DEF 14A of Delta Air Lines, Inc.
Filed Apr 27, 2018 · FY20170001193125-18-139175
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Agenda At the Annual Meeting, you will be asked to vote on the following proposals:
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| Item | | Board Recommends Vote: | | 1 | Election of 12 directors named in the Proxy Statement | FOR | | 2 | Advisory vote on executive compensation | FOR | | 3 | Ratification of Ernst & Young LLP as independent auditors for 2018 | FOR |
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In addition, we will transact any other business properly presented at the meeting, including any adjournment or postponement thereof, by or at the direction of the Board of Directors. A list of shareholders entitled to vote at the meeting will be available for examination during normal business hours for ten days before the meeting at Delta’s Investor Relations Department, 1030 Delta Boulevard, Atlanta, Georgia 30354. The shareholder 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. Shareholders without appropriate documentation may not be admitted to the meeting. If you plan to attend the meeting, please see the instructions on page 9 of the attached proxy statement. If you will need special assistance at the meeting because of a disability, contact Investor Relations at (866) 715-2170. We encourage shareholders to sign up to receive future proxy materials electronically, including the Notice Regarding the Availability of Proxy Materials. 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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| | | | Edward H. Bastian | Francis S. Blake | | Chief Executive Officer | Chairman of the Board |
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Atlanta, Georgia May 18, 2018 2017 Performance Highlights
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| 2017 was our third consecutive year with more than $5 billion in both GAAP pre-tax income and adjusted pre-tax income. Over the past three years, Delta has generated a cumulative $17.5 billion in adjusted pre-tax income in varying fuel, revenue and cost environments. | | |
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| | Our operational excellence continued in 2017, with 242 days with no mainline cancellations, slightly better than 2016. In 2017, we did not have a single mainline cancellation on roughly two of every three days. |
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| Our investments in the customer experience, onboard our aircraft, in airports, and in customer-facing technology continue to yield benefits, with our revenue premium to the industry expanding from 9% to 10%. During 2017, we improved net promoter scores in every region and increased our overall score by 2 points, including an all-time high in November. | |
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| | We returned $2.4 billion to our shareholders in 2017 and raised our dividend by 50% for the fourth year in a row. |
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| We have consistently used our strong cash flow to strengthen our balance sheet, ending 2017 with debt and capital lease obligations of $8.8 billion, while reducing unfunded pension obligations. In 2017, we received our third investment grade credit rating, and our defined benefit pension is at the highest funded level since our merger with Northwest. | |
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| See “Supplemental Information about Financial Measures” on page 59 for reconciliations of non-GAAP measures and reasons we use them.* |
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Director Nominees
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| Director | Age | Director Since | Occupation | Other Public Boards | Current Delta Committees | | Independent Directors | | | | | | | Francis S. Blake | 68 | 2014 | Former Chairman and CEO of The Home Depot, Inc. | 2 | Audit Corporate Governance* Personnel & Compensation | | Daniel A. Carp | 70 | 2007 | Former Chairman and CEO of Eastman Kodak | 2 | Corporate Governance Finance Personnel & Compensation* | | Ashton B. Carter | 63 | 2017 | Director of the Belfer Center for Science and International Affairs at Harvard Kennedy School | 0 | Audit Safety & Security | | David G. DeWalt | 54 | 2011 | Former Executive Chairman and CEO of FireEye | 2 | Audit Safety & Security** | | William H. Easter III | 68 | 2012 | Former Chairman, President and CEO of DCP Midstream | 2 | Audit* Corporate Governance Safety & Security | | Michael P. Huerta | 61 | 2018 | Former Administrator, Federal Aviation Administration | 0 | Audit Safety & Security | | Jeanne P. Jackson | 66 | 2017 | Former Senior Strategic Advisor to the CEO of NIKE, Inc. | 2 | Finance Personnel & Compensation | | George N. Mattson | 52 | 2012 | Former Partner of Goldman Sachs | 1 | Corporate Governance Finance* Personnel & Compensation | | Sergio A.L. Rial | 57 | 2014 | CEO of Banco Santander Brazil | 1 | Finance Personnel & Compensation | | Kathy N. Waller | 60 | 2015 | Executive Vice President, CFO and President, Enabling Services of The Coca-Cola Company | 1 | Audit Corporate Governance Safety & Security | | Non-Independent Directors | | | | | | | Edward H. Bastian | 60 | 2010 | CEO of Delta | 1 | n/a | | Douglas R. Ralph | 63 | 2015 | Captain, B767ER, Delta | 0 | Finance Safety & Security |
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| Chair* |
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| Vice Chair (expected to become Chair upon Mr. Foret’s retirement)** |
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Most of the Board nominees are independent; as a result of robust board succession planning, they also have a mixture of tenure and five of twelve are diverse. Executive Compensation Program Our executive compensation program is based on the philosophy that we can best achieve our short-term and long-term business goals, which we refer to as our Flight Plan, by closely linking pay to performance and aligning the interests of all Delta employees, including executive officers, with our customers and shareholders.
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| Performance-Based | Employee-Aligned | Equity-Based | | • Ninety-four percent of our Chief Executive Officer’s target compensation opportunity is at risk • Pay is linked to performance based on the achievement of financial, operational, customer service and stock price performance measures | • Our people are critical to our success and we are committed to Delta being a great place to work • Our annual and long-term incentive plans include incentives that also drive payouts to frontline employees under our broad-based profit sharing and shared rewards programs | • Eighty-one percent of Mr. Bastian’s target compensation is delivered through equity-based opportunities • Equity-based incentives focus on long-term shareholder value and align our executive officers’ interests with shareholders by rewarding strategic success |
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Notable Accomplishments:
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| • | Our 2017 financial performance resulted in $1.1 billion paid to our people under our broad-based profit sharing program — the fourth consecutive year of payouts in excess of $1 billion. |
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| • | Our commitment to our people was recognized externally — including on Fortune’s 100 Best Companies to Work For list in 2017 and 2018. |
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| • | The Personnel & Compensation Committee of the Board of Directors reviewed and updated the performance measures used in our 2017 annual and long-term incentive plans, including adding a relative total shareholder return performance measure. |
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| • | We expanded the use of performance stock options beyond our Chief Executive Officer. |
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Governance Highlights
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| ☑ Independent chairman | | ☑ All directors elected annually; average Board tenure of nominees is 4 years | | ☑ Ongoing Board succession efforts — five new directors from 2015 to the present. Board committee refreshment in 2017 | | ☑ Majority voting for directors in uncontested elections | | ☑ Bylaws provide for proxy access | | ☑ Corporate Governance Principles provide no outside director will stand for re-election after age 72 | | ☑ Robust annual self-assessment of Board and Board committees | | ☑ Regular formal succession planning for management and the Board of Directors, evidenced by successful senior leadership transitions and new Board members | | ☑ Anti-hedging and anti-pledging policy for all employees and Board members | | ☑ Corporate Governance Principles prohibit ownership of specific airline competitors’ stock by Board members and officers | | ☑ Meaningful stock ownership and retention guidelines for Board members and executive officers | | ☑ No shareholder rights plan (poison pill) or super-majority voting | | ☑ No employment agreements or supplemental executive retirement plans for officers |
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Independence All independent except CEO and ALPHA Nominee Board Tenure Average tenure 4 years Diversity 5 of 12 directors are diverse from racial, gender or ethnic standpoint Sustainability Highlights Delta is committed to being a good steward of the environment, a positive force in our communities and a great place to work and fly. For Delta, sustainability means “meeting the Company’s financial goals of growth and profitability over time, through innovative business practices that minimize the environmental impacts on Delta operations while promoting the health, welfare and productivity of the individuals and communities we employ and serve.” Environmental, social and governance (ESG) highlights include:
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| ☑ Continued to focus on fleet and operational efficiency by balancing aircraft age with long-term corporate financial sustainability with plans to replace approximately 30% of our mainline fleet by 2020 with newer, more fuel-efficient aircraft | | ☑ Achieved carbon neutral growth since 2012 through voluntary purchases of carbon offsets while simultaneously focusing on fuel efficiency and management of our carbon footprint in line with industry goals | | ☑ Being the first legacy airline to report a verified annual greenhouse gas emissions inventory, with continued verification under the Climate Registry, a non-profit organization that verifies carbon footprints | | ☑ Named to the Dow Jones North American Sustainability Index in 2017, the seventh consecutive year | | ☑ Named to the FTSE4 Good, European (Sustainability) Index in 2017, the third consecutive year | | ☑ Amended the charter of the Corporate Governance Committee of the Board of Directors in 2017 to provide for committee oversight over Delta’s sustainability efforts | | ☑ Launched a 20 person cross-divisional ESG steering committee in 2017, overseeing sustainability reporting across Delta | | ☑ Responded to a large number of customer, industry and rating agency ESG disclosure requests, including Sustainalytics, MSCI and ISS, while also engaging with institutional investors and organizations such as the SASB on ESG trends and opportunities | | ☑ Engaged the Georgia Tech Ray C. Anderson Center for Sustainable Business to evolve Delta’s ESG sustainability efforts | | ☑ Contributed over $40 million in 2017 as part of our annual commitment to donate 1% of our net income to key charitable organizations |
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More information about our sustainability practices is in our Global Reporting Initiative (GRI)-compliant Corporate Responsibility Report. Active Investor Outreach We have long-standing, active engagement with our investors. Our senior management meets with investors at our annual Investor Day and more than 10 industry conferences throughout the year. In 2017, management initiated contact with approximately 90% of our top 20 investors and 95% of our top 20 actively-managed investors to discuss governance and financial performance of the company. Annually we invite our largest 25 investors to discuss recent changes in our executive compensation program, financial performance, the say on pay proposal, and other agenda items for the annual meeting. In 2017 we also discussed our process for Board and CEO succession, Board diversity, investor views on ESG matters, changes in our proxy statement disclosures, our adoption of a proxy access bylaw and returns to shareholders through share buybacks and dividends. We regularly report our investors’ views to our Board of Directors, and its Personnel & Compensation Committee considers these views when developing our executive compensation program. In addition, we engage with analysts through quarterly conference calls, our investor relations website and meetings and calls. We have dedicated resources to engage with all shareholders through monitoring of investor relations e-mail, and use social media to convey key investment messages with a broader audience.
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| Proxy Statement Summary | 1 | | 2017 Performance Highlights | 1 | | Director Nominees | 2 | | Executive Compensation Program | 3 | | Governance Highlights | 3 | | Sustainability Highlights | 4 | | Active Investor Outreach | 4 | | General Information | 6 | | Internet Availability of Proxy Materials | 6 | | Shareholders Entitled to Vote | 6 | | Quorum for the Annual Meeting | 6 | | Voting Information | 6 | | Revoking a Proxy or Voting Instructions | 8 | | Limitation on Brokers’ Authority to Vote Shares | 8 | | Votes Necessary to Act on Proposals | 8 | | Recommendations of the Board of Directors | 8 | | Presentation of Other Business at the Meeting | 9 | | Attending the Meeting | 9 | | Householding | 9 | | Governance Matters | 10 | | Governance Overview | 10 | | Director Independence | 10 | | Directors Elected Annually; Majority Voting for Directors | 10 | | Identification and Selection of Nominees for Director | 10 | | Audit Committee Financial Experts | 11 | | Compensation Committee Interlocks and Insider Participation | 11 | | Communications with Directors | 11 | | Board of Directors | 11 | | Board of Directors Leadership Structure | 11 | | Board Committees | 13 | | Board Oversight of Risk Management | 14 | | Board of Directors Succession | 14 | | Board and Committee Evaluation Process | 14 | | Proposal 1 — Election of Directors | 15 | | Information About Nominees | 15 | | Beneficial Ownership of Securities | 21 | | Directors, Nominees for Director and Executive Officers | 21 | | Beneficial Owners of More than 5% of Voting Stock | 22 |
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| Executive Compensation | 23 | | Compensation Discussion and Analysis | 23 | | Information about Summary Compensation Table and Related Matters | 39 | | Summary Compensation Table | 39 | | Grants of Plan-Based Awards Table | 41 | | Outstanding Equity Awards at Fiscal Year-End Table | 42 | | Option Exercises and Stock Vested Table | 43 | | Post-Employment Compensation | 43 | | Defined Benefit Pension Benefits | 43 | | Pension Benefits Table | 44 | | Potential Post-Employment Benefits upon Termination or Change in Control | 44 | | Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control | 48 | | CEO Pay Ratio | 50 | | Director Compensation | 51 | | Director Compensation Table | 52 | | Stock Ownership Guidelines | 53 | | Audit Committee Report | 54 | | Proposal 2 — Advisory Vote on Executive Compensation | 56 | | Proposal 3 — Ratification of the Appointment of Independent Auditors | 57 | | Fees of Independent Auditors for 2017 and 2016 | 57 | | Pre-Approval of Audit and Non-Audit Services | 58 | | Other Matters | 59 | | Cost of Solicitation | 59 | | Submission of Shareholder Proposals | 59 | | Section 16 Beneficial Ownership Reporting Compliance | 59 | | Supplemental Information about Financial Measures | 59 |
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Internet Availability of Proxy Materials All of our proxy materials (including our 2017 Form 10-K) are made available to our shareholders on the Internet, rather than mailing paper copies to each shareholder. 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. 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 shareholders beginning on or about May 18, 2018. Shareholders Entitled to Vote The Board of Directors set May 2, 2018 as the record date for the meeting. This means that our shareholders as of the close of business on that date are entitled to notice of and to vote at the annual meeting. On April 20, 2018, 701,476,922 shares of Delta common stock were outstanding and we do not expect the number of shares will 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. Quorum for the Annual Meeting 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. Voting Information It is important that you vote in order to play a part in the future of the company. Please carefully review the proxy materials and follow the instructions below to cast your vote.
Independence of Audit, Corporate Governance and Personnel & Compensation Committee Members
| Edward H. Bastian Age: 60 Joined Delta’s Board: February 5, 2010 | Mr. Bastian is the Chief Executive Officer of Delta. Previously, he served as President of Delta from 2007 to May 2016 and President of Delta and Chief Executive Officer of Northwest Airlines, Inc. from 2008 to 2009. Mr. Bastian was also 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. Qualifications: Mr. Bastian has over sixteen years of experience as a Delta officer, including serving as Delta’s Chief Executive Officer, President, Chief Financial Officer, Chief Restructuring Officer during its Chapter 11 bankruptcy proceeding and Northwest Airlines, Inc.’s Chief Executive Officer after the merger. Mr. Bastian’s accounting and finance background provides financial and strategic expertise to the Board of Directors. Directorships: Grupo Aeroméxico, S.A.B. de C.V.; GOL Linhas Aereas Inteligentes, S.A. (2012-2016) Affiliations: Member, Board of Woodruff Arts Center | | Francis S. Blake Age: 68 Joined Delta’s Board: July 25, 2014 Committees: Audit; Corporate Governance (Chair); Personnel & Compensation | Mr. Blake is the non-executive Chairman of Delta’s Board of Directors and previously served as the lead director of Delta’s Board from May 2016 to October 2016. He served as the Chairman of The Home Depot from 2007 until his retirement in February 2015. He was the Chief Executive Officer of The Home Depot from 2007 to November 2014 and previously served as Vice Chairman of the Board of Directors and its Executive Vice President. He joined The Home Depot in 2002 as Executive Vice President — Business 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. Qualifications: Mr. Blake has extensive 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 and governance committees. Directorships: Macy’s, Inc.; The Procter & Gamble Company Affiliations: Member, Board of Georgia Aquarium; Member, Board of Grady Hospital; Member, Board of Agnes Scott College |
Independence of Audit, Corporate Governance and Personnel & Compensation Committee Members
| Daniel A. Carp Age: 70 Joined Delta’s Board: April 30, 2007 Committees: Corporate Governance; Finance; Personnel & Compensation (Chair) | Mr. Carp served as non-executive Chairman of Delta’s Board of Directors from 2007 until May 2016. 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. Qualifications: Mr. Carp has 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 boards of directors of large public companies other than Delta, Mr. Carp has experience on audit, compensation, finance and governance committees. Directorships: Norfolk Southern Corporation; Texas Instruments Inc. | | Ashton B. Carter Age: 63 Joined Delta’s Board: October 23, 2017 Committees: Audit; Safety & Security | Secretary Carter is Director of the Belfer Center for Science and International Affairs at Harvard Kennedy School and an Innovation Fellow at MIT. Secretary Carter served as U.S. Secretary of Defense from 2015 to 2017. He served as Senior Executive at the Markle Foundation and a Fellow at Stanford University from 2014 to 2015. In prior service in the Department of Defense, Mr. Carter served as Deputy Secretary of Defense from 2011 to 2013, functioning as the department’s chief operating officer, and as Undersecretary of Defense of Acquisition, Technology and Logistics from 2009 to 2011. Mr. Carter served as the Chair of the International and Global Affairs Faculty and Professor of Science at Harvard from 2000 to 2009. Qualifications: Secretary Carter has substantial experience in government and security matters, having served directly and indirectly under 11 Secretaries of Defense in both Democratic and Republican administrations. As Secretary of Defense, Secretary Carter managed a complex and diverse organization. Secretary Carter was recommended to the Board’s Corporate Governance Committee as a new director by a third party search firm. Affiliations: Board Member, Council on Foreign Relations; Fellow, American Academy of Arts and Sciences; International Institute for Strategic Studies; National Committee on U.S.-China Relations | | David G. DeWalt Age: 54 Joined Delta’s Board: November 22, 2011 Committees: Audit; Safety & Security (Vice Chair, expected to become Chair upon Mr. Foret’s retirement) | Mr. DeWalt most recently served as the Executive Chairman of FireEye, Inc., a global network cyber security company. Mr. DeWalt served as FireEye’s Chief Executive Officer from November 2012 to June 2016 and Chairman of the Board from June 2012 to January 2017. 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. Qualifications: Mr. DeWalt has substantial expertise in the information technology security industry and has strategic and operational experience as the former Chief Executive Officer of FireEye, Inc. and former Chief Executive Officer of McAfee, Inc. As a member of the boards of directors of public companies other than Delta, Mr. DeWalt has served on the audit and compensation committees. Directorships: Five9, Inc.; Forescout Technologies, Inc.; FireEye, Inc. (2012-2017); Jive Software, Inc. (2011-2013); Polycom Inc. (2005-2013) Affiliations: National Security & Technology Advisory Committee |
Independence of Audit, Corporate Governance and Personnel & Compensation Committee Members
| William H. Easter III Age: 68 Joined Delta’s Board: December 3, 2012 Committees: Audit (Chair); Corporate Governance; Safety & Security | Mr. Easter was Chairman, President and Chief Executive Officer 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. Qualifications: Mr. Easter has 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 boards of directors of other public companies where he served on the audit, corporate governance, compensation and finance committees. Since his retirement from DCP Midstream, LLC, Mr. Easter has been involved in private investments. Directorships: Concho Resources, Inc.; Grupo Aeroméxico, S.A.B. de C.V.; BakerHughes, Inc. (2014-2017) Affiliations: Member, Board of Memorial Hermann Health System, Houston, Texas | | Michael P. Huerta Age: 61 Joined Delta’s Board: April 20, 2018 Committees: Audit; Safety & Security | Mr. Huerta is a Senior Advisor to Macquarie Capital. Mr. Huerta recently completed a five-year term as Administrator of the Federal Aviation Administration (FAA). Before being named as Administrator, Mr. Huerta served as Acting Administrator of the FAA from 2011 to 2013 and FAA Deputy Administrator from 2010 to 2011. Mr. Huerta served as Executive Vice President and Group President of the Transportation Solutions Group at Affiliated Computer Services, Inc. (now Conduent) from 2008 to 2009 and Senior Vice President and Managing Director, Transportation Solutions of ACS Government Solutions from 2002 to 2008. Qualifications: As head of the FAA, Mr. Huerta led a complex organization that is responsible for the safety and efficiency of civil aviation in the U.S. Throughout his career, he has held key transportation industry roles in both the public and private sectors. Mr. Huerta was recommended to the Board’s Corporate Governance Committee as a new director by a third party search firm. Affiliations: Fellow of the Royal Aeronautical Society | | Jeanne P. Jackson Age: 66 Joined Delta’s Board: January 25, 2017 Committees: Finance; Personnel & Compensation | Ms. Jackson retired as senior strategic advisor to the chief executive officer of NIKE, Inc. effective August 2017. She served as NIKE’s President, Product and Merchandising from July 2013 until April 2016 and President, Direct to Consumer from 2009 until July 2013. Ms. Jackson joined the NIKE Executive team in 2009 after serving on its Board of Directors for eight years. She founded and served as the Chief Executive Officer of MSP Capital, a private investment company from 2002 to 2009, and has resumed the role since retiring from NIKE. Ms. Jackson served as Chief Executive Officer of Walmart.com, a private e-commerce enterprise, from 2000 to 2002. Ms. Jackson previously served in various leadership positions at Gap Inc., Victoria’s Secret, Saks Fifth Avenue and Federated Department Stores, Inc., all clothing retailers, and Walt Disney Attractions, Inc., the theme parks and vacation resorts division of The Walt Disney Company. Qualifications: Ms. Jackson has extensive experience as a senior executive for a major consumer retailer, with expertise in consumer product and direct to consumer marketing. She has also served on boards of directors of public companies in the consumer product industry. Directorships: McDonald’s Corporation; Kraft Heinz Company Affiliations: United States Ski & Snowboard Association |
Independence of Audit, Corporate Governance and Personnel & Compensation Committee Members
| George N. Mattson Age: 52 Joined Delta’s Board: October 1, 2012 Committees: Corporate Governance; Finance (Chair); Personnel & Compensation | Mr. Mattson served as 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 is a private investor focused on acquiring and building middle market businesses. Qualifications: Mr. Mattson has 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. Since his retirement from Goldman Sachs, Mr. Mattson has been involved in acquiring and growing middle market industrial businesses. Directorships: Air France KLM Group Affiliations: Chair of the Board of Visitors of the Pratt School of Engineering at Duke University; Advisory Board, Star Mountain Capital; Advisory Board, Comvest Partners | | Douglas R. Ralph Age: 63 Joined Delta’s Board: June 25, 2015 Committees: Finance; Safety & Security | Mr. Ralph has been a Delta pilot since 1991 and is currently a Captain 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. Prior to joining the Board of Directors, Mr. Ralph was the Chair of the Investor Relations Committee of the Delta MEC and also served on a Government Affairs Committee for the Delta MEC. Qualifications: 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. | | Sergio A. L. Rial Age: 57 Joined Delta’s Board: December 9, 2014 Committees: Finance; Personnel & Compensation | Mr. Rial has been Chief Executive Officer since January 2016 of Banco Santander Brazil, the third largest private bank in Brazil and a member of Santander Group, the largest bank in the Eurozone. Mr. Rial served as Chairman of Banco Santander Brazil from February 2015 until January 2016. From 2012 to February 2015, Mr. Rial was Chief Executive Officer of Marfrig Global Foods, one of the world’s largest meat companies with operations in Brazil and 15 other countries. Prior to joining Marfrig in 2012, Mr. 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, Mr. Rial served as Chief Financial Officer from 2009 to 2011 and Executive Vice President from 2011 to 2012. He was also a member of Cargill’s board of directors from 2010 to 2012. From 2002 to 2004, Mr. 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. Qualifications: Mr. Rial has experience as a chief executive officer in global business, particularly in the key market of Latin America, and has 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. Directorships: Banco Santander (Brazil) S.A.; Cyrela Brazil Realty S.A. (2010-2015); The Mosaic Company (2010-2011) Affiliations: Co-Chair of the Latin America Conservation Council (The Nature Conservancy) |
Independence of Audit, Corporate Governance and Personnel & Compensation Committee Members
| Kathy N. Waller Age: 60 Joined Delta’s Board: July 24, 2015 Committees: Audit; Corporate Governance; Safety & Security | Ms. Waller has been the Executive Vice President and Chief Financial Officer of The Coca-Cola Company since 2014. Effective May 1, 2017, Ms. Waller assumed responsibility for Coca-Cola’s strategic governance area as Executive Vice President, Chief Financial Officer and President, Enabling Services. Ms. Waller joined Coca-Cola in 1987 as a senior accountant and has assumed roles of increasing responsibility during her career, including Vice President, Finance and Controller. Qualifications: Ms. Waller has extensive financial experience with a global business enterprise, including her role as Chief Financial Officer. Ms. Waller’s accounting and finance background provides financial and strategic expertise to the Board of Directors. Directorships: Monster Beverage Corporation; Coca-Cola FEMSA, S.A.B. de C.V. (2015-2017) |
Administration of the Executive Compensation Program
Administration of the Executive Compensation Program Personnel & Compensation Committee. The Personnel & Compensation Committee oversees the development of, reviews and approves the executive compensation program to ensure that it is designed to link pay with company performance. In this role, the Personnel & Compensation Committee administers and approves the design and terms of the annual and long-term incentive compensation plans and establishes the compensation of the Chief Executive Officer and other executive officers. Compensation Consultant. In 2017, after considering the six factors provided under the NYSE listing standards and Item 407(e)(3)(iii) of SEC Regulation S-K, the Personnel & Compensation Committee retained Meridian Compensation Partners, LLC (Meridian) as its executive compensation consultant for the fifth consecutive year. In this role, Meridian provides advice regarding Delta’s executive compensation strategy and programs, the compensation of the Chief Executive Officer and other executive officers, evolving industry practices and also provides market information and analysis regarding the competitiveness of our program design. Meridian meets regularly with the Personnel & Compensation Committee in executive session without management. Meridian also serves as independent compensation consultant to the Corporate Governance Committee to provide advice regarding, and benchmarking of, Delta’s compensation for the non-executive Chairman of the Board and non-employee directors. Meridian provides no other services to Delta; it may, however, work directly with management on behalf of the Personnel & Compensation Committee, but this work is always under the control and supervision of the Personnel & Compensation Committee. The Personnel & Compensation Committee considered Meridian’s advice when determining executive compensation plan design and award levels in 2017. Management. Under the supervision of the Personnel & Compensation Committee, Delta’s human resources department is responsible for the ongoing administration of the executive compensation program. The Executive Vice President & Chief Human Resources Officer and her staff serve the Personnel & Compensation Committee and, in cooperation with the compensation consultant, prepare proposed compensation programs and policies for review by the Personnel & Compensation Committee at the request of the Personnel & Compensation Committee and the Chief Executive Officer. In addition, the Chief Executive Officer makes recommendations to the Personnel & Compensation 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 Vice President — Corporate Audit 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.
Executive Compensation Philosophy and Objectives
| • | Directly supports our Flight Plan by utilizing challenging performance measures that provide incentives that deliver value to our customers and shareholders and drive payouts to frontline employees under our broad-based Profit Sharing and Shared Rewards Programs. |
Performance Measure Selection
Performance Measure Selection Consistent with our executive compensation philosophy, the Personnel & Compensation Committee selects performance measures to support our Flight Plan and to closely align the interests of the named executive officers with our key stakeholders. The performance measures included under our 2017 annual and long-term incentive plans are different under each plan and demonstrate how the Personnel & Compensation Committee incorporates the elements of our Flight Plan to incentivize performance that benefits our people, customers and shareholders. The Personnel & Compensation Committee recognizes that the performance measures used under our annual and long-term incentive plans may need to change over time to reflect evolving priorities. Accordingly, the Personnel & Compensation Committee, together with company management and the compensation consultant, evaluates the performance measures used in our incentive plans each year to ensure that they are consistent with Delta’s long-term strategic plan, as well as our annual Flight Plan goals. Our goals to maintain top-tier financial and operational performance, reduce our non-fuel costs and earn and maintain customer loyalty remained cornerstones of the 2017 Flight Plan. The Flight Plan also reflected Delta’s view of 2017 as a transition year to focus on returning to positive unit revenue growth and our emphasis on strengthening our global partnerships and alliances. As a result of this evaluation, changes were made to the performance measures under the 2017 annual and long-term incentive plans, as described below. Annual Incentive Plan. The Personnel & Compensation Committee retained the same absolute financial and operational performance measures used in 2016. These measures are also utilized under the Profit Sharing and Shared Rewards Programs, thereby aligning the interests of Delta management with our people. Last year’s revenue measure, which was transitioned to the long-term incentive program, was replaced in 2017 by a relative financial performance measure —Delta’s pre-tax income margin measured relative to the composite performance of other airline peers.
Performance Measure Selection
Long-Term Incentive Program. The Personnel & Compensation Committee expanded the number of performance measures under the long-term incentive program to four by adding a relative total shareholder return measure. In addition, the Personnel & Compensation Committee retained and made adjustments to the customer service performance and return on invested capital performance measures and replaced the average annual operating income margin with the revenue performance measure previously included in our annual incentive plan — Total Revenue per Available Seat Mile (TRASM).
Performance Measure Selection
| • | Relative Total Shareholder Return. This performance measure compares our long-term total shareholder return relative to all other S&P 500 member companies. The Personnel & Compensation Committee made this addition as another way to measure one of the main pillars of our Flight Plan: delivering industry-leading financial results for our shareholders. |
Comparative Market Data; Peer Group
Comparative Market Data; Peer Group Our peer group is composed 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, including revenue size, market capitalization, number of employees, operating margin and global presence. The Personnel & Compensation Committee, in consultation with the compensation consultant and company management, reviews and considers changes to the composition of our peer group annually. The Personnel & Compensation Committee continued to be satisfied with our peer group and made no changes to it in 2017. The companies in our peer group are:
Comparative Market Data; Peer Group
| Airlines: | American Airlines Group Inc. | Southwest Airlines Co. | United Continental Holdings, Inc. | | Hotel/Leisure: | Carnival Corporation | Marriott International, Inc. | | | Transportation/ Distribution: | The Coca-Cola Company FedEx Corporation Norfolk Southern Corporation | PepsiCo, Inc. Sysco Corporation | Union Pacific Corporation United Parcel Service, Inc. | | Machinery/ Aerospace/Defense: | The Boeing Company Honeywell International Inc. | L-3 Communications Corporation Textron Inc. | United Technologies Corporation | | Retail: | Best Buy Co., Inc. The Home Depot, Inc. | Lowe’s Corporation | Target Corporation |
Comparative Market Data; Peer Group
The following table shows that, compared to the peer group, Delta’s revenue is near the median and is below the median in market capitalization and with respect to its international operations as a percentage of revenue.
Comparative Market Data; Peer Group
| Peer Group | Revenue ($)(1) | Market Capitalization ($)(2) | International Operations as Percentage of Revenue (%)(3) | | 75(th) Percentile | 63,525 | 105,559 | 43 | | Median | 42,151 | 49,485 | 32 | | 25(th) Percentile | 21,240 | 31,644 | 20 | | Delta Air Lines | 41,244 | 39,771 | 28 |
Comparative Market Data; Peer Group
Source: Standard & Poors Research Insight®
Comparative Market Data; Peer Group
| Last 12 months from most recent quarter ended on or before December 31, 2017. In millions.(1) |
Comparative Market Data; Peer Group
| As of December 31, 2017. In millions.(2) |
Comparative Market Data; Peer Group
| As of the most recent fiscal year end.(3) |
Comparative Market Data; Peer Group
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 Personnel & Compensation Committee’s objective is to bring target total direct compensation opportunities to be competitive with the peer group, with individual variation based on the individual’s 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 and at-risk incentive opportunities over base salaries, which are a fixed cost. When compared to these businesses, Delta’s total compensation opportunities in 2017 for the named executive officers group in aggregate are competitive with our peer group, and take into consideration the executives’ tenure, criticality of their roles to Delta’s success, company performance, succession planning and retention. As stated above, the Personnel & Compensation Committee uses this data as a point of reference, not as the determining factor in setting compensation.
Elements of Compensation
| Component | Vehicle | Purpose | Key Characteristics | | Base Salary | Cash | • Provides a fixed amount of compensation for performing day-to-day functions based on level of responsibility, experience and individual performance | • There is no set schedule for base salary increases. Increases are periodically provided based on competitive market data or in connection with an increase in responsibilities | | Annual Incentive Plan | Cash (except in certain circumstances) | • Rewards short-term financial and operational performance on a relative and absolute basis using pre-established performance criteria that support the Flight Plan | • 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 with restrictions that do not lapse until a profit sharing payment is made (with certain exceptions) | | Long-Term Incentive Program | A mix of Performance Awards, Performance Stock Options and Restricted Stock | • Motivates management employees by linking incentives to our multi-year financial and customer service-related goals and rewarding long-term value creation measured by our stock price and return on capital • Aligns with interests of shareholders, facilitates executive officer stock ownership and encourages retention of our management employees | • Performance awards are earned based on achievement of objective, pre-established performance measures over a three-year performance period payable to executive officers in stock • Performance stock options vest over a three-year period upon the achievement of performance measures linked to employees receiving a payout under the Profit Sharing Program • Restricted stock is subject to a three-year vesting period | | Benefits | Health, Welfare and Retirement Benefit Plans | • Contributes to the attraction and retention of highly qualified executives with competitive benefit plans | • Participation in health, welfare and retirement benefit plans on the same terms as all Delta employees, except executives do not receive basic life insurance coverage |
Elements of Compensation
| • | The actual MIP award, if any, is capped at the target award opportunity, even if Delta’s performance for operational and absolute financial goals meets or exceeds the maximum level. |
Elements of Compensation
| • | Any awards earned by executive officers under the 2017 MIP are made in restricted stock, which will not vest until there is a payment under the Profit Sharing Program or under certain termination of employment scenarios. |
Elements of Compensation
The target award opportunities under the 2017 MIP are expressed as a percentage of the participant’s base salary. The Personnel & Compensation Committee determined the target award opportunities taking into consideration the peer group comparison, the Chief Executive Officer’s recommendations for executive officers other than himself and input from the compensation consultant. The Personnel & Compensation Committee maintained the 2016 target award opportunities for the named executive officers. The target cash compensation opportunities (base salary and MIP) for our named executive officers remain generally below the peer group median. Summarized in the table below are the 2017 MIP awards earned by each named executive officer. Because there was a payout under the Profit Sharing Program for 2017, payments under the 2017 MIP were made in cash.
Elements of Compensation
| Named Executive Officer | Base Salary | Target Award (as % of base salary) | Target Award (in dollars) | Percentage of Target Award Earned | Total 2017 MIP Award | | Mr. Bastian | $800,000 | 200% | $1,600,000 | 132.47% | $2,119,531 | | Mr. Hauenstein | $625,000 | 175% | $1,093,750 | 132.47% | $1,448,891 | | Mr. West | $625,000 | 175% | $1,093,750 | 132.47% | $1,448,891 | | Mr. Jacobson | $525,000 | 150% | $787,500 | 132.47% | $1,043,201 | | Mr. Carter | $500,000 | 125% | $625,000 | 132.47% | $827,938 |
Elements of Compensation
Long-Term Incentives. 2017 Long-Term Incentive Program. The 2017 Long-Term Incentive Program (2017 LTIP) links pay and performance by providing management employees with a compensation opportunity that aligns the interest of management and shareholders, with a large portion contingent upon Delta’s financial, customer service and stock performance over a three-year period. The performance measures and goals are the same for the Chief Executive Officer, the other named executive officers and all other participants in this program. Under the 2017 LTIP, Mr. Bastian and Mr. Hauenstein received an award opportunity consisting of 34% performance awards, 33% performance stock options and 33% restricted stock and our other executive officers received an award opportunity consisting of 38% performance awards, 25% performance stock options and 37% restricted stock. These allocations were selected to balance the incentive opportunity between Delta’s financial performance relative to other airlines, internal company performance and stock price performance. The inclusion of performance-based stock options for all named executive officers, and not just Mr. Bastian, was intended to further enhance the alignment of their compensation opportunities with shareholders. This change recognizes that our executive officers play a pivotal role in defining Delta’s long-term strategy. This mix and the other terms of the 2017 LTIP are intended to balance the performance and retention incentives with the volatility of airline stocks. The 2017 LTIP target awards are the largest component of each executive officer’s compensation opportunity, reflecting the Personnel & Compensation Committee’s focus on longer-term compensation, Delta’s financial results relative to peer airlines, return on invested capital and customer service performance, as well as Delta’s stock price performance. The Personnel & Compensation Committee determined the target award opportunities so the participant’s total direct compensation opportunity is competitive with the peer group. Performance Awards. Performance awards are dollar-denominated long-term incentive opportunities payable in common stock to executive officers and in cash to other participants. The following chart shows the range of potential payments of the performance awards, which may range from zero to 200% of the target award, based on the 2017 LTIP’s four performance measures over the three-year period ending December 31, 2019.
Elements of Compensation
| | | | Performance Levels | | | | Performance Measure | Performance Measure Weighting | | Threshold (50% of Target Payout) | Target (100% of Target Payout) | Maximum (200% of Target Payout) | | Delta’s Total Revenue per Available Seat Mile (TRASM) performance relative to the Industry Group’s TRASM performance(1) | 25% | | 108.8% | 110.3% | 111.8% | | Delta’s Customer Service Performance (Net Promoter Score) | | | | | | | Domestic | 12.5% | | +0 percentage points | +2.5 percentage points | +4.0 percentage points or higher | | Trans-Atlantic | 6.25% | | +2.0 percentage points | +3.0 percentage points | +4.0 percentage points or higher | | Trans-Pacific | 3.125% | | | | | | Latin America | 3.125% | | | | | | Delta’s Return on Invested Capital | 25% | | 12.0% | 14.0% | 16.0% or higher | | Delta’s total shareholder return performance relative to all other S&P 500 companies | 25% | | 25(th) percentile | 50(th) percentile | 75 percentile or higher | | (1) For purposes of the 2017 LTIP, the Industry Group consists of: Alaska Airlines, American Airlines, JetBlue Airways, Southwest Airlines and United Airlines. | | | | | |
Elements of Compensation
Restricted Stock. The 2017 LTIP provides that restricted stock will vest in three equal installments on February 1, 2018, February 1, 2019 and February 1, 2020, subject to forfeiture in certain circumstances. Restricted stock is eligible for dividends, but they will not become payable until the restrictions lapse. The value of a participant’s restricted stock award will depend on the price of Delta common stock when the award vests. Performance Stock Options. While stock options are inherently performance-based, as they provide realized value only with future stock price appreciation, the Personnel & Compensation Committee added a performance hurdle based on employees receiving a payout under the Profit Sharing Program to further align our named executive officers’ interests with our people. The 2017 LTIP generally provides that 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:
Elements of Compensation
| Performance Measure | Vesting Dates | | | Employees receive a payout under the Profit Sharing Program for 2017 | (1)⁄3 of performance stock option award | February 1, 2018 | | | (1)⁄3 of performance stock option award | February 1, 2019 | | | (1)⁄3 of performance stock option award | February 1, 2020 | | If there is no Profit Sharing Program payout for 2017, but employees receive a payout under the Profit Sharing Program for 2018 | (2)⁄3 of performance stock option award | February 1, 2019 | | | (1)⁄3 of performance stock option award | February 1, 2020 | | Employees receive no Profit Sharing Program payout for either 2017 or 2018 | The entire performance stock option award will be forfeited (regardless of whether employees receive a payout under the Profit Sharing Program for 2019) | |
Elements of Compensation
Because our people received a payout under the Profit Sharing Program for 2017, one-third of the named executive officers’ performance stock options vested and became exercisable on February 8, 2018 (the date on which the Personnel & Compensation Committee certified the performance measure was satisfied) and the remaining two-thirds will vest in equal installments on each of February 1, 2019 and February 1, 2020, subject to forfeiture in certain circumstances. For additional information about the vesting and possible forfeiture of the 2017 LTIP awards, see “Post-Employment Compensation — Potential Post-Employment Benefits upon Termination or Change in Control — Long-Term Incentive Programs” on page 46. The 2015 Long-Term Incentive Program Payouts. In 2015, the Personnel & Compensation Committee granted the named executive officers (other than Mr. Carter, whose employment with Delta began after such awards were granted in 2015) performance awards under the 2015 Long-Term Incentive Program (2015 LTIP). Delta reported these award opportunities in our proxy statement for the applicable year. The performance awards were denominated in cash but paid in shares of common stock to the named 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, Delta’s customer service performance and return on invested capital over the three-year performance period ended December 31, 2017. The potential payout ranged from zero to 200% of the target award. Summarized in the chart below are the performance results certified by the Personnel & Compensation Committee for the performance awards under the 2015 LTIP and the resulting percentage of target award opportunity earned:
Executive Compensation Policies
Executive Compensation Policies The Personnel & Compensation Committee monitors the continuing dialogue among corporate governance experts, securities regulators and related parties regarding best practices for executive compensation. Delta’s executive compensation policies are aligned with shareholder interests and incent responsible behavior through a compensation clawback policy for officers, stock ownership guidelines for executive officers and an equity award grant policy. Additionally, Delta 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 Personnel & Compensation Committee determines an officer has engaged in fraud or misconduct that requires a restatement of Delta’s financial statements, the Personnel & Compensation 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. Delta’s stock ownership guidelines strengthen the alignment between executive officers and shareholders. Under these guidelines, the current executive officers are required to own shares of Delta common stock equal or greater to:
Executive Compensation Policies
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. Stock ownership does not include shares an executive officer has the right to acquire through the exercise 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, 2017, all of our executive officers exceeded their required stock ownership level. Equity Award Grant Policy. Delta’s equity award grant policy provides objective, standardized criteria for the timing, practices and procedures used in granting equity awards. Under this policy, the Personnel & Compensation 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 Personnel & Compensation 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. Anti-Hedging and Anti-Pledging Policy. Under Delta’s insider trading policy, employees are prohibited 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, employees are prohibited from holding Delta securities in a margin account or otherwise pledging Delta securities as collateral for a loan.
Post-Employment Compensation
Post-Employment Compensation 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 Personnel & Compensation 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 the named executive officers are described in “Post-Employment Compensation — Potential Post-Employment Benefits upon Termination or Change in Control” on page 44.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1)(2)(3) | Option Awards ($)(1)(4) | Non- Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Nonqualified Deferred Compensation earnings ($)(6) | All Other compensation ($)(7) | Total ($)(8) | | Edward H. Bastian Chief Executive Officer | 2017 | 800,004 | — | 6,700,177 | 3,300,030 | 2,119,531 | 32,292 | 253,669 | 13,205,703 | | | 2016 | 741,669 | — | 6,700,405 | 3,300,032 | 1,512,980 | 24,104 | 278,041 | 12,557,231 | | | 2015 | 625,000 | — | 4,000,169 | 2,000,195 | 2,187,500 | — | 233,710 | 9,046,574 | | Glen W. Hauenstein President | 2017 | 625,000 | — | 4,020,106 | 1,980,082 | 1,448,891 | — | 153,110 | 8,227,189 | | | 2016 | 604,997 | — | 6,000,368 | — | 1,069,428 | — | 214,776 | 7,889,569 | | | 2015 | 565,000 | — | 4,750,287 | — | 1,695,000 | — | 192,276 | 7,202,563 | | W. Gil West Senior Executive Vice President & Chief Operating Officer | 2017 | 625,000 | — | 3,937,615 | 1,312,597 | 1,448,891 | — | 167,087 | 7,491,190 | | | 2016 | 617,977 | — | 4,750,001 | — | 1,131,207 | — | 191,147 | 6,690,332 | | | 2015 | 540,000 | — | 3,750,130 | — | 1,620,000 | — | 162,605 | 6,072,735 | | Paul A. Jacobson Executive Vice President & Chief Financial Officer | 2017 | 525,000 | — | 3,000,393 | 1,000,028 | 1,043,201 | 17,223 | 153,712 | 5,739,557 | | | 2016 | 525,000 | — | 4,000,391 | — | 832,466 | 11,183 | 183,200 | 5,552,240 | | | 2015 | 525,000 | — | 3,550,006 | — | 1,575,000 | — | 177,506 | 5,827,512 | | Peter W. Carter Executive Vice President & Chief Legal Officer | 2017 | 500,000 | — | 1,912,683 | 637,602 | 827,938 | — | 139,990 | 4,018,213 | | | 2016 | 500,000 | — | 2,550,156 | — | 660,688 | — | 129,926 | 3,840,770 |
Summary Compensation Table
| 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.(1) |
Summary Compensation Table
| The reported amounts for 2017, 2016 and 2015 in the “Stock Awards” column reflect award opportunities under Delta’s long-term incentive programs. For additional information, see footnotes 2 and 3 below. |
Summary Compensation Table
| The 2017 Long-Term Incentive Program (2017 LTIP) provides our executive officers with a long-term incentive opportunity consisting of performance awards, performance stock options and restricted stock. The performance awards under the 2017 LTIP are denominated in dollars. The payouts, if any, earned by a named executive officer will be made in stock based on the achievement of pre-established performance measures over a three-year performance period. The restricted stock granted under the 2017 LTIP vests in equal installments on February 1, 2018, 2019 and 2020, subject to forfeiture in certain circumstances. See “Compensation Discussion and Analysis — Elements of Compensation — Long-Term Incentives” on page 33 for details about the 2017 LTIP.(2) |
Summary Compensation Table
| The reported amounts for 2017 in the “Stock Awards” column include the fair value of the performance awards and restricted stock under the 2017 LTIP, computed in accordance with FASB ASC Topic 718 on February 9, 2017, the date the 2017 LTIP awards became effective. |
Summary Compensation Table
| See footnote 4 below for additional information regarding the performance stock options. |
Summary Compensation Table
| 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 2017 LTIP is computed based on performance at the target level.(3) |
Summary Compensation Table
| 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 or performance stock option component of the 2017 LTIP, for the named executive officers would be as follows: |
Summary Compensation Table
| Name | 2017 ($) | 2016 ($) | 2015 ($) | | Edward H. Bastian | 6,800,000 | 6,800,000 | 4,000,000 | | Glen W. Hauenstein | 4,080,000 | 6,000,000 | 4,750,000 | | W. Gil West | 3,990,000 | 4,750,000 | 3,750,000 | | Paul A. Jacobson | 3,040,000 | 4,000,000 | 3,550,000 | | Peter W. Carter | 1,938,000 | 2,550,000 | — |
Summary Compensation Table
| Beginning with the 2017 LTIP, performance stock options were granted to all named executive officers. Accordingly, the percentage of performance awards granted to the named executive officers (other than Mr. Bastian) was reduced to 38% of the total 2017 LTIP award from 50% in 2015 and 2016. |
Summary Compensation Table
| The stock options granted under the 2017 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 8, 2018, February 1, 2019 and February 1, 2020. 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 2.04% risk-free interest rate, (2) a 37% expected volatility of common stock and (3) a six year expected life.(4) |
Summary Compensation Table
| The 2017 Management Incentive Plan (MIP) provides our executive officers with an annual incentive opportunity based on the achievement of pre-established performance measures. See “Compensation Discussion and Analysis — Elements of Compensation — Annual Incentives” on page 31 for details about the 2017 MIP, including a description of Delta’s 2017 MIP performance.(5) |
Summary Compensation Table
| The reported amounts for 2017 reflect the aggregate change in the actuarial present value for Mr. Bastian’s and Mr. Jacobson’s accumulated benefits under the frozen Delta Retirement Plan measured from December 31, 2016 to December 31, 2017. Mr. Hauenstein, Mr. West and Mr. Carter are not participants in this plan. See “Post-Employment Compensation — Defined Benefit Pension Benefits” on page 43 for a description of this plan, including its eligibility requirements.(6) |
Summary Compensation Table
| The reported amounts of all other compensation for 2017 include the following items:(7) |
Summary Compensation Table
| Name | Contributions to Qualified Defined Contribution Plan(a) | Payment due to IRS limits to Qualified Plan(b) | Reimbursement of Taxes(c) | Perquisites and Other Benefits(d) | | Edward H. Bastian | 24,300 | 183,869 | 23,198 | 22,302 | | Glen W. Hauenstein | 8,100 | 128,198 | 16,812 | — | | W. Gil West | 24,300 | 133,759 | 9,028 | — | | Paul A. Jacobson | 24,300 | 97,872 | 19,685 | 11,855 | | Peter W. Carter | 24,300 | 80,162 | 21,603 | 13,925 |
Summary Compensation Table
| Represents Delta’s 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.(a) |
Summary Compensation Table
| Represents amounts paid directly to the named executive officer that Delta would have contributed to the officer’s 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.(b) |
Summary Compensation Table
| Represents tax reimbursements for flight benefits as described below.(c) |
Summary Compensation Table
| The amounts consist of an annual physical examination for officers and flight benefits as described below. Mr. Hauenstein and Mr. West did not receive perquisites or other personal benefits with a total incremental cost of $10,000 or more, the threshold for reporting under SEC rules. From time to time, the named executive officers attend events sponsored by Delta at no incremental cost to Delta.(d) |
Summary Compensation Table
| As is common in the airline industry, Delta provides complimentary travel and certain Delta Sky Club privileges for named executive officers; the officer’s spouse, domestic partner or designated companion; the officer’s children and parents; and, to a limited extent, other persons designated by the officer. |
Summary Compensation Table
| Complimentary travel for such other persons is limited to an aggregate imputed value of $20,000 per year for the Chief Executive Officer, President and Senior Executive Vice 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, President and Senior Executive Vice 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 officer’s death. Delta will not reimburse surviving spouses or domestic partners for associated taxes on complimentary travel under the survivor travel benefit. Delta’s 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, during employment each named executive officer may purchase private jet flights from a Delta subsidiary by paying the incremental cost of the flight. Also, certain named executive officers have flight benefits on another airline at no incremental cost to the officers or Delta. |
Summary Compensation Table
| 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.(8) |
Grants of Plan-Based Awards Table
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 2017 under the 2017 MIP and the 2017 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” beginning on page 31.
Grants of Plan-Based Awards Table
| Name/Type of Award | Grant Date(1) | Date of Personnel & Compensation 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 ($) | | | | | | Edward H. Bastian | | | | | | | | | | | | | | 2017 MIP | 1/1/2017 | 12/13/2016 | 800,004 | 1,600,008 | 3,200,016 | | | | | | | | | 2017 LTIP — Performance Award | 2/9/2017 | 2/9/2017 | | | | 1,700,000 | 3,400,000 | 6,800,000 | | | | 3,400,000 | | 2017 LTIP — Restricted Stock | 2/9/2017 | 2/9/2017 | | | | | | | 66,900 | | | 3,300,177 | | 2017 LTIP — Performance Stock Options | 2/9/2017 | 2/9/2017 | | | | | | | | 206,510 | 49.33 | 3,300,030 | | Glen W. Hauenstein | | | | | | | | | | | | | | 2017 MIP | 1/1/2017 | 12/13/2016 | 546,875 | 1,093,750 | 2,187,500 | | | | | | | | | 2017 LTIP — Performance Award | 2/9/2017 | 2/9/2017 | | | | 1,020,000 | 2,040,000 | 4,080,000 | | | | 2,040,000 | | 2017 LTIP — Restricted Stock | 2/9/2017 | 2/9/2017 | | | | | | | 40,140 | | | 1,980,106 | | 2017 LTIP — Performance Stock Options | 2/9/2017 | 2/9/2017 | | | | | | | | 123,910 | 49.33 | 1,980,082 | | W. Gil West | | | | | | | | | | | | | | 2017 MIP | 1/1/2017 | 12/13/2016 | 546,875 | 1,093,750 | 2,187,500 | | | | | | | | | 2017 LTIP — Performance Award | 2/9/2017 | 2/9/2017 | | | | 997,500 | 1,995,000 | 3,990,000 | | | | 1,995,000 | | 2017 LTIP — Restricted Stock | 2/9/2017 | 2/9/2017 | | | | | | | 39,380 | | | 1,942,615 | | 2017 LTIP — Performance Stock Options | 2/9/2017 | 2/9/2017 | | | | | | | | 82,140 | 49.33 | 1,312,597 | | Paul A. Jacobson | | | | | | | | | | | | | | 2017 MIP | 1/1/2017 | 12/13/2016 | 393,750 | 787,500 | 1,575,000 | | | | | | | | | 2017 LTIP — Performance Award | 2/9/2017 | 2/9/2017 | | | | 760,000 | 1,520,000 | 3,040,000 | | | | 1,520,000 | | 2017 LTIP — Restricted Stock | 2/9/2017 | 2/9/2017 | | | | | | | 30,010 | | | 1,480,393 | | 2017 LTIP — Performance Stock Options | 2/9/2017 | 2/9/2017 | | | | | | | | 62,580 | 49.33 | 1,000,028 | | Peter W. Carter | | | | | | | | | | | | | | 2017 MIP | 1/1/2017 | 12/13/2016 | 312,500 | 625,000 | 1,250,000 | | | | | | | | | 2017 LTIP — Performance Award | 2/9/2017 | 2/9/2017 | | | | 484,500 | 969,000 | 1,938,000 | | | | 969,000 | | 2017 LTIP — Restricted Stock | 2/9/2017 | 2/9/2017 | | | | | | | 19,130 | | | 943,683 | | 2017 LTIP — Performance Stock Options | 2/9/2017 | 2/9/2017 | | | | | | | | 39,900 | 49.33 | 637,602 |
Grants of Plan-Based Awards Table
| For purposes of this column, the grant date for the 2017 MIP is the date the performance period began. The grant date for the 2017 LTIP is the grant date or, if earlier, the service inception date determined under FASB ASC Topic 718.(1) |
Grants of Plan-Based Awards Table
| These columns show the annual award opportunities under the 2017 MIP. For additional information about the 2017 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” on page 31.(2) |
Grants of Plan-Based Awards Table
| These columns show the long-term award opportunities under the performance award component of the 2017 LTIP. For additional information about the 2017 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” on page 33.(3) |
Grants of Plan-Based Awards Table
| This column shows the restricted stock component of the 2017 LTIP.(4) |
Grants of Plan-Based Awards Table
| This column shows the performance stock option component of the 2017 LTIP. For additional information about the performance stock option component of the 2017 LTIP, see footnote 4 to the Summary Compensation Table.(5) |
Grants of Plan-Based Awards Table
| The exercise price is equal to the closing price of Delta common stock on the NYSE on the date of grant.(6) |
Grants of Plan-Based Awards Table
| 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.(7) |
Outstanding Equity Awards at Fiscal Year-End Table
Outstanding Equity Awards at Fiscal Year-End Table The following table provides information regarding the outstanding equity awards on December 31, 2017 for each of the named executive officers.
Outstanding Equity Awards at Fiscal Year-End Table
| | | Option Awards | | | | | Stock Awards | | | | | Name | Grant Date(1) | 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 ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(6) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Edward H. Bastian | | | | | | | | | | | | 2015 LTIP-Restricted Stock | 2/5/2015 | — | — | — | — | — | 14,450 | 809,200 | — | — | | 2016 LTIP-Restricted Stock | 2/2/2016 | — | — | — | — | — | 50,453 | 2,825,368 | — | — | | 2017 LTIP Restricted Stock | 2/9/2017 | — | — | — | — | — | 66,900 | 3,746,400 | — | — | | 2014 LTIP-Performance Stock Options | 2/6/2014 | 131,840 | — | — | 30.89 | 2/5/2024 | — | — | — | — | | 2015 LTIP-Performance Stock Options | 2/5/2015 | 61,140 | 30,570 | — | 46.14 | 2/4/2025 | — | — | — | — | | 2016 LTIP-Performance Stock Options | 2/2/2016 | 57,744 | 115,486 | — | 43.61 | 2/1/2026 | — | — | — | — | | 2017 LTIP Performance Stock Options | 2/9/2017 | — | — | 206,510 | 49.33 | 2/8/2027 | — | — | — | — | | Glen W. Hauenstein | | | | | | | | | | | | 2015 LTIP-Restricted Stock | 2/5/2015 | — | — | — | — | — | 17,160 | 960,960 | — | — | | 2016 LTIP-Restricted Stock | 2/2/2016 | — | — | — | — | — | 45,866 | 2,568,496 | — | — | | 2017 LTIP Restricted Stock | 2/9/2017 | — | — | — | — | — | 40,140 | 2,247,840 | — | — | | 2017 LTIP Performance Stock Options | 2/9/2017 | — | — | 123,910 | 49.33 | 2/8/2027 | — | — | — | — | | W. Gil West | | | | | | | | | | | | 2015 LTIP-Restricted Stock | 2/5/2015 | — | — | — | — | — | 13,546 | 758,576 | — | — | | 2016 LTIP-Restricted Stock | 2/2/2016 | — | — | — | — | — | 36,306 | 2,033,136 | — | — | | 2017 LTIP Restricted Stock | 2/9/2017 | — | — | — | — | — | 39,380 | 2,205,280 | — | — | | 2017 LTIP Performance Stock Options | 2/9/2017 | — | — | 82,140 | 49.33 | 2/8/2027 | — | — | — | — | | Paul A. Jacobson | | | | | | | | | | | | 2015 LTIP-Restricted Stock | 2/5/2015 | — | — | — | — | — | 12,823 | 718,088 | — | — | | 2016 LTIP-Restricted Stock | 2/2/2016 | — | — | — | — | — | 30,580 | 1,712,480 | — | — | | 2017 LTIP Restricted Stock | 2/9/2017 | — | — | — | — | — | 30,010 | 1,680,560 | — | — | | Merger Award-Stock Options | 10/29/2008 | 81,000 | — | — | 7.99 | 10/28/2018 | — | — | — | — | | 2017 LTIP Performance Stock Options | 2/9/2017 | — | — | 62,580 | 49.33 | 2/8/2027 | — | — | — | — | | Peter W. Carter | | | | | | | | | | | | 2015 Restricted Stock | 7/20/2015 | — | — | — | — | — | 19,280 | 1,079,680 | — | — | | 2016 LTIP-Restricted Stock | 2/2/2016 | — | — | — | — | — | 19,493 | 1,091,608 | — | — | | 2017 LTIP Restricted Stock | 2/9/2017 | — | — | — | — | — | 19,130 | 1,071,280 | — | — | | 2017 LTIP-Performance Stock Options | 2/9/2017 | — | — | 39,900 | 49.33 | 2/8/2027 | — | — | — | — |
Outstanding Equity Awards at Fiscal Year-End Table
| 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.(1) |
Outstanding Equity Awards at Fiscal Year-End Table
| The 2017 LTIP Performance Stock Options vest as follows: (a) if there is a payout under the Profit Sharing Program for 2017, then ratably over three years with 1/3 vesting on each of February 1, 2018, 2019 and 2020; (b) if there is no payout under the Profit Sharing Program for 2017, but there is a payout for 2018, then 2/3 vest on February 1, 2019 and 1/3 vest on February 1, 2020; and (c) if there is no payout for 2017 or 2018 under the Profit Sharing Program, then the options will be forfeited. Because there was a payout for 2017 under the Profit Sharing Program, the options vest as described in (a) of the foregoing sentence, except that the first vesting date occurred on February 8, 2018, the date on which the Personnel & Compensation Committee certified the satisfaction of the performance measure. Performance stock options are subject to forfeiture in certain circumstances.(2) |
Outstanding Equity Awards at Fiscal Year-End Table
| The exercise price of the stock options is the closing price of Delta common stock on the NYSE on the applicable grant date.(3) |
Outstanding Equity Awards at Fiscal Year-End Table
| These shares of restricted stock vest as follows:(4) |
Outstanding Equity Awards at Fiscal Year-End Table
February 5, 2015 LTIP Grant Date. In equal installments on February 1, 2016, 2017 and 2018. February 2, 2016 LTIP Grant Date. In equal installments on February 1, 2017, 2018 and 2019. February 9, 2017 LTIP Grant Date. In equal installments on February 1, 2018, 2019 and 2020. 2015 Restricted Stock grant to Mr. Carter. In equal installments on July 13, 2016, 2017 and 2018. Restricted stock is subject to forfeiture in certain circumstances.
Outstanding Equity Awards at Fiscal Year-End Table
| In accordance with SEC rules, the amounts in this column for the market value of restricted stock are based on the $56.00 closing price of Delta common stock on the NYSE on December 29, 2017.(5) |
Outstanding Equity Awards at Fiscal Year-End Table
| This table does not include the performance award component of the 2017 LTIP, 2016 LTIP and the 2015 LTIP because (a) these award opportunities are denominated in dollars and (b) the payout, if any, earned by the named executive officers will be made in stock based on achievement of the pre-established performance measures during the measurement periods for each program. For additional information about the performance award component of the 2017 LTIP, see footnote 2 to the Summary Compensation Table and the Grants of Plan-Based Awards Table above.(6) |
Option Exercises and Stock Vested Table
Option Exercises and Stock Vested Table The following table provides information regarding the exercise of stock options and the vesting of stock for the named executive officers in 2017.
Option Exercises and Stock Vested Table
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | | Edward H. Bastian | 284,240 | 11,829,293 | 133,792 | 6,610,962 | | Glen W. Hauenstein | 98,600 | 3,827,498 | 145,112 | 7,199,937 | | W. Gil West | 0 | 0 | 113,460 | 5,632,076 | | Paul A. Jacobson | 83,000 | 3,245,577 | 106,245 | 5,276,696 | | Peter W. Carter | 0 | 0 | 29,027 | 1,511,403 |
Option Exercises and Stock Vested Table
| 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.(1) |
Option Exercises and Stock Vested Table
| 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 2014, 2015 and 2016.(2) |
Option Exercises and Stock Vested Table
Post-Employment Compensation
Defined Benefit Pension Benefits
Defined Benefit Pension Benefits Frozen Delta Retirement Plan. The Delta Retirement Plan (Retirement Plan) is a broad-based, non-contributory qualified defined benefit pension plan for Delta’s ground and flight attendant employees. To participate in the Retirement Plan, an 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. Carter, Mr. Hauenstein and Mr. West are not. We do not offer any supplemental executive retirement plans or deferred compensation plans to the named executive officers. Eligible ground and flight attendant employees hired (or rehired) on or before July 1, 2003, receive Retirement Plan benefits based on a final average earnings (FAE) formula. Effective July 1, 2003, the Retirement Plan transitioned to a cash balance plan and benefits for ground and flight attendant employees hired (or rehired) after that date are generally based solely on the cash balance formula. Employees covered by the Retirement Plan who were employed on July 1, 2003, receive Retirement Plan benefits based on the higher of the FAE and cash balance formulas. Under the cash balance formula, 6% of a participant’s pay (base salary and, if any, eligible annual incentive compensation) was credited annually until January 1, 2006, to a hypothetical account, which account is credited with an annual interest credit based on a market rate of interest. Interest credits will continue to be credited annually regardless of the plan’s frozen status. At termination of employment, an amount equal to the balance of the participant’s cash balance account is payable to the participant, at his or her election, in the form of an immediate or deferred lump sum or equivalent monthly benefit. Benefits under the FAE formula are based on a participant’s (1) final average earnings; (2) years of service prior to January 1, 2006; (3) age when benefit payments begin (but not before age 52); and (4) primary Social Security benefit. Final average earnings are the average of the participant’s highest average monthly earnings (base salary and, if any, eligible annual incentive compensation) for the 36 consecutive months in the 120-month period preceding the earlier of termination of employment and January 1, 2006. The monthly retirement benefit at the normal retirement age of 65 equals 60% of the participant’s final average earnings, reduced for years of service less than 30 (determined as of December 31, 2005) and by 50% of the participants’ primary Social Security benefit (also reduced for less than 30 years of service). Benefits determined under the FAE formula are paid in the form of a monthly annuity.
Pension Benefits Table
Pension Benefits Table The table below shows certain pension benefit information for Mr. Bastian and Mr. Jacobson as of December 31, 2017.
Pension Benefits Table
| Name | Plan Name | Number of Years of Credited Service (as of December 31, 2017)(1) | Present Value of Accumulated Benefits ($)(2) | Payments During Last Fiscal Year | | Mr. Bastian(3) | Delta Retirement Plan | 6 years, 10 months | FAE Formula: 292,360 Cash Balance Formula: 67,140 | 0 | | Mr. Jacobson(4) | Delta Retirement Plan | 8 years, 2 months | FAE Formula: 106,692 Cash Balance Formula: 8,281 | 0 |
Pension Benefits Table
| As discussed above, the Retirement Plan was frozen effective December 31, 2005, and no additional service credit will accrue after that date. All years of service reflected in this column include service until December 31, 2005.(1) |
Pension Benefits Table
| Benefits were calculated using interest rate and mortality rate assumptions consistent with those used in our financial statements (see “Assumptions” in Note 8 of the Notes to the Consolidated Financial Statements in Delta’s 2017 Form 10-K). In addition, certain individual data were used in developing these values. Benefits accrued under the FAE formula and the cash balance formula are listed separately. For purposes of the FAE formula benefit, the assumed retirement age is 62. The form of benefit payable under the FAE formula for Mr. Bastian and Mr. Jacobson is a single life annuity.(2) |
Pension Benefits Table
| Mr. Bastian resigned from Delta as of April 1, 2005, and rejoined Delta in July 2005. His years of credited service include the 6 years, 5 months of service he had completed as of April 1, 2005. As a result, the portion of his benefit calculated under the FAE formula was determined under the rules applicable to vested employees who terminate their service with Delta prior to early retirement age instead of under the rules applicable to retirees at early retirement age. Accordingly, Mr. Bastian’s benefit is smaller than it would have been had he retired at early retirement age. All benefits earned by Mr. Bastian after he rejoined Delta in July 2005 are based solely on the cash balance formula.(3) |
Pension Benefits Table
| Mr. Jacobson resigned from Delta as of March 18, 2005, and rejoined Delta in August 2005. His years of credited service include the 7 years, 10 months of service he had completed as of March 18, 2005. As a result, the portion of his benefit calculated under the FAE formula was determined under the rules applicable to vested employees who terminate their service with Delta prior to early retirement age instead of under the rules applicable to retirees at early retirement age. Accordingly, Mr. Jacobson’s benefit is smaller than it would have been had he retired at early retirement age. In addition, following his resignation in March 2005, Mr. Jacobson elected to receive the cash balance portion of his benefit in a lump sum payment. All benefits earned by Mr. Jacobson after he rejoined Delta in August 2005 are based solely on the cash balance formula.(4) |
Potential Post-Employment Benefits upon Termination or Change in Control
Potential Post-Employment Benefits upon Termination or Change in Control This section describes the potential benefits the named executive officers may receive under certain termination of employment scenarios, including in connection with a change in control, assuming termination of employment on December 31, 2017. The definitions of “cause,” “change in control,” “disability,” “good reason” and “retirement,” as such terms are used in the following sections, are summarized below. Severance Plan. Officers and director level employees are generally eligible to participate in Delta’s Officer and Director Severance Plan (Severance Plan), which may be amended at any time by Delta. The following chart summarizes the principal benefits the named executive officers are eligible to receive under the Severance Plan.
Potential Post-Employment Benefits upon Termination or Change in Control
| Name | Termination Without Cause (no Change in Control)(1) | Resignation for Good Reason (no Change in Control)(1) | Termination without Cause or Resignation for Good Reason in Connection with a Change in Control(1)(2) | | Mr. Bastian | • 24 months base salary • 200% target MIP • 24 months healthcare benefit continuation • outplacement services | • 24 months base salary • 200% target MIP • 24 months healthcare benefit continuation • outplacement services | • 24 months base salary • 200% target MIP • 24 months healthcare benefit continuation • outplacement services | | Mr. Hauenstein and Mr. West | • 24 months base salary • 200% target MIP • 24 months healthcare benefit continuation • outplacement services | • None | • 24 months base salary • 200% target MIP • 24 months healthcare benefit continuation • outplacement services | | Mr. Carter and Mr. Jacobson | • 18 months base salary • 150% target MIP • 18 months healthcare benefit continuation • outplacement services | • None | • 18 months base salary • 150% target MIP • 18 months healthcare benefit continuation • outplacement services | | (1) The cash severance amount (base salary plus target MIP) is paid in a lump sum following termination of employment. Outplacement services fees are limited to $5,000. (2) These benefits apply if the termination of employment occurs during the two-year period after a change in control. | | | |
Potential Post-Employment Benefits upon Termination or Change in Control
To receive benefits under the Severance Plan, participants must enter into a general release of claims against Delta and non-competition, non-solicitation, non-disparagement and confidentiality covenants for the benefit of Delta. The Severance Plan does not provide for any excise tax gross-ups for benefits received in connection with a change in control. If a participant is entitled to benefits under the Severance Plan in connection with a change in control, the amount of such benefits will be reduced to the statutory safe harbor under Section 4999 of the Internal Revenue Code if this results in a greater after-tax benefit than if the participant paid the excise tax. Long-Term Incentive Programs. The following chart summarizes the treatment of performance awards, restricted stock and performance stock options awarded under Delta’s long-term incentive programs (LTIP) for 2015, 2016 and 2017 under various termination of employment scenarios.
Potential Post-Employment Benefits upon Termination or Change in Control
| Termination Scenario | LTIP Award Treatment(1)(2) | | | Termination without Cause or Resignation for Good Reason without a Change in Control and Retirement | Mr. Bastian, Mr. Hauenstein and Mr. West | The named executive officer will remain eligible to receive his performance award (including any Earned Awards), restricted stock award and, as applicable, performance stock option award pursuant to the same vesting, performance and general payment provisions as if his employment had continued.(3)(4) | | | Mr. Carter and Mr. Jacobson | The named executive officer will receive any Earned Awards, a prorated performance award and, as applicable, a prorated performance stock option award under the same vesting, performance and general payment provisions as if his employment had continued and the immediate vesting of a pro rata portion of his restricted stock award. Any remaining portions will be forfeited. | | Resignation without Good Reason | Mr. Bastian, Mr. Hauenstein and Mr. West | The named executive officer will remain eligible to receive his performance award (including any Earned Awards), restricted stock award and, as applicable, performance stock option award pursuant to the same vesting, performance and general payment provisions as if his employment had continued.(3)(4) | | | Mr. Carter and Mr. Jacobson | The named executive officer’s performance award, restricted stock award and, as applicable, performance stock option award will be immediately forfeited. | | Termination for Cause | The named executive officer’s performance award (including any Earned Awards), restricted stock award and, as applicable, performance stock option award will be immediately forfeited. | | | Termination due to Death or Disability | The named executive officer’s performance award (including any Earned Awards), restricted stock award and, as applicable, performance stock option award will immediately vest, with the performance award paid at the target level. | | | Termination without Cause or Resignation for Good Reason with a Change in Control | The named executive officer’s performance award (including any Earned Awards), restricted stock award and, as applicable, performance stock option award will immediately vest, with the performance award paid at the target level. | | | (1) The LTIP award treatment described in this chart is applicable to each named executive officer under each of the 2015, 2016 and 2017 LTIPs (other than Mr. Carter, who has only received awards under the 2016 and 2017 LTIPs). However, only Mr. Bastian received performance stock option awards under the 2015 and 2016 LTIPs. (2) For the portion of the performance award attributable to the return on invested capital performance measure under the 2015 LTIP, achievement of such measure is determined independently for each calendar year during the applicable performance period (each an ROIC Installment) and, to the extent that Delta’s actual performance meets or exceeds the threshold level at the end of each calendar year, each such ROIC Installment will be treated as an “Earned Award.” Generally, Earned Awards, if any, will accumulate until the end of the performance period at which time all Earned Awards will vest and become payable. To the extent subject to proration, the portion of the performance award attributable to the return on invested capital performance measure under the 2015 LTIP will be prorated as follows: for any ROIC Installment outstanding in the year in which the termination occurred, the named executive officer will receive the ROIC Installment based on actual performance for the applicable year prorated based on the number of months he was employed with Delta during the year, with any remaining ROIC Installment(s) being forfeited. Under the 2016 and 2017 LTIPs, the return on invested capital performance measure is measured over the entire three-year performance period. (3) In order for the named executive officer to be eligible for this treatment, his termination of employment must have occurred on or after (i) October 1, 2015 under the 2015 LTIP; (ii) October 1, 2016 under the 2016 LTIP; and (iii) October 1, 2017 under the 2017 LTIP. For terminations of employment prior to such dates, the awards granted to the named executive officer under each of the LTIPs would be subject to the same treatment as described for Mr. Carter and Mr. Jacobson. (4) In consideration for this treatment, these named executive officers entered into award agreements containing enhanced non-competition and non-solicitation covenants for the benefit of Delta. In the event the executive breaches such covenants during the two-year period following employment, he will forfeit any outstanding awards. | | |
Potential Post-Employment Benefits upon Termination or Change in Control
Annual Incentive Plan. Delta’s 2017 Management Incentive Plan (MIP) generally provides that a participant whose employment with Delta terminates prior to the end of the workday on December 31, 2017 is not eligible for a 2017 MIP payment. If, however, the participant’s employment is terminated (1) due to death or disability or (2) by Delta without cause or for any other reason that would entitle the participant to benefits under the Severance Plan, the participant is eligible for a pro rata 2017 MIP payment based on (a) the number of months during 2017 the participant was employed in a MIP-qualified position and (b) the terms and conditions of the 2017 MIP that would have applied if his or her employment had continued through December 31, 2017. Other Equity Awards. Upon commencement of his employment with Delta on July 13, 2015, Mr. Carter received a restricted stock award. This award is subject to the same termination provisions applicable to Mr. Carter under the 2016 and 2017 LTIPs as described above. Triggering Events. As noted above, eligibility for severance benefits and acceleration of the vesting of equity awards are triggered by certain events. The terms “cause,” “change in control,” “disability,” “good reason” and “retirement,” as they apply to the named executive officers, are summarized below.
Potential Post-Employment Benefits upon Termination or Change in Control
| • | Cause means, in general, a person’s (1) continued, substantial failure to perform his duties with Delta; (2) misconduct which is economically injurious to Delta; (3) conviction of, or plea of guilty or no contest to, a felony or other crime involving moral turpitude, fraud, theft, embezzlement or dishonesty; or (4) material violation of any material Delta policy or rule regarding conduct. A person has ten business days to cure, if curable, any of the events which could lead to a termination for cause. For executive vice presidents or more senior executives, a termination for cause must be approved by a 2/3 vote of the entire Board of Directors. |
Potential Post-Employment Benefits upon Termination or Change in Control
| • | Change in control means, in general, the occurrence of any of the following events: (1) any person becomes the beneficial owner of more than 35% of Delta common stock; (2) during a period of 12 consecutive months, the Board of Directors at the beginning of the period and their approved successors cease to constitute a majority of the Board; (3) the consummation of a merger or consolidation involving Delta, other than a merger or consolidation which results in the Delta common stock outstanding immediately before the transaction continuing to represent more than 65% of the Delta common stock outstanding immediately after the transaction; or (4) a sale, lease or other transfer of Delta’s assets that have a total gross fair market value greater than 40% of the total gross fair market value of Delta’s assets immediately before the transaction. |
Potential Post-Employment Benefits upon Termination or Change in Control
| • | Disability means long-term or permanent disability as determined under the applicable Delta disability plan. |
Potential Post-Employment Benefits upon Termination or Change in Control
| • | Good reason means, in general, the occurrence of any of the following without a person’s written consent: (1) a material diminution of a person’s authorities, duties or responsibilities, other than an insubstantial and inadvertent act that is promptly remedied by Delta after written notice by the person; (2) the relocation of a person’s office by more than 50 miles; (3) a material reduction in a person’s base salary or target annual bonus opportunities, other than pursuant to a uniform percentage salary or target annual bonus reduction for similarly situated persons; or (4) a material breach by Delta of any material term of a person’s employment. An event constitutes good reason only if a person gives Delta certain written notice of his intent to resign and Delta does not cure the event within a specified period. |
Potential Post-Employment Benefits upon Termination or Change in Control
| • | Retirement means a termination of employment (1) at or after age 52 with ten years of service completed since a person’s most recent hire date or (2) on or after the date he or she has completed at least 25 years of service since his or her most recent hire date regardless of age. |
Potential Post-Employment Benefits upon Termination or Change in Control
Retiree Flight Benefits. A named executive officer who retires from Delta at or after age 52 with at least ten years of service or with at least 25 years of service regardless of age, may continue to receive Flight Benefits (see footnote 7(d) to the Summary Compensation Table on page 40 for a description of Flight Benefits including survivor travel benefits) during retirement, except the unused portion of the two annual allowances will not accumulate into succeeding years (Retiree Flight Benefits). Notwithstanding the above, a person who is first elected an officer on or after June 8, 2009, will not receive reimbursement for taxes for Retiree Flight Benefits. Delta also does not provide reimbursement for taxes associated with travel by the surviving spouse or domestic partner of any officer. In exchange for certain non-competition, non-solicitation, non-disparagement and confidentiality covenants for the benefit of Delta and a general release of claims against Delta, an officer who served in that capacity during the period beginning on the date Delta entered into the merger agreement with Northwest Airlines and ending on the date the merger occurred, or who joined Delta from Northwest on the date the merger occurred and who had been a Northwest officer on the date Delta entered into the merger agreement, will receive, on his termination of employment (other than by death or by Delta for cause), a vested right to Retiree Flight Benefits, regardless of the officer’s age and years of service at his termination of employment.
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control The following table describes the termination benefits for each named executive officer, assuming termination of employment on December 31, 2017. Also included is a column that describes the benefits, if any, each named executive officer would have received in connection with a change in control (CIC). Further, because termination is deemed to occur at the end of the workday on December 31, 2017, the named executive officer would have earned his 2017 MIP award and the performance award under the 2015 LTIP, to the extent otherwise payable. Accordingly, these awards are unrelated to the termination of employment. We have not included in this section any benefit that is available generally to all employees on a non-discriminatory basis such as payment of retirement, disability and death benefits. See “Defined Benefit Pension Benefits” above, for a discussion of the benefits accrued for eligible named executive officers under the Delta Retirement Plan. On December 31, 2017, only Mr. Bastian and Mr. Hauenstein were eligible to retire under the definition of Retirement described above. The other named executive officers are not eligible to retire under these requirements and, therefore, are not eligible for any retirement-related compensation or benefits.
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| | | | Equity ($) | | | Other Benefits ($)(5) | | Name | Termination Scenario | Severance Payment ($)(1) | Performance Awards(2) | Performance Stock Options(3) | Restricted Stock(4) | | | Mr. Bastian | Without Cause | 4,800,000 | 6,800,000 | 3,109,713 | 7,380,968 | 802,129 | | | Resignation for Good Reason | 4,800,000 | 6,800,000 | 3,109,713 | 7,380,968 | 802,129 | | | For Cause | 0 | 0 | 0 | 0 | 0 | | | Resignation without Good Reason | 0 | 6,800,000 | 3,109,713 | 7,380,968 | 774,277 | | | Retirement | 0 | 6,800,000 | 3,109,713 | 7,380,968 | 774,277 | | | Death | 0 | 6,800,000 | 3,109,713 | 7,380,968 | 0 | | | Disability | 0 | 6,800,000 | 3,109,713 | 7,380,968 | 774,277 | | | CIC — Termination without Cause/Resignation for Good Reason | 4,800,000 | 6,800,000 | 3,109,713 | 7,380,968 | 802,129 | | Mr. Hauenstein | Without Cause | 3,437,500 | 5,040,000 | 826,480 | 5,777,296 | 523,745 | | | Resignation for Good Reason | 0 | 5,040,000 | 826,480 | 5,777,296 | 505,829 | | | For Cause | 0 | 0 | 0 | 0 | 0 | | | Resignation without Good Reason | 0 | 5,040,000 | 826,480 | 5,777,296 | 505,829 | | | Retirement | 0 | 5,040,000 | 826,480 | 5,777,296 | 505,829 | | | Death | 0 | 5,040,000 | 826,480 | 5,777,296 | 0 | | | Disability | 0 | 5,040,000 | 826,480 | 5,777,296 | 505,829 | | | ‘CIC — Termination without Cause/Resignation for Good Reason | 3,437,500 | 5,040,000 | 826,480 | 5,777,296 | 523,745 | | Mr. West | Without Cause | 3,437,500 | 4,370,000 | 547,874 | 4,996,992 | 299,126 | | | Resignation for Good Reason | 0 | 4,370,000 | 547,874 | 4,996,992 | 252,276 | | | For Cause | 0 | 0 | 0 | 0 | 0 | | | Resignation without Good Reason | 0 | 4,370,000 | 547,874 | 4,996,992 | 252,276 | | | Death | 0 | 4,370,000 | 547,874 | 4,996,992 | 12,816 | | | Disability | 0 | 4,370,000 | 547,874 | 4,996,992 | 252,276 | | | CIC — Termination without Cause/Resignation for Good Reason | 3,437,500 | 4,370,000 | 547,874 | 4,996,992 | 299,126 |
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| | | | Equity ($) | | | Other Benefits ($)(5) | | Name | Termination Scenario | Severance Payment ($)(1) | Performance Awards(2) | Performance Stock Options(3) | Restricted Stock(4) | | | Mr. Jacobson | Without Cause | 1,968,750 | 1,840,000 | 233,830 | 3,007,368 | 685,904 | | | Resignation for Good Reason | 0 | 1,840,000 | 233,830 | 3,007,368 | 650,338 | | | For Cause | 0 | 0 | 0 | 0 | 0 | | | Resignation without Good Reason | 0 | 0 | 0 | 0 | 650,338 | | | Death | 0 | 3,520,000 | 417,409 | 4,111,128 | 9,987 | | | Disability | 0 | 3,520,000 | 417,409 | 4,111,128 | 650,338 | | | CIC — Termination without Cause/Resignation for Good Reason | 1,968,750 | 3,520,000 | 417,409 | 4,111,128 | 685,904 | | Mr. Carter | Without Cause | 1,687,500 | 1,173,000 | 149,088 | 2,371,768 | 35,917 | | | Resignation for Good Reason | 0 | 1,173,000 | 149,088 | 2,371,768 | 0 | | | For Cause | 0 | 0 | 0 | 0 | 0 | | | Resignation without Good Reason | 0 | 0 | 0 | 0 | 0 | | | Death | 0 | 2,244,000 | 266,133 | 3,242,568 | 0 | | | Disability | 0 | 2,244,000 | 266,133 | 3,242,568 | 0 | | | CIC — Termination without Cause/Resignation for Good Reason | 1,687,500 | 2,244,000 | 266,133 | 3,242,568 | 35,917 | | (1) The severance payment, if applicable, represents the following for each named executive officer: (i) Mr. Bastian: 24 months of base salary and 200% of his MIP target award, which is 200% of his base salary; (ii) Mr. Hauenstein: 24 months of base salary and 200% of his MIP target award, which is 175% of his base salary; (iii) Mr. West: 24 months of base salary and 200% of his MIP target award, which is 175% of his base salary; (iv) Mr. Jacobson: 18 months of base salary and 150% of his MIP target award, which is 150% of his base salary; and (v) Mr. Carter: 18 months of base salary and 150% of his MIP target award, which is 125% of his base salary. (2) The value of the performance awards in the tables is based on payment at the target level. (3) We used intrinsic value for the performance stock options assuming that the performance criteria attributable to the stock options under the 2015, 2016 and 2017 LTIPs were met. The exercise price for the unexercisable stock options outstanding on December 31, 2017 was (1) $46.14 for the options granted on February 5, 2015; (2) $43.61 for the options granted on February 2, 2016; and (3) $49.33 for the options granted on February 9, 2017. (4) As required by SEC rules, the values in these tables for restricted stock are based on the $56.00 closing price of Delta common stock on the NYSE on December 29, 2017. (5) Other benefits include company-paid healthcare coverage, outplacement services and, except for Mr. Carter, Retiree Flight Benefits. The Retiree Flight Benefits reflected for each named executive officer were determined by using the following assumptions for each officer: (1) Flight Benefits continue for the life expectancy of the officer or the joint life expectancy of the officer and his spouse or domestic partner, measured using a mortality table that calculates the average life expectancy to be 30 years; (2) the level of usage of Retiree Flight Benefits for each year is the same as the officer’s and his spouse’s or domestic partner’s actual usage of Flight Benefits during 2017; (3) the incremental cost to Delta of Retiree Flight Benefits for each year is the same as the actual incremental cost incurred by Delta for the officer’s Flight Benefits in 2017; and (4) the value of Retiree Flight Benefits includes a tax gross up equal to 60% of the lesser of (i) the officer’s actual usage of Flight Benefits in 2017 and (ii) the annual tax reimbursement allowance (as described in footnote 7(d) to the Summary Compensation Table) (surviving spouses and domestic partners do not receive reimbursement for taxes associated with Retiree Flight Benefits). On the basis of these assumptions, we determined the value of Retiree Flight Benefits for each named executive officer by calculating the present value of the benefit over the officer’s life expectancy (or joint life expectancy with his spouse or domestic partner) using a discount rate of 4.14%. | | | | | | |
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
CEO Pay Ratio Under rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are required to calculate and disclose the total compensation paid to our median employee as well as the ratio of the pay of our Chief Executive Officer to the median employee. For 2017:
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| • | the annual total compensation of the employee identified at median of all our employees other than our Chief Executive Officer was $93,316; |
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| • | the annual total compensation of our Chief Executive Officer, Ed Bastian, was $13,205,703; and |
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| • | the ratio of the annual total compensation of our Chief Executive Officer to the median of the total annual compensation of all our employees was estimated to be 142 to 1. |
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records, using the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported here, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. To identify the median of the annual total compensation of our employees, the methodology and the material assumptions, adjustments, and estimates that we used were as follows:
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| • | We identified our median employee as of December 31, 2017, the last day of our fiscal year. |
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| • | Because less than 5% of our employees reside in other countries, we excluded all 3,296 of our international employees using the de minimis exemption permitted under SEC rules.* |
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| • | After applying the de minimis exemption, we had 114,600 U.S. employees. This includes the employees of all of our subsidiaries and all part-time, seasonal, temporary and ready reserve employees. |
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| • | To identify the median employee, we utilized information from Box 5 of Form W-2 as we believe this measure reflects the most comparable measure of compensation across our diverse workgroups. |
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| • | In reviewing this information, we annualized the compensation of permanent full-time and part-time employees who were hired in 2017 and remained employed as of December 31, 2017. |
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| • | We then identified employees with nearly identical W-2 Box 5 compensation as the median compensated employee and compared the compensation characteristics of this group of employees (including the median compensated employee). Because the median compensated employee did not have compensation characteristics that were representative of our employees generally, as allowable by the SEC, we substituted an employee with nearly identical compensation as reported on Box 5 of Form W-2 whose variable compensation characteristics more accurately represented our employees as a whole. |
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
After identifying the median employee, we calculated the annual total compensation for our median employee using the rules used when calculating our Chief Executive Officer’s compensation for purposes of the Summary Compensation Table, as required. Because these rules require us to include the value of certain benefits provided by the company, the compensation reported for the median employee is higher than the compensation reported in Box 5 of the employee’s W-2.
Table Regarding Potential Post-Employment Benefits upon Termination or Change in Control
| The non U.S. countries and the number of employees in each of those countries is as follows: Argentina - 10; Aruba - 3; Australia - 4; Bahamas - 58; Barbados - 1; Belgium - 17; Belize - 1; Bermuda - 13; Brazil - 193; Canada - 353; Cayman Islands - 2; Chile - 34; China - 122; Colombia - 11; Costa Rica - 40; Czech Republic - 2; Denmark - 1; Dominican Republic - 15; Ecuador - 8; El Salvador - 9; France - 86; Germany - 38; Ghana - 3; Greece - 4; Grenada - 1; Guam - 113; Guatemala - 28; Haiti - 1; Honduras - 7; Hong Kong - 36; Hungary - 1; Iceland - 1; India - 3; Ireland - 19; Israel - 4; Italy - 48; Jamaica - 7; Japan - 613; Korea - 16; Mexico - 372; N. Mariana Islands - 2; Netherlands Antilles - 2; Nicaragua - 20; Nigeria - 8; Palau - 1; Panama - 10; Peru - 21; Philippines - 58; Russia - 22; Senegal - 3; Singapore - 537; South Africa - 3; Spain - 37; St. Lucia - 2; Switzerland - 2; The Netherlands - 70; Turks/Caicos - 1; UAE - 1; United Kingdom - 85; US Virgin Islands - 2; Venezuela - 1* |
Director Compensation
Director Compensation Non-employee director compensation is approved by the full Board of Directors, based on recommendations of the Corporate Governance Committee. In 2017, the Committee engaged outside compensation consultant Meridian Compensation Partners, LLC to assist the Committee in a competitive assessment of the compensation program for outside directors. Meridian reviewed our director compensation against the same 21 companies (including three airlines) in the peer group used for executive compensation purposes by our Personnel & Compensation Committee. Meridian recommended an increase in the compensation for the independent non-executive chairman of the Board, who transitioned to this position from lead independent director in October 2017, but retained the same level of compensation paid to him as lead director. After discussion, with input from Meridian, the Committee proposed, and the Board approved, the following changes to Board compensation: (1) a small increase in the cash and equity compensation paid to non-employee directors; (2) an equity award to the independent non-executive chairman of the Board; (3) the discontinuation of committee member cash retainers; and (4) the retention of committee chair cash retainers at the existing level, but with a small increase in the amount of the audit committee chair retainer. The Performance Compensation Plan limits equity awards to non-employee directors to $1 million. Employee directors continued to receive no additional pay for Board service. Non-employee directors receive the following for their service on the Board of Directors:
Director Compensation
| Annual Board Retainer: | $100,000 | | Annual Board Equity Grant: | $175,000 in restricted stock that vests at or shortly before the next annual meeting of shareholders, subject to the director’s continued service on the Board of Directors on the vesting date. Dividends accrue on these awards and are paid upon vesting of the restricted stock. | | Annual Committee Chair Cash Retainer: | $20,000, except $25,000 for Audit Committee Chair | | Annual Non-executive Chairman of the Board Equity Retainer: | $130,000 in restricted stock with the same vesting schedule as the annual Board equity grant | | Expense Reimbursements: | Reimbursement of reasonable expenses incurred in attending meetings | | Matching Gifts for Education Program: | Directors (and all employees and retirees) are eligible to participate in a program under which The Delta Air Lines Foundation matches 100% of contributions to eligible public and private, accredited, non-profit, educational institutions, pre-kindergarten through post-graduate, up to a $5,000 cap per individual director per calendar year. |
Director Compensation
As is common in the airline industry, Delta provides complimentary travel and certain Delta Sky Club privileges for members of the Board of Directors; the director’s spouse, domestic partner or designated companion; the director’s children and parents; and, to a limited extent, other persons designated by the director (Director Flight Benefits). Complimentary travel for such other persons is limited to an aggregate imputed value of $20,000 per year. Delta reimburses the director for associated taxes on complimentary travel with an imputed tax value of up to $25,000 per year. Unused portions of the annual allowances described in the previous two sentences accumulate and may be carried into succeeding years during Board service. Complimentary travel is provided to an eligible director’s surviving spouse or domestic partner after the eligible director’s death. Delta will not reimburse the surviving spouse or domestic partner for associated taxes on complimentary travel under the survivor travel benefit. A director who retires from the Board at or after age 52 with at least ten years of service as a director, at or after age 68 with at least five years of service as a director, or at his or her mandatory retirement date, may continue to receive Director Flight Benefits during retirement, except the unused portion of the annual allowances does not accumulate into succeeding years (Retired Director Flight Benefits). A director who served on the Board of Directors during the period beginning on the date Delta entered into the merger agreement with Northwest and ending on the date the merger occurred, or who joined the Board at the closing of the merger on October 29, 2008, will receive, at the completion of his or her Board service (other than due to death or due to removal by shareholders for cause), a vested right to receive Retired Director Flight Benefits, regardless of the director’s age and years of service when his or her Board service ends. A director is not eligible to receive Retired Director Flight Benefits if the director engages in certain wrongful acts. Notwithstanding the above, a person who is first elected to the Board of Directors on or after June 8, 2009, will not receive reimbursement for taxes for Retired Director Flight Benefits. Directors and retired directors may also purchase private jet flights from a Delta subsidiary by paying the incremental cost of the flights. Mr. Ralph is not eligible to receive flight benefits other than those he receives as a Delta employee.
Director Compensation
Director Compensation Director Compensation Table The following table sets forth the compensation paid to non-employee members of Delta’s Board of Directors for 2017.
Director Compensation
| Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards(2) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation(3) ($) | Total ($) | | Francis S. Blake | 135,000 | 305,000 | 0 | 0 | 0 | 23,131 | 463,131 | | Daniel A. Carp | 120,000 | 175,000 | 0 | 0 | 0 | 6,249 | 301,249 | | Ashton B. Carter | 16,667 | 175,000 | 0 | 0 | 0 | 0 | 191,667 | | David G. DeWalt | 105,000 | 175,000 | 0 | 0 | 0 | 8,138 | 288,138 | | Thomas E. Donilon | 55,000 | 0 | 0 | 0 | 0 | 544 | 55,544 | | William H. Easter III | 122,500 | 175,000 | 0 | 0 | 0 | 677 | 298,177 | | Mickey P. Foret | 120,000 | 175,000 | 0 | 0 | 0 | 26,866 | 321,866 | | Shirley C. Franklin | 55,000 | 0 | 0 | 0 | 0 | 30,519 | 85,519 | | Jeanne P. Jackson | 95,834 | 335,000 | 0 | 0 | 0 | 7,526 | 438,360 | | George N. Mattson | 120,000 | 175,000 | 0 | 0 | 0 | 40,134 | 335,134 | | Sergio A.L. Rial | 105,000 | 175,000 | 0 | 0 | 0 | 1,029 | 281,029 | | Kathy N. Waller | 105,000 | 175,000 | 0 | 0 | 0 | 1,180 | 281,180 | | Kenneth B. Woodrow | 55,000 | 0 | 0 | 0 | 0 | 6,849 | 61,849 |
Director Compensation
| As Delta employees, Mr. Bastian, and Mr. Ralph were not separately compensated for their service on the Board of Directors in 2017. Mr. Bastian’s compensation is included in the Summary Compensation Table on page 39. Mr. Ralph’s compensation is described in “Proposal 1 — Election of Directors” on page 15.(1) |
Director Compensation
| On June 30, 2017, the Board of Directors granted 3,260 shares of restricted stock to each non-employee director at that date. This award vests on June 29, 2018, subject to continued Board service on that date. Mr. Blake received an additional grant of 5,680 shares as compensation for service as non-executive chairman of the board, subject to vesting on the same schedule as described above. Ms. Jackson was elected to the Board on January 25, 2017 and on that date received a grant of 3,190 shares of restricted stock. Mr. Carter was elected to the Board on October 23, 2017 and on that date received a grant of 3,350 shares of restricted stock. Mr. Donilon resigned from the Board on April 7, 2017 due to other commitments. His stock award outstanding on that date was amended to provide for continued eligibility as if he remained a non-employee director. Mr. Woodrow and Ms. Franklin retired at the 2017 Annual Meeting of Shareholders. The “Stock Awards” column shows the fair value of the restricted stock granted to each non-employee director in 2017 as determined under FASB ASC Topic 718, based on date of the grant.(2) |
Director Compensation
| The amounts in this column for each non-employee director represent reimbursement of taxes associated with Director Flight Benefits. The amount for Mr. Blake represents the incremental cost of Director Flight Benefits of $10,412 and reimbursement of taxes associated with this benefit of $12,719. The amount for Ms. Franklin represents the incremental cost of $16,106 for Director Flight Benefits and a Board retirement gift. It also includes for Ms. Franklin $14,413 in reimbursement of taxes associated with these items. The amount for Mr. Foret represents the incremental cost of $13,369 for Director Flight Benefits and reimbursement under a benefit plan he had with Northwest Airlines, which Delta is required to honor as a result of its merger with Northwest. It also includes for Mr. Foret $13,497 in reimbursement of taxes associated with Director Flight Benefits and the benefit plan. The amount for Mr. Mattson includes $7,159 in reimbursement of taxes associated with Director Flight Benefits and $25,000 in compensation for acting on Delta’s behalf as director of Air France/KLM. The amount for Mr. Woodrow represents $6,849 in reimbursement of taxes associated with Director Flight Benefits, as well as a Board retirement gift. No other non-employee director received perquisites or other personal benefits with a total incremental cost of $10,000 or more, the threshold for reporting under SEC rules. From time to time, directors attend events sponsored by Delta at no incremental cost to Delta.(3) |
Director Compensation
Stock Ownership Guidelines The non-employee director stock ownership guidelines require each non-employee director to own shares of Delta common stock equal to or greater than (1) shares with a value of five times the annual Board cash retainer paid to the director or (2) 35,000 shares. Non-employee directors must achieve this ownership level within five years after initial election to the Board. For this purpose, stock ownership includes restricted stock and restricted stock units; shares owned directly or by a spouse or dependent children; shares held in trust by or for the director or an immediate family member who resides in the same household as the director (an immediate family member); or shares owned by an entity wholly-owned by the director or an immediate family member. It does not include shares a director has the right to acquire through the exercise of stock options. In addition, each non-employee director 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 are achieved. For this purpose, “net shares” means all shares retained after any applicable withholding of any shares for tax purposes. As of April 20, 2018, all non-employee directors exceeded the required stock ownership level except three directors, each of whom was first elected in 2017 or 2018. Each director has five years from the date of his or her election to achieve the required ownership level under the non-employee director stock ownership guidelines.