and revenue performance relative to key business plan goals. |
Payments, if any, earned by the named executive officers under the 2014 MIP are made (a) in cash if there is a payout under Deltas broad-based employee profit sharing program (Profit Sharing Program) for 2014 and (b) in restricted stock if there is no such payout (MIP Restricted Stock).
Because Delta was profitable in 2014, 2013 and 2012, there were payouts to Delta employees under the Profit Sharing Program in each of those years. Accordingly, payments earned by executive officers under the 2014 MIP, 2013 MIP and 2012 MIP were made in cash. These cash payments are reported for 2014, 2013 and 2012 in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. See Compensation Discussion and Analysis Elements of Compensation Annual Incentives for details on Deltas 2014 MIP performance.
(6) | Delta does not sponsor a supplemental executive retirement plan for any named executive officer. |
The Delta Retirement Plan is a broad-based, non-contributory tax qualified defined benefit pension plan for nonpilot employees. Effective December 31, 2005, the Delta Retirement Plan was amended to freeze service, earnings and pay credits for all participants, including any participating named executive officers. See Post-Employment Compensation Defined Benefit Pension Benefits for a description of this plan.
The reported amounts for 2014 reflect the aggregate change in the actuarial present value of each applicable named executive officers accumulated benefit under the Delta Retirement Plan measured from December 31, 2013 to December 31, 2014. For the period from December 31, 2012 to December 31, 2013, the actuarial present value of the accumulated benefits decreased during this period by $20,013 for Mr. Bastian and $12,235 for Mr. Jacobson. This decrease is the result of an increase in the discount rate assumption in calculating these values.
Mr. Anderson, Mr. Hauenstein and Mr. West are not eligible to participate in the Delta Retirement Plan because they did not complete 12 months of service before the plan was frozen on December 31, 2005.
DELTA AIR LINES, INC. | 45 | EXECUTIVE COMPENSATION |
(7) | The reported amounts of all other compensation for 2014 include the following items: |
Name |
Contributions to Qualified Defined Contribution Retirement Plan ($)(a) |
Payments due to Internal Revenue Code Limits Applicable to Qualified Defined Contribution Plan ($)(b) |
Life Insurance Premiums ($)(c) |
Reimbursement of Taxes ($)(d) |
Perquisites and Other Personal Benefits ($)(e) |
|||||||||||||||
Richard H. Anderson |
18,200 | 208,425 | 2,064 | 35,199 | 34,993 | |||||||||||||||
Edward H. Bastian |
18,200 | 143,976 | 1,618 | 24,012 | 23,253 | |||||||||||||||
Glen W. Hauenstein |
18,200 | 98,258 | 1,380 | 18,424 | 30,670 | |||||||||||||||
Paul A. Jacobson |
18,200 | 86,718 | 1,305 | 14,961 | 18,303 | |||||||||||||||
W. Gil West |
18,200 | 86,718 | 1,305 | 11,884 | 10,157 |
(a) | Represents Deltas contributions to the Delta Family-Care Savings Plan, a broad-based tax qualified defined contribution plan, based on the same fixed and matching contribution formula applicable to all participants in this plan. |
(b) | Represents amounts paid directly to the named executive officer that Delta would have contributed to the officers account under the Delta Family-Care Savings Plan absent limits applicable to such plans under the Internal Revenue Code. These payments are based on the same fixed and matching contribution formula applicable to all participants in this plan and are available to any plan participant affected by such limits. |
(c) | Represents the annual premium on supplemental life insurance coverage equal to two times base salary that Delta provided to named executive officers. |
(d) | Represents tax reimbursements for flight benefits as described below. |
(e) | The amounts consist of financial planning services, home security services, an annual physical examination for officers and flight benefits as described below, except Mr. Bastian did not have costs for financial planning services and Mr. West did not have costs for home security services. From time to time, the named executive officers attend events sponsored by Delta at no incremental cost to Delta. |
As is common in the airline industry, Delta provides complimentary travel and certain Delta Sky Club privileges for named executive officers; the officers spouse, domestic partner or designated companion; the officers children and parents; and, to a limited extent, other persons designated by the officer.
Complimentary travel for such other persons is limited to an aggregate imputed value of $20,000 per year for the Chief Executive Officer and President and $15,000 per year for executive vice presidents. Delta reimburses the officer for associated taxes on complimentary travel with an imputed tax value of up to $25,000 per year for the Chief Executive Officer and President and $20,000 per year for executive vice presidents. Unused portions of the annual allowances described in the previous two sentences accumulate and may be carried into succeeding years during employment. Complimentary travel is provided to the surviving spouse or domestic partner of eligible officers after the eligible officers death. Delta will not reimburse surviving spouses or domestic partners for associated taxes on complimentary travel under the survivor travel benefit. Deltas incremental cost of providing flight benefits includes incremental fuel expense and the incremental cost on a flight segment basis for customer service expenses such as meals, onboard expenses, baggage handling, insurance, airport security and aircraft cleaning. In addition, certain named executive officers have flight benefits on another airline at no incremental cost to Delta.
(8) | As required by SEC rules, the amount in the Total column for each named executive officer represents the sum of the amounts in all the other columns. As discussed in footnote (1) above, the amounts in the Stock Awards and Option Awards columns do not represent amounts the named executive officers received or are entitled to receive. Rather, these amounts represent the aggregate fair value of awards computed in accordance with FASB ASC Topic 718 on the applicable grant date or, if earlier, the service inception date. The amounts do not reflect the risk the awards may be forfeited in certain circumstances, for awards subject to performance conditions, the risk there is no payout or in the case of performance stock options, there is no vesting, because the performance conditions are not met. |
(9) | Mr. West became Executive Vice President & Chief Operating Officer on March 1, 2014. |
EXECUTIVE COMPENSATION | 46 | DELTA AIR LINES, INC. |
Grants of Plan-Based Awards Table
The following table provides information about annual and long-term award opportunities granted to the named executive officers during 2014 under the 2014 MIP and the 2014 LTIP. These award opportunities are described in the Compensation Discussion and Analysis section of the proxy statement under Elements of Compensation Annual Incentives and Elements of Compensation Long-Term Incentives.
Name/Type of Award |
Grant Date(1) |
Date of Personnel & Compen- sation Committee or Board Action |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(2) |
Estimated Future Payouts Under Equity Incentive Plan Awards(3) |
All Other Stock Awards: Number of Shares of Stock or Units (#)(4) |
All Other Option Awards: Number of Securities Underlying Options (#)(5) |
Exercise or Base Price of Option Awards ($/Sh)(6) |
Grant Date Fair Value of Stock and Option Awards ($)(7) |
||||||||||||||||||||||||||||||||||||||||
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold ($) |
Target ($) |
Maximum ($) |
|||||||||||||||||||||||||||||||||||||||||||
Richard H. Anderson |
||||||||||||||||||||||||||||||||||||||||||||||||
2014 MIP |
1/1/2014 | 12/11/2013 | 800,000 | 1,600,000 | 3,200,000 | | | | | | | | ||||||||||||||||||||||||||||||||||||
2014 LTIP Performance Award |
2/6/2014 | 2/6/2014 | | | | 2,394,167 | 4,788,333 | 9,576,666 | | | | 4,788,333 | ||||||||||||||||||||||||||||||||||||
2014 LTIP Restricted Stock |
2/6/2014 | 2/6/2014 | | | | | | | 155,020 | | | 4,788,568 | ||||||||||||||||||||||||||||||||||||
2014 LTIP Performance Stock Options |
2/6/2014 | 2/6/2014 | | | | | | | | 252,700 | 30.89 | 3,833,459 | ||||||||||||||||||||||||||||||||||||
Edward H. Bastian |
||||||||||||||||||||||||||||||||||||||||||||||||
2014 MIP |
1/1/2014 | 12/11/2013 | 546,875 | 1,093,750 | 2,187,500 | | | | | | | | ||||||||||||||||||||||||||||||||||||
2014 LTIP Performance Award |
2/6/2014 | 2/6/2014 | | | | 1,000,000 | 2,000,000 | 4,000,000 | | | | 2,000,000 | ||||||||||||||||||||||||||||||||||||
2014 LTIP Restricted Stock |
2/6/2014 | 2/6/2014 | | | | | | | 64,750 | | | 2,000,128 | ||||||||||||||||||||||||||||||||||||
2014 LTIP Performance Stock Options |
2/6/2014 | 2/6/2014 | | | | | | | | 131,840 | 30.89 | 2,000,013 | ||||||||||||||||||||||||||||||||||||
Glen W. Hauenstein |
||||||||||||||||||||||||||||||||||||||||||||||||
2014 MIP |
1/1/2014 | 12/11/2013 | 393,750 | 787,500 | 1,575,000 | | | | | | | | ||||||||||||||||||||||||||||||||||||
2014 LTIP Performance Award |
2/6/2014 | 2/6/2014 | | | | 875,000 | 1,750,000 | 3,500,000 | | | | 1,750,000 | ||||||||||||||||||||||||||||||||||||
2014 LTIP Restricted Stock |
2/6/2014 | 2/6/2014 | | | | | | | 56,660 | | | 1,750,227 | ||||||||||||||||||||||||||||||||||||
Paul A. Jacobson |
||||||||||||||||||||||||||||||||||||||||||||||||
2014 MIP |
1/1/2014 | 12/11/2013 | 375,000 | 750,000 | 1,500,000 | | | | | | | | ||||||||||||||||||||||||||||||||||||
2014 LTIPPerformance Award |
2/6/2014 | 2/6/2014 | | | | 637,500 | 1,275,000 | 2,550,000 | | | | 1,275,000 | ||||||||||||||||||||||||||||||||||||
2014 LTIP Restricted Stock |
2/6/2014 | 2/6/2014 | | | | | | | 41,280 | | | 1,275,139 | ||||||||||||||||||||||||||||||||||||
W. Gil West |
||||||||||||||||||||||||||||||||||||||||||||||||
2014 MIP |
1/1/2014 | 12/11/2013 | 375,000 | 750,000 | 1,500,000 | | | | | | | | ||||||||||||||||||||||||||||||||||||
2014 LTIP Performance Award |
2/6/2014 | 2/6/2014 | | | | 637,500 | 1,275,000 | 2,550,000 | | | | 1,275,000 | ||||||||||||||||||||||||||||||||||||
2014 LTIP Restricted Stock |
2/6/2014 | 2/6/2014 | | | | | | | 41,280 | | | 1,275,139 |
(1) | For purposes of this column, the grant date for the 2014 MIP is the date the performance period began. The grant date for the 2014 LTIP is the grant date or, if earlier, the service inception date determined under FASB ASC Topic 718. |
(2) | These columns show the annual award opportunities under the 2014 MIP. For additional information about the 2014 MIP, see footnote 5 to the Summary Compensation Table and the Compensation Discussion and Analysis section of the proxy statement under Elements of Compensation Annual Incentives. |
(3) | These columns show the long-term award opportunities under the performance award component of the 2014 LTIP. For additional information about the 2014 LTIP, see footnotes 2 and 3 to the Summary Compensation Table and the Compensation Discussion and Analysis section of this proxy statement under Elements of Compensation Long-Term Incentives. |
(4) | This column shows the restricted stock component of the 2014 LTIP. |
(5) | This column shows the performance stock option component of the 2014 LTIP. For additional information about the performance stock option component of the 2014 LTIP, see footnote 4 to the Summary Compensation Table. |
(6) | The exercise price is equal to the closing price of Delta common stock on the NYSE on the date of grant. |
(7) | The amounts in this column do not represent amounts the named executive officers received or are entitled to receive. Rather, the reported amounts represent the fair value of the awards computed in accordance with FASB ASC Topic 718 on the applicable grant date or, if earlier, the service inception date. For awards subject to performance conditions, the value shown is based on the probable outcome of the performance condition as of the applicable grant date or, if earlier, the service inception date. The amounts do not reflect the risk that the awards may be forfeited in certain circumstances or, in the case of performance awards, that there is no payout, or in the case of performance stock options, that there is no vesting, if the required performance measures are not met. |
DELTA AIR LINES, INC. | 47 | EXECUTIVE COMPENSATION |
Outstanding Equity Awards at Fiscal Year-End Table
The following table provides information regarding the outstanding equity awards on December 31, 2014 for each of the named executive officers.
Name |
Grant Date(1) |
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(2) |
Option Exercise Price ($)(3) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#)(4) |
Market Value of Shares or Units of Stock That Have Not Vested ($)(5) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(6) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
||||||||||||||||||||||||||||||||
Richard H. Anderson |
||||||||||||||||||||||||||||||||||||||||
2013 LTIP-Restricted Stock |
2/7/2013 | | | | | | 157,026 | 7,724,109 | | | ||||||||||||||||||||||||||||||
One-Time TAP-Restricted Stock |
2/7/2013 | | | | | | 64,270 | 3,161,441 | | | ||||||||||||||||||||||||||||||
2014 LTIP-Restricted Stock |
2/6/2014 | | | | | | 155,020 | 7,625,434 | | | ||||||||||||||||||||||||||||||
Stock Options |
9/1/2007 | 264,300 | | | 16.88 | 8/31/2017 | | | | | ||||||||||||||||||||||||||||||
2008 LTIP-Stock Options |
4/3/2008 | 126,390 | | | 8.81 | 4/2/2018 | | | | | ||||||||||||||||||||||||||||||
Merger Award-Stock Options |
10/29/2008 | 1,520,000 | | | 7.99 | 10/28/2018 | | | | | ||||||||||||||||||||||||||||||
2012 LTIP-Performance Stock Options |
2/2/2012 | 212,320 | 106,160 | | 11.10 | 2/1/2022 | | | | | ||||||||||||||||||||||||||||||
2013 LTIP-Performance Stock Options |
2/7/2013 | 83,334 | 166,666 | | 14.86 | 2/6/2023 | | | | | ||||||||||||||||||||||||||||||
2014 LTIP-Performance Stock Options |
2/6/2014 | | | 252,700 | 30.89 | 2/5/2024 | | | | | ||||||||||||||||||||||||||||||
Edward H. Bastian |
||||||||||||||||||||||||||||||||||||||||
2013 LTIP-Restricted Stock |
2/7/2013 | | | | | | 78,513 | 3,862,054 | | | ||||||||||||||||||||||||||||||
One-Time TAP-Restricted Stock |
2/7/2013 | | | | | | 61,920 | 3,045,845 | | | ||||||||||||||||||||||||||||||
2014 LTIP-Restricted Stock |
2/6/2014 | | | | | | 64,750 | 3,185,053 | | | ||||||||||||||||||||||||||||||
Stock Options |
6/4/2007 | 142,900 | | | 18.84 | 4/29/2017 | | | | | ||||||||||||||||||||||||||||||
Stock Options |
9/1/2007 | 60,100 | | | 16.88 | 8/31/2017 | | | | | ||||||||||||||||||||||||||||||
2008 LTIP-Stock Options |
4/3/2008 | 71,090 | | | 8.81 | 4/2/2018 | | | | | ||||||||||||||||||||||||||||||
Merger Award-Stock Options |
10/29/2008 | 440,000 | | | 7.99 | 10/28/2018 | | | | | ||||||||||||||||||||||||||||||
2012 LTIP-Performance Stock Options |
2/2/2012 | 106,160 | 53,080 | | 11.10 | 2/1/2022 | | | | | ||||||||||||||||||||||||||||||
2013 LTIP-Performance Stock Options |
2/7/2013 | 41,667 | 83,333 | | 14.86 | 2/6/2023 | | | | | ||||||||||||||||||||||||||||||
2014 LTIP-Performance Stock Options |
2/6/2014 | | | 131,840 | 30.89 | 2/5/2024 | | | | | ||||||||||||||||||||||||||||||
Glen W. Hauenstein |
||||||||||||||||||||||||||||||||||||||||
2012 LTIP-Restricted Stock Retention Award |
2/2/2012 | | | | | | 45,050 | 2,216,010 | | | ||||||||||||||||||||||||||||||
2013 LTIP-Restricted Stock |
2/7/2013 | | | | | | 48,233 | 2,372,581 | | | ||||||||||||||||||||||||||||||
One-Time TAP-Restricted Stock |
2/7/2013 | | | | | | 40,050 | 1,970,060 | | | ||||||||||||||||||||||||||||||
2014 LTIP-Restricted Stock |
2/6/2014 | | | | | | 56,660 | 2,787,105 | | | ||||||||||||||||||||||||||||||
Stock Options |
6/4/2007 | 105,500 | | | 18.84 | 4/29/2017 | | | | | ||||||||||||||||||||||||||||||
Stock Options |
11/1/2007 | 67,000 | | | 20.20 | 10/31/2017 | | | | | ||||||||||||||||||||||||||||||
2008 LTIP-Stock Options |
4/3/2008 | 31,600 | | | 8.81 | 4/2/2018 | | | | | ||||||||||||||||||||||||||||||
Paul A. Jacobson |
||||||||||||||||||||||||||||||||||||||||
2013 LTIP-Restricted Stock |
2/7/2013 | | | | | | 41,500 | 2,041,385 | | | ||||||||||||||||||||||||||||||
One-Time TAP-Restricted Stock |
2/7/2013 | | | | | | 32,640 | 1,605,562 | | | ||||||||||||||||||||||||||||||
2014 LTIP-Restricted Stock |
2/6/2014 | | | | | | 41,280 | 2,030,563 | | | ||||||||||||||||||||||||||||||
Stock Options |
6/4/2007 | 40,100 | | | 18.84 | 4/29/2017 | | | | | ||||||||||||||||||||||||||||||
2008 LTIP-Stock Options |
4/3/2008 | 7,900 | | | 8.81 | 4/2/2018 | | | | | ||||||||||||||||||||||||||||||
Merger Award-Stock Options |
10/29/2008 | 193,000 | | | 7.99 | 10/28/2018 | | | | | ||||||||||||||||||||||||||||||
W. Gil West |
||||||||||||||||||||||||||||||||||||||||
2013 LTIP-Restricted Stock |
2/7/2013 | | | | | | 41,500 | 2,041,385 | | | ||||||||||||||||||||||||||||||
One-Time TAP-Restricted Stock |
2/7/2013 | | | | | | 32,640 | 1,605,562 | | | ||||||||||||||||||||||||||||||
2014 LTIP-Restricted Stock |
2/6/2014 | | | | | | 41,280 | 2,030,563 | | |
(1) | For purposes of this column, the grant date for the awards is the grant date or, if earlier, the service inception date determined under FASB ASC Topic 718. |
(2) | The 2014 LTIP Performance Stock Options vest as follows: (a) if there is a payout under the Profit Sharing Program for 2014, then ratably over three years with 1/3 vesting on each of February 1, 2015, 2016 and 2017; (b) if there is no payout under the Profit Sharing Program for 2014, but there is a payout for 2015, then 2/3 vest on February 1, 2016 and 1/3 vest on February 1, 2017; and (c) if there is no payout for 2014 or 2015 under the Profit Sharing Program, then the options will be forfeited. Because there was a payout for 2014 under the Profit Sharing Program, the options vest as described in |
EXECUTIVE COMPENSATION | 48 | DELTA AIR LINES, INC. |
(a) of the foregoing sentence, except that the first vesting date occurred on February 5, 2015, the date on which the P&C Committee certified the satisfaction of the performance measure. Performance stock options are subject to forfeiture in certain circumstances. |
(3) | The exercise price of the stock options other than those granted on September 1, 2007 is the closing price of Delta common stock on the NYSE on the applicable grant date. The exercise price of the stock options granted on Saturday, September 1, 2007 is the closing price of the common stock on the NYSE on Friday, August 31, 2007, the last trading day immediately preceding the grant date. |
(4) | These shares of restricted stock vest as follows: |
February 2, 2012 Retention Award Grant Date. In equal installments on February 1, 2014 and 2015.
February 7, 2013 LTIP Grant. In equal installments on February 1, 2014, 2015 and 2016.
One-Time TAP Grant. On February 1, 2015.
February 6, 2014 LTIP Grant Date. In equal installments on February 1, 2015, 2016 and 2017.
Restricted stock is subject to forfeiture in certain circumstances.
(5) | In accordance with SEC rules, the amounts in this column for the market value of restricted stock are based on the $49.19 closing price of Delta common stock on the NYSE on December 31, 2014. |
(6) | This table does not include the performance award component of the 2014 LTIP and the 2013 LTIP because (a) these award opportunities are denominated in dollars and (b) the payout, if any, earned by the named executive officers will be made in stock based on achievement of the average annual operating income margin, the return on invested capital and customer service performance measures during the measurement periods for each program. For additional information about the performance award component of the 2014 LTIP, see footnote 2 to the Summary Compensation Table and the Grants of Plan-Based Awards Table in this proxy statement. |
Option Exercises and Stock Vested Table
The following table provides information regarding the vesting of stock for the named executive officers in 2014.
Option Awards | Stock Awards | |||||||||||||||
Name |
Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($) (1) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) (2) |
||||||||||||
Richard H. Anderson |
0 | 0 | 277,570 | 9,139,297 | ||||||||||||
Edward H. Bastian |
0 | 0 | 157,966 | 5,454,660 | ||||||||||||
Glen W. Hauenstein |
0 | 0 | 143,384 | 4,789,534 | ||||||||||||
Paul A. Jacobson |
0 | 0 | 59,793 | 2,156,751 | ||||||||||||
W. Gil West |
0 | 0 | 95,365 | 2,919,123 |
(1) | The value realized on exercise is based on the difference between the market price on the date of exercise and the exercise price of the options. |
(2) | The value realized on vesting is based on the closing price of Delta common stock on the NYSE on the applicable vesting date. These amounts represent the vesting of award opportunities granted in 2012 and 2013. |
DELTA AIR LINES, INC. | 49 | EXECUTIVE COMPENSATION |
Defined Benefit Pension Benefits
Qualified Nonpilot Retirement Plan. The Delta Retirement Plan (Retirement Plan) is a broad-based, non-contributory qualified defined benefit pension plan for Delta nonpilot employees. To participate in the Retirement Plan, a nonpilot employee must have completed 12 months of service before the plan was frozen on December 31, 2005. As a result, Mr. Bastian and Mr. Jacobson are eligible to participate in the Retirement Plan but Mr. Anderson, Mr. Hauenstein and Mr. West are not. We do not offer any supplemental executive retirement plans or deferred compensation plans to our named executive officers.
Until July 1, 2003, benefits for participants in the Retirement Plan, including the eligible named executive officers, were calculated using only a final average earnings formula (FAE formula). Under this formula, the benefit is based on an employees (1) final average earnings; (2) years of service prior to January 1, 2006; (3) age when the payment of benefits begins (which may not be before age 52); and (4) primary Social Security benefit. Final average earnings are the average of an employees highest average monthly earnings (based on the employees salary and eligible annual incentive compensation, if any) for the 36 consecutive months in the 120-month period immediately preceding the earlier of termination of employment or January 1, 2006. The monthly retirement benefit payable at the normal retirement age of 65 is determined by multiplying final average earnings by 60%, and then reducing that amount for service of less than 30 years with Delta and by 50% of the primary Social Security benefit payable to the employee. The 50% Social Security offset is also reduced for service of less than 30 years. Participants become fully vested in their FAE formula benefits after completing three years of service. Benefits determined under the FAE formula are paid in the form of a monthly annuity.
Effective July 1, 2003, the Retirement Plan was amended to transition to a cash balance formula. Generally, for employees hired (or rehired) after July 1, 2003, retirement benefits earned after that date are based only on the cash balance formula. Under this formula, each participant has an account, for recordkeeping purposes only, to which pay credits were allocated annually until January 1, 2006. These pay credits were based on 6% of a participants salary and eligible annual incentive compensation, if any. In addition, all balances in a participants account are credited with an annual interest credit which is currently based on a market rate of interest (the Annual Interest Credit). Participants become fully vested in their cash balance formula benefits after completing three years of service. At termination of employment, an amount equal to the then-vested balance of a participants cash balance account is payable to the participant, at his election, in the form of an immediate or deferred lump sum (to the extent the lump sum payment is available under the Internal Revenue Code) or equivalent monthly annuity benefit.
Employees covered by the Retirement Plan who were employed on July 1, 2003 are eligible for transition benefits as long as they remained continuously employed. For the period that began July 1, 2003 and ended December 31, 2005, these employees earned retirement benefits equal to the greater of the benefit determined under the Retirement Plans FAE formula or its cash balance formula.
Effective December 31, 2005, the Retirement Plan was amended (1) to freeze accrual of future benefits attributable to years of service and pay increases after December 31, 2005 under the FAE formula; and (2) to cease pay credits under the cash balance formula. Effective March 31, 2007, all benefits under the Retirement Plan were frozen; however, Annual Interest Credits will continue to be added to the cash balance account after December 31, 2005.
EXECUTIVE COMPENSATION | 50 | DELTA AIR LINES, INC. |
The table below shows certain pension benefit information for Mr. Bastian and Mr. Jacobson as of December 31, 2014. The table does not include any information for Mr. Anderson, Mr. Hauenstein or Mr. West because they are not eligible to participate in the Retirement Plan.
Name | Plan Name | Number of Years of Credited Service (as of December 31, 2014) (1) |
Present Value of Accumulated Benefits ($) (2) |
Payments During Last Fiscal Year |
||||||||
Mr. Bastian (3) |
Delta Retirement Plan |
|
6 years, 10 months |
|
FAE Formula: 243,622 Cash Balance Formula: 66,693 |
0 | ||||||
Mr. Jacobson (4) |
Delta Retirement Plan |
|
8 years, 2 months |
|