UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

(RULE 14A-101)

 

INFORMATION REQUIRED IN
PROXY STATEMENT

 

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

 

 Filed by the Registrant  Filed by a Party other than the Registrant

 

Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to § 240.14a-12

 

 

DELTA AIR LINES, INC.

 

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):
No fee required.
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NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS

 

TIME AND DATE:

ACCESS THE ANNUAL MEETING:

RECORD DATE:

Thursday, June 18, 2020

7:30 a.m. Eastern Daylight Time

Due to the COVID-19 pandemic, the annual
meeting will be held virtually. Shareholders may
participate by logging in at
www.virtualshareholdermeeting.com/DAL2020.

April 30, 2020

 

AGENDA

 

At the Annual Meeting, shareholders will be asked to vote on the following proposals:

Board Recommends Vote:

ITEM 1

Election of 12 directors named in the Proxy Statement

FOR each nominee

ITEM 2

Advisory vote on executive compensation

FOR

ITEM 3

Ratification of Ernst & Young LLP as independent auditors for 2020

FOR

ITEM 4

Shareholder proposal regarding right to act by written consent, if properly presented

AGAINST

ITEM 5

Shareholder proposal on a climate lobbying report, if properly presented

AGAINST

ITEM 6

Shareholder proposal on a political contributions report, if properly presented

AGAINST

ITEM 7

Shareholder proposal regarding sexual harassment policy, if properly presented

AGAINST

 

 

 

In addition, we will transact any other business properly presented at the meeting, including any adjournment or postponement 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.

If you plan to attend the meeting virtually, please see the instructions on page 73 of the attached proxy statement.

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.

BY INTERNET IN ADVANCE

BY TELEPHONE

BY MAIL

AT THE MEETING

Go to www.proxyvote.com and follow the instructions

Call 1-800-690-6903

Sign, date and return your proxy card in the enclosed postage-paid envelope

Attend the annual meeting virtually. See page 73 for instructions on how to attend

 

 

The Notice of Internet Availability of Proxy Materials is being mailed, and the attached proxy statement is being made available, to our shareholders on or about May 7, 2020.

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.

Atlanta, Georgia
May 7, 2020

 

  2020 PROXY STATEMENT     1


LETTER FROM THE NON-EXECUTIVE CHAIRMAN OF THE BOARD

 

 

 

As the non-executive Chairman of the Board, thank you for your support of Delta Air Lines especially during this time of challenge for our company, our country and the global community we serve. At all times and especially this time of crisis, our Board strives to oversee Delta in a responsible and transparent way.

2019 was an amazing year for Delta - record profits and outstanding operational performance demonstrating the strength of Delta’s people and its culture. In the blink of an eye, the COVID-19 pandemic dramatically disrupted our industry, our country and our world.

The information in this proxy statement is primarily related to our 2019 results and our upcoming annual meeting, but I wanted to use this space to highlight the actions we have taken with respect to executive compensation in 2020 as of April 15. As CEO, Ed is setting the example by forgoing his salary for six months through September and the other members of the executive leadership team are taking a 50% pay cut through September. All other officers of the company are taking a 50% pay cut for three months through the end of June and managing director and director-level employees are taking a 25% pay cut for the same period. As Board members, we are also forgoing our cash retainers for six months.

The strong foundation of good governance described in the pages of this proxy statement has been especially crucial in this time. The breadth of experience and wisdom among the Board members is critical as we exercise our responsibility to oversee the strong management team in place at the company. When board members who bring varied experiences are able to interact in the collegial and engaged way in which we operate, you can be confident that we are working hard on your behalf.

We are especially grateful to Dan Carp for his 13 years of leadership on the Delta Board. Dan served as the non-executive chair of the Board during a time of significant change and growth in the global industry. Joining the Board as Chair in 2007, Dan’s tenure has seen Delta lead the industry through a period of industry consolidation and expansion in the global marketplace. The Board’s thoughtful oversight during this period has resulted in Delta’s emergence as the leader in the global industry. Dan’s leadership, thoughtfulness and commitment to Delta will be missed, and we wish him well in his retirement from the Board.

As we look forward to the second half of this year and the challenges that lie ahead for Delta, the Board welcomes your support and engagement. We encourage you to share suggestion and concerns with us. In particular, we encourage you to review this proxy statement, and vote in the upcoming meeting.

As always, we deeply appreciate your support as shareholders and customers.

Sincerely,

 

 

ir.delta.com

  2020 PROXY STATEMENT     2


LETTER FROM THE CEO

 

 

In 2019, Delta demonstrated the power of our people and brand with our best year in history operationally, financially and for our customers. We know every year comes with its challenges, and we knew 2020 would be no exception. But we could have never predicted just how quickly the COVID-19 pandemic would upend our plans and reset expectations for the year, as demand for near-term air travel dropped to almost zero in a matter of weeks.

We all hope this period will end soon, but we must be realistic that the timing and shape of revenue recovery are uncertain. The actions we have taken and continue to take in the coming months will define how Delta emerges on the other side.

As we look ahead to the rest of 2020, our response remains focused on three priorities:

Taking care of our people and customers. Nothing is more important than the health and safety of our employees and customers. We have invested in resources to increase cleanliness across the organization, including a wide range of safety and cleaning measures on planes, at airports and across our facilities. These actions won’t end when the virus abates – we will continue to invest in new techniques to make flying safer than ever. We are also taking steps to help our employees and customers practice social distancing, including blocking middle seats, pausing automatic upgrades, modifying our boarding process and reducing meal service.

Preserving our liquidity. As revenues rapidly deteriorated, we took decisive action to reduce our cost base and protect liquidity. We hit pause on every project that was not necessary and cut expenses by consolidating airport operations, closing many Delta Sky Clubs and delaying non-essential aircraft maintenance. Since early March, we have raised capital and are receiving payroll support under the CARES Act. Our actions so far, combined with CARES Act relief, should bolster our liquidity to over $12 billion by the end of the June quarter, putting us on a solid path to stay above our $5 billion minimum liquidity target throughout the entire year.

Positioning Delta for recovery. We are confident that people will begin to travel again. The actions we take now and over the next few quarters will define Delta’s recovery position. To succeed, we will need to be a more nimble airline going forward. Delta’s core business strengths are enduring: our people, brand, domestic network and operational reliability. These advantages will continue to differentiate Delta and position us to succeed while rescaling the business and our cost structure.

We have the best team in the industry, and I thank all 90,000 employees for the incredible work they are doing. Our employees are on the front lines in the fight against the virus, keeping our nation’s airways open for essential travel. They are ensuring that medical professionals, first responders and other critical workers can get to the destinations where they are most needed.

As of late April, 37,000 employees – more than one-third of our workforce – have chosen to take voluntary unpaid leaves, ranging from 30 days to one year, a significant personal sacrifice for which I will forever be grateful.

We know Delta will successfully navigate through this crisis and remain the airline of choice when our customers are ready to fly again. Our culture and people ensure we will always do what is right for our customers, our shareholders, and each other. Thank you for your support now and always.

Sincerely,

 

 

  2020 PROXY STATEMENT     3


  ›TABLE OF CONTENTS    

 

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  2020 PROXY STATEMENT     4


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PROXY STATEMENT SUMMARY

The Delta Difference

As of the date this proxy statement is being published, the COVID-19 pandemic has driven a sudden and significant impact on our business. Our quick response to protect liquidity along with our proven track record over the last decade position Delta to navigate through the crisis and restore Delta to its pre-crisis position of strength.

In 2019, Delta connected over 200 million customers across our expansive global network to more than 300 destinations in over 50 countries. Over the last decade, Delta has built a strong financial foundation, achieved record customer satisfaction scores, established diversified revenue streams and created a scale advantage through the transformation of its global network.

 

 

POWERFUL CONSUMER BRAND

COMPETITIVE ADVANTAGES

PROVEN TRACK RECORD OF EXECUTION

Delta is an exceptional, trusted consumer brand that consistently delivers a superior travel experience.

Over the last decade, we significantly improved the quality and reliability of our operations. As a result, customer satisfaction scores have more than tripled – our domestic net promoter score has improved from 15% in 2009 to 50.8% in 2019, an all-time high, with scores improving in all geographic regions. With operational excellence and best-in-class service, we earn our customers’ trust and preference.

In 2019, Delta was named one of Fortune’s Most Admired Companies and its Most Admired Airline for the eighth time in the past nine years, The Wall Street Journal’s best US Airline (for the third year), number 1 in The Business Travel News Annual Airline survey, and certified as a Great Place to Work for the fourth consecutive year, with 92% of employees proud to work at Delta.

At the core of Delta are our passionate and determined professionals with an innate sense of caring for our customers. Our people consistently deliver industry- leading results and drive further improvements and efficiencies through innovation.

In 2019, our operations had 281 days without a mainline cancellation and 165 days without a cancellation systemwide.

Our global network has the best connecting hub complex – including the world’s most efficient hub in Atlanta - enhanced by strong international alliances and joint ventures.

Our ascending brand and strong, growing relationship with American Express® combine to produce customer loyalty and a diversified, high-margin revenue stream.

 

 

Over the last decade we have fundamentally transformed our business, creating a customer-focused operation with improvements in product, reliability and service and established a strong financial foundation. Our broad financial principle has been to reinvest nearly half of our operating cash flow into the business, providing Delta the ability to invest in our people, airports, new fleet and technology.

In 2019, Delta was the world’s largest airline by total revenues and the most profitable with five consecutive years of $5 billion or more in pre-tax income.

As a result of the impact COVID-19 is having on Delta’s cash flow in 2020, the company has taken on more leverage. Delta is confident that it has the right course of action to successfully navigate through the crisis and position the company to regain its pre-crisis position of strength. Upon recovery, the company intends to pay down debt levels to strengthen its balance sheet.

 

 

  2020 PROXY STATEMENT     5

 


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2019 Performance Highlights

Delta people produced record financial results, industry-leading operational reliability and continued improvements in customer satisfaction. We maintained our position as a reliable, customer-focused airline with strong profits and cash flow.

Below are some of the categories of performance measures included in our incentive compensation plans that demonstrate our pay for performance philosophy. See page 28 for further information about the performance measures included in these plans.

PRE-TAX INCOME

 

OPERATIONAL RELIABILITY AND CUSTOMER SERVICE

 

CONTINUED BALANCE SHEET PERFORMANCE

 

 

*

See “Supplemental Information about Financial Measures” on page 75 for reconciliations of non-GAAP measures and reasons we use them.

 

 

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  2020 PROXY STATEMENT     6



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Director Nominees

 

Committee Chair

★★ Expected to become Chair upon Mr. Carp’s retirement.

 

 

  2020 PROXY STATEMENT     7

 


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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.

 

 

PERFORMANCE-BASED

 

EMPLOYEE-ALIGNED

 

EQUITY-BASED

 

 

94% 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 goals that also drive payouts to frontline employees under our broad-
based profit sharing and shared rewards programs

 

82% of our Chief Executive Officer’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

 

 

Investor Engagement Efforts

We have long-standing, active engagement with our investors. Our senior management met with analysts and investors at our annual Investor Day in December 2019 and more than 10 industry conferences throughout 2019. We have dedicated resources to engage with all shareholders through monitoring of investor relations e-mail and using various media to convey key investment messages to a broader audience. In 2019, Delta was named as a “Most Honored Company” by the financial journal Institutional Investor, which ranked Delta’s investor relations effort number 1 in the airline category.

 

 

 

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Environmental, Social and Governance (ESG) Highlights

We are committed to being a good steward of the environment, a positive force in our communities and a great place to work and fly. This commitment is based on our culture of a strong set of core values that put people first in all we do - whether it’s our employees, the nearly 200 million customers who trust us with their travel each year, or the millions who make up the communities where we live, work and serve.

Environmental Stewardship

As a responsible business, we remain mindful of the impact of our global decisions. Nowhere is this clearer than in our view and approach to reducing carbon emissions and managing our environmental impacts.

SUSTAINABILITY PROGRAM OVERSIGHT

The oversight of our environmental sustainability program is guided by the following:

Regular Board level oversight by reporting environmental sustainability initiatives and status to the Corporate Governance Committee began in 2018

Continuing cross-divisional executive level oversight of environmental sustainability initiatives and guidance on priorities

Regular engagement of a 20 person cross-divisional steering committee, overseeing environmental sustainability reporting across Delta and implementing an internet site devoted to our sustainability matters

Guided by The Delta Environmental Sustainability Principles: Action, Innovation, Collaboration, Evolution and Transparency

 

TRANSPARENCY AND REPORTING

We report our environmental sustainability practices through the following:

Dow Jones North American Sustainability Index
(9th year in a row)

 

FTSE4 Good, European (Sustainability) Index
(5th consecutive year)

 

 

Leadership band from CDP
A- Score

CDP evaluates how companies measure and manage their risks and opportunities on climate change

 

Climate Registry
Continued verification of our carbon footprint

 

 

 

Prepared and reviewed reports for numerous customer, industry and rating agency ESG disclosures, including Sustainalytics, MSCI and ISS, while also engaging with institutional investors and organizations such as the Sustainability Accounting Standards Board (SASB) on ESG trends and opportunities

More information about our sustainability practices is in our Corporate Responsibility Report, reporting GRI, SASB and TCFD indicators, which can be found at www.delta.com/sustainability. That website is not incorporated by reference into this proxy statement.

 

ENVIRONMENTAL AND CLIMATE ACTION

The aviation industry accounts for roughly 2 percent of global carbon emissions. Our carbon footprint is our largest environmental impact, with 98 percent of emissions coming from aircraft. We are focusing our efforts to become carbon neutral through carbon reduction, carbon removal and stakeholder engagement. Some of the most notable achievements to date and plans for the future in each area include the following:

 

 

  2020 PROXY STATEMENT     9

 


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Carbon Reduction

 

 

Fleet Replacement

Replacing older mainline aircraft with newer aircraft that are typically 25% more efficient on a per seat basis than the aircraft they replace

Fuel Savings

Established a Fuel Board, comprised of senior leaders from each operating division to focus on promoting fuel savings initiatives throughout the airline. Initiatives pushed by the Delta Fuel Council and Fuel Board saved 33M gallons of fuel, $75M in fuel cost, and avoided 325,000 metric tons of carbon emissions

Sustainable Aviation Fuel

Flew our first flights with the use of sustainable aviation fuel (SAF) in partnership with Airbus for A330-900neo deliveries and with Airbus and AirBP for 20 carbon-neutral A321 deliveries from Mobile

Invested $2M in a feasibility study with Northwest Advanced Bio-Fuels (NWABF). The project would utilize wood residue deposits and wood slash from forest floors to produce SAF

Signed an offtake agreement with Gevo to purchase 10 million gallons of SAF per year, made from inedible, industrial corn products

Carbon Removal

Purchased and retired more than 12 metric tons (or more than 26 billion pounds) of offsets since 2012

Offset projects typically also support UN Sustainable Development Goals

 

Stakeholder Engagement

Partnered with corporate accounts to address emissions; pilot carbon offset agreements in place with companies such as the Bill and Melinda Gates Foundation, Columbia Sportswear, Merck and UCB Biopharmaceuticals

Global Partnerships & Coalition Building: multi-million dollar contribution to Global Citizen movement to address climate change, reduce inequality and end extreme poverty by 2030; Delta’s CEO Ed Bastian became the co-chair of Global Citizen’s private sector

Established Youth Advisory Board on Sustainability, made up of several young environmental champions who help support Delta’s sustainability work

Actively collaborating with the FAA and the airline industry to modernize the air traffic control (ATC) system through forums such as the NextGen Advisory Committee (NAC); modernization efforts reduce delays, decrease fuel consumption, and cut carbon emissions by shortening flights and providing more direct routes

Engaged with industry, government and ICAO on CORSIA and other climate and environmental regulations

 

Progress Against Industry Goals

As a result of these measures, we have shown improvements against industry climate metrics:

 

Waste Reduction Achievements in 2019

 

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Corporate Social Responsibility Commitment

Our people and our culture are the foundation of our success. We have long understood that taking care of our people also leads to satisfied customers and stakeholders.

Our culture also involves giving back to the communities we serve as well as serving important global initiatives.

With The Delta Air Lines Foundation, contributed $55 million as part of our annual commitment to give one percent of net income to key charitable organizations in our communities

Recognized as a national leader in our commitment to anti-human trafficking efforts, which includes continuing to train our front-line employees to help identify and report suspected instances of human trafficking

Beginning in 2019, paying all employees for a day of service each year to qualified non-profit organizations of their choice

 

METRIC

 

GOAL

 

INDICATORS OF CONTINUING PROGRESS

COMMUNITY

 

Donate 1% of our net income to key charitable organizations

 

Contributed $55 million in 2019 to the communities we serve.

EMPLOYEE ENGAGEMENT

 

Achieve 85 percent positive employee engagement

 

Met our goal as measured through positive employee engagement responses to our annual employee survey, in which more than 37,000 employees participated (over 40% of Delta’s employees).

CUSTOMER SAFETY

 

Proactively reduce risks by identifying, assessing, mitigating and/or eliminating hazards that may cause incidents, accidents or injuries to customers

 

On-board aircraft, in boarding bridges and at airport gates, we perform risk assessments for the safety of our customers. Our in-flight safety demonstrations and announcements are continually enhanced. Our pilot and maintenance teams collaborate to continuously report on and repair on board equipment such as seats, tray tables and bins.

EMPLOYEE SAFETY

 

Achieve world-class personal safety performance with the goal of sending all Delta employees and business partners home safely

 

Our safety culture enabled us to maintain a 3.9 percent Total Recordable Injury Rate in 2019, performance that was even with 2018 and 43 percent better than the industry average. Our days away, restricted or transfer rate was 3.21 days in 2019 compared to 3.09 in 2018. In 2019, we experienced a work-related fatality for the first time since 2010.

CUSTOMER SATISFACTION

 

Consistent year-over-year growth in net promoter scores

 

 

Sustained strong record of customer satisfaction. Achieved record net promoter scores (NPS) throughout the year and at year-end across all of our regions, including a record 50.8 NPS on domestic flights - an increase of 5 points from 2018.

 

 

 

 

 

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COMMUNITY IMPACT

 

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Governance Highlights

Delta has a history of a strong, independent Board, composed of seasoned members with diversity of experiences. The Board is committed to sound corporate governance practices in line with evolving best practices.

 

 

CORPORATE GOVERNANCE AND BOARD PRACTICES

Independent chairman

All directors elected annually. Average Board tenure of nominees is less than 5 years

Ongoing Board succession efforts — 8 of 13 current directors first elected from 2014 to the present. Regular Board committee refreshment. Almost half of Board nominees are diverse

Majority voting for directors in uncontested elections

Proxy access; special meeting call by holders of 20% of outstanding common stock

Corporate Governance Principles provide no outside director will stand for re-election after age 72

Robust annual self-evaluations of Board and Board committees

Regular comprehensive succession planning for management, evidenced by successful senior leadership transition

Anti-hedging and anti-pledging policy for all employees and Board

Corporate Governance Principles prohibit ownership of specific airline competitors’ stock by Board and officers

Meaningful stock ownership and retention guidelines for Board 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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GOVERNANCE - BOARD MATTERS

During 2019, the Board of Directors met 11 times. Each director who served on the Board during 2019 attended at least 75% of the meetings of the Board of Directors and the committees on which he or she served that were held during his or her tenure on the Board. It is the Board’s policy that directors are encouraged to attend the annual meeting. All of Delta’s directors attended the annual meeting in 2019. During the year, the Board routinely held executive sessions without the Chief Executive Officer. Mr. Blake presided at these sessions as non-executive Chairman of the Board.

Board Leadership Structure

Because we believe operating pursuant to sound governance practices benefits the long-term interests of our shareholders, for many years we have chosen to elect an independent, non-executive Chairman of the Board separate from our Chief Executive Officer.

We believe the non-executive Chairman of the Board plays an important governance leadership role that enhances long-term shareholder value. The Chairman’s responsibilities include:

 

chairing meetings of non-management directors (executive sessions)

presiding at the annual meeting of shareholders

briefing the Chief Executive Officer on issues raised in executive sessions

in collaboration with the Corporate Governance Committee, committee chairs and the Chief Executive Officer, scheduling Board meetings, setting Board agendas and strategic discussions and providing a review of pre-meeting materials delivered to directors

overseeing annual Board, committee and Chief Executive Officer performance evaluations and succession planning

managing the Board and committee oversight of risks

recommending appropriate governance policies and practices

overseeing the avoidance of conflicts of interest

recommending Board committee and committee chair assignments

facilitating director discussions inside and outside the boardroom, managing the relationship between the Chief Executive Officer and the Board, consulting with the Chief Executive Officer and serving as a counterweight as appropriate

overseeing the process for selecting new Board members

calling meetings of the Board and shareholders

chairing the Corporate Governance Committee

carrying out other duties requested by the Chief Executive Officer and the Board

Board Committees and Governance Documents

The Board of Directors has established the Audit, Corporate Governance, Finance, Personnel & Compensation and Safety & Security committees to assist it in discharging its responsibilities. The number of meetings for each of these committees in 2019 and primary responsibilities are listed on the next page. A complete list of the responsibilities of each committee can be found in the committee charters, which are available in the corporate governance section of our website at ir.delta.com/governance/. Our Certificate of Incorporation, Bylaws, Corporate Governance Principles, codes of ethics and business conduct and independence standards are also available in the corporate governance section of our website at ir.delta.com/governance/.

All members of the Audit, Corporate Governance, Finance and Personnel & Compensation Committees are non-employee directors who are independent, as defined in the New York Stock Exchange (NYSE) listing standards and Delta’s director independence standards. The members of the Audit Committee also satisfy the additional independence requirements set forth in rules under the Securities Exchange Act of 1934 Act (the 1934 Act). The members of the Personnel & Compensation Committee also satisfy the additional independence requirements set forth in rules under the 1934 Act.

 

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AUDIT COMMITTEE

Members

Primary Responsibilities

William H. Easter III* (Chair)

Francis S. Blake*

Ashton B. Carter

David G. DeWalt*

Michael P. Huerta

Kathy N. Waller*

Meetings in 2019: 9

 

oversees our financial reporting and disclosure processes, including the appointment of our independent auditors, the review of the audit and work of our internal audit department and the adequacy and effectiveness of our internal controls over financial reporting

oversees compliance with procedures and processes pertaining to corporate ethics and standards of conduct

reviews and, if appropriate, approves or ratifies possible conflicts of interest involving members of the Board or executive officers and related party transactions that would be subject to disclosure under Item 404 of Regulation S-K

reviews enterprise risk management processes and discusses major risk exposures with management

reviews cybersecurity risks and the security and operations of our information technology systems

*Audit Committee Financial Experts

The Audit Committee Report can be found on page 58.

 

CORPORATE GOVERNANCE COMMITTEE

Members

Primary Responsibilities

Francis S. Blake (Chair)

Daniel A. Carp*

William H. Easter III

George N. Mattson

Kathy N. Waller

Meetings in 2019: 5

leads the Board’s governance practices and procedures, including the search for and recruiting of new outside directors and consideration of nominees for the Board

oversees our governance standards, processes for evaluation of the Board and its committees, compensation of non-employee directors and the company’s ESG sustainability efforts

*Retiring at the Annual Meeting

 

 

FINANCE COMMITTEE

Members

Primary Responsibilities

George N. Mattson (Chair)

Daniel A. Carp*

Jeanne P. Jackson

Sergio A. L. Rial

David S. Taylor

Meetings in 2019: 10

reviews and makes recommendations about the financial structure of the company, financial planning, investments, acquisitions and divestitures, operating plans, capital structure and hedging activities

reviews and approves or recommends to the Board commitments, capital expenditures and financing transactions

*Retiring at the Annual Meeting

 

 

PERSONNEL & COMPENSATION COMMITTEE

Members

Primary Responsibilities

Daniel A. Carp (Chair)*

Francis S. Blake

Jeanne P. Jackson

George N. Mattson

Sergio A. L. Rial**

David S. Taylor

Meetings in 2019: 8

oversees our general compensation philosophy and practices and the annual review of our Chief Executive Officer and reviews and approves compensation programs for our executive officers

reviews management succession plans and the company leader and talent planning process

makes recommendations to the Board regarding election of officers

*Retiring at the Annual Meeting

**Expected to become Chair upon Mr. Carp’s retirement

The Personnel & Compensation Committee Report can be found on page 35.

 

 

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SAFETY & SECURITY COMMITTEE

Members

Primary Responsibilities

David G. DeWalt (Chair)

Ashton B. Carter

William H. Easter III

Christopher A. Hazleton

Michael P. Huerta

Kathy N. Waller

Meetings in 2019: 5

oversees and consults with management on our customer, employee and aircraft operating safety and security

reviews current and proposed safety and security-related programs, policies and compliance matters

reviews matters with a material effect on our flight safety operations and security

establishes and approves annual safety and security goals

 

 

 

Board Refreshment Process

The Corporate Governance Committee recommends to the Board of Directors nominees for election to the Board.

Delta believes each current nominee for the Board of Directors has the following attributes:

integrity, honesty and adherence to high ethical standards

extensive business acumen and sound judgment

a track record of service as a leader in business or governmental settings

The Committee seeks nominees who have the skills and experience to assist management in the operation of Delta’s business and to provide input on Delta’s strategy, among other matters. In accordance with Delta’s Corporate Governance Principles, the Committee and the Board assess potential nominees (including incumbent directors) based on factors such as the individual’s business experience, character, judgment, diversity of experience, international background and other matters relevant to the Board’s needs and objectives at the particular time. Independence, financial literacy, and the ability to devote significant time to Board activities and to the enhancement of the nominee’s knowledge of Delta’s business are also factors considered for Board membership.

In its succession planning role, the Committee regularly considers potential candidates for the Board in light of the company’s new and evolving risks, strategies and operations. While the Board does not have a specific policy with respect to diversity, the Board and Corporate Governance Committee recognize that the members of the Board should represent the diversity of Delta’s customers, employees and management. The Committee balances the desire for continuity on the Board with the benefits of fresh perspectives and additional experiences to align with the changing business.

The Committee retains third-party search firms from time to time to assist in identifying and preliminarily screening potential Board members who have experience that would complement and enhance the current Board.

 

Board and Committee Evaluation Process

For many years our Board of Directors and each of its committees have annually engaged in comprehensive self-evaluations. The Corporate Governance Committee oversees the evaluations and re-examines the process for the Board and Board committee evaluations each year. For the 2019 evaluation, the Chief Legal Officer spoke individually with each Board member to discuss specific topics, such as issues of importance to the Board for 2020, strategic planning, succession planning and key attributes of new directors, and to obtain his or her assessment of Board and committee performance, functioning and operations during the year. These discussions also allowed time for engagement with each director on any other topic he or she desired to discuss. The comments of the directors were compiled on an anonymous basis and reviewed by the Board and the Board committees in executive sessions. The Chairman of the Board and the chairs of the committees address follow-up matters from the evaluations. These included continuing focus on strategy, cybersecurity, sustainability, risk management and investments, as well as operational matters, among other items. The Board believes this annual evaluation process supports its effectiveness and continuous improvement.

Topics discussed during the Board performance evaluation one-on-ones with the Chief Legal Officer include:

issues of importance to the Board for 2020

risk management, strategic planning and succession planning

board structure and processes

an assessment of Board and committee performance in 2019

 

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Board Oversight of Risk Management

The Board of Directors has ultimate responsibility to oversee Delta’s enterprise risk management program (ERM). Headed by the Vice President — Corporate Audit & Enterprise Risk Management, the ERM program instills a heightened awareness of risk management throughout Delta, identifies and categorizes risks and monitors the progress of enterprise risk mitigation plans. The role of ERM is to provide a risk management framework with cross functional alignment to enable risk informed decision-making through identification and categorization of risks and monitoring the progress of enterprise risk mitigation plans. The Board discusses risk throughout the year, particularly when reviewing operating and strategic plans and when considering specific actions for approval. Depending on the nature of the risk, the responsibility for oversight of selected risks may be delegated to appropriate committees of the Board, with material findings reported to and discussed with the full Board. Delegations of risk oversight by the Board include:

The Audit Committee reviews the ERM framework at the enterprise level; reviews management’s process for identifying, managing and assessing risk; oversees the management of risks related to the integrity of the consolidated financial statements, internal control over financial reporting, the internal audit function, and legal and regulatory matters.

The Board delegated to the Audit Committee oversight of risks related to cybersecurity and the security and operations of the information technology systems. Members of the Audit Committee receive internal and external training on cybersecurity risks, and an experienced cybersecurity professional, David DeWalt, is a member of the Audit Committee and has been a Delta director since 2011.

The Executive Vice President-Chief Information Officer and the Vice President-Chief Information Security Officer and their staffs regularly report to the Audit Committee on cybersecurity and information technology risks and initiatives.

The Finance Committee oversees the management of risks related to aircraft fuel price and fuel hedging; foreign currency and interest rate hedging; Delta’s financial condition and capital structure; its financing, acquisition, divestiture and investment transactions and related matters.

The Personnel & Compensation Committee reviews risks related to management succession and development, Delta’s executive compensation program, Company leadership and talent planning process and related matters.

The Corporate Governance Committee reviews risks related to Board of Directors’ succession plans, Delta’s corporate governance, ESG sustainability and related matters.

The Safety & Security Committee oversees the management of risks related to customer, employee, aircraft and airport operating safety and security and related matters.

Delta’s ERM process is a journey of continuous improvement and iteration to meet the evolving needs of our business. Leaders of the business divisions, working closely with the ERM leader, have responsibility for risk identification, development of business risk mitigation plans, and monitoring and reporting progress of their implementation. The corporate safety and security department oversees the risk management process for risks related to customer, employee, aircraft and airport safety and security matters. A senior management level, cross-divisional council, the Delta Risk Council (DRC), meets quarterly and includes the Chief Financial Officer, Chief Information Officer, Chief Legal Officer, Controller, Chief Information Security Officer, Chief Compliance Officer and Vice President — Corporate Audit & Enterprise Risk Management, among others. The DRC is responsible for overseeing all of the company business and safety and security risks, including the following: monitoring risk tolerance levels; defining organizational responsibilities for risk management; identifying significant risks to Delta; and risk mitigation and management strategies based on Delta’s risk tolerance levels as well as monitoring the business to determine that risk mitigation activities are in place and operating. As appropriate, various officers and employees attend meetings of the DRC and follow up on issues addressed within the DRC.

The Board of Directors believes that Delta’s leadership structure, combined with the roles of the Board, its committees, and the DRC, provide the appropriate leadership for effective risk oversight.

Communications with Directors

Shareholders and other interested parties may communicate with our non-management directors by sending an e-mail to nonmgmt.directors@delta.com. We have established a link to this address on our Investor Relations website. Communications with directors may also be mailed to Delta’s Corporate Secretary at Law Department, Delta Air Lines, Inc., Department 981, P.O. Box 20574, Atlanta, Georgia, 30320. Communications will be sent directly to the Chairman of the Board, as representative of the non-management directors, other than communications pertaining to customer service, human resources, accounting, auditing, internal control and financial reporting matters. Communications regarding customer service and human resources matters will be forwarded for handling by the appropriate Delta department. Communications regarding accounting, auditing, internal control and financial reporting matters will be brought to the attention of the Audit Committee Chair.

 

 

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SHARE OWNERSHIP

Beneficial Ownership of Securities

Directors, Nominees for Director and Executive Officers

The following table sets forth the number of shares of Delta common stock beneficially owned as of April 15, 2020, by each director and director nominee, each person named in the Summary Compensation Table in this proxy statement, and all directors and executive officers as a group. Unless otherwise indicated by footnote, the owner exercises sole voting and investment power over the shares.

Name of Beneficial Owner

Amount and Nature of

Beneficial Ownership

(1) 

Directors:

 

 

Edward H. Bastian

1,154,044

(2) 

Francis S. Blake

53,335

 

Daniel A. Carp

48,253

 

Ashton B. Carter

10,000

 

David G. DeWalt

54,720

 

William H. Easter III

48,170

 

Christopher A. Hazelton

300

 

Michael P. Huerta

9,825

 

Jeanne P. Jackson

13,100

 

George N. Mattson

105,660

(3) 

Sergio A.L. Rial

15,597

 

David S. Taylor

7,960

 

Kathy N. Waller

17,350

 

Named Executive Officers:

 

 

Glen W. Hauenstein

615,745

(2) 

W. Gil West

380,210

(2) 

Paul A. Jacobson

647,835

(2)(4) 

Peter W. Carter

211,254

(2) 

Directors and Executive Officers as a Group (21 Persons)

4,050,058

(2) 

(1) 

Each of the individuals listed in the table and the directors and executive officers as a group beneficially owned less than 1% of the shares of common stock outstanding on April 15, 2020.

(2) 

Includes the following number of shares of common stock which a director or named executive officer has the right to acquire upon the exercise of stock options that were exercisable as of April 15, 2020, or that will become exercisable within 60 days after that date:

 

Name

Number of Shares

Edward H. Bastian

747,984

Glen W. Hauenstein

299,397

W. Gil West

257,627

Paul A. Jacobson

147,357

Peter W. Carter

95,874

Directors & Executive Officers as a Group

1,822,590

 

(3) 

Includes 2,000 shares held by a trust for the benefit of Mr. Mattson’s adult son, over which Mr. Mattson has shared investment power.

(4) 

Includes 29,000 shares held by a family foundation, of which Mr. Jacobson and his wife are the trustees.

 

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Beneficial Owners of More than 5% of Voting Stock

The following table provides information about the following entities known to Delta to be the beneficial owner of more than five percent of Delta’s outstanding common stock as of April 15, 2020.

Name and Address of Beneficial Owner

Amount and Nature of

Beneficial Ownership

Percentage of Class

Berkshire Hathaway Inc.

58,900,759(1)

9.23%

3555 Farnam Street
Omaha, NE 68131

 

 

The Vanguard Group

43,812,141(2)

6.87%

100 Vanguard Blvd
Malvern, PA 19355

 

 

BlackRock, Inc.

34,386,285(3)

5.39%

55 East 52nd Street
New York, NY 10055

 

 

(1) 

Based on a Form 4 filed April 3, 2020, in which Berkshire Hathaway, Inc. reported that, as of April 1, 2020, it may be deemed to have beneficial ownership of shares owned by its wholly-owned subsidiaries National Indemnity Company (51,907,636) and Government Employees Insurance Company (6,993,123). In Schedule 13G/A filed February 14, 2020, Berkshire Hathaway Inc. indicated it had shared voting and dispositive power over all shares owned by these subsidiaries.

(2) 

Based on Schedule 13G/A filed February 10, 2020, in which The Vanguard Group reported that, as of December 31, 2019, it had sole voting power over 717,016 of these shares, shared voting power over 41,583 of these shares, sole dispositive power over 43,068,506 of these shares and shared dispositive power over 743,635 of these shares.

(3) 

Based on Schedule 13G/A filed February 5, 2020, in which BlackRock, Inc. reported that, as of December 31, 2019, it had sole voting power over 30,390,151 of these shares and sole dispositive power over all of these shares.

 

 

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EXECUTIVE COMPENSATION

Note from the Chairman of the Personnel & Compensation Committee

 

In the last few years, we have shared with you a summary of the previous year’s highlights and the connection between Delta’s outstanding operational and financial performance and the compensation paid to our executives. Without question, 2019 was a successful year for Delta allowing us to pay out $1.6 billion in profit sharing to our front-line employees. But as our business has been disrupted and all of our lives have changed in 2020, I want to share with you the actions we have been and are taking on executive compensation in response to the crisis brought on by the COVID-19 pandemic.

As the rapid spread of COVID-19 became a pandemic, delivering a devastating blow to the company’s business, the Board and management of Delta took quick action with respect to current compensation to lead the way in preserving cash and bolstering liquidity. As of April 15, these actions have included:

Ed Bastian, our CEO, forgoing his salary for six months beginning April 1;

Members of our executive leadership team, including the named executive officers, taking a 50% pay cut for six months beginning April 1;

All other officers taking a 50% pay cut for 90 days beginning April 1;

Managing director- and director-level employees taking a 25% pay cut for 90 days beginning April 1; and

Board members waiving their cash retainers for six months.

The core competitive strength of Delta has always been and will continue to be its people and values-based culture. In these times of uncertainty, more than ever, it will be our talent that sets us apart. During this crisis, the Board and I have once again witnessed the strength and commitment of Delta’s people, including our leadership team. We recognize the extraordinary efforts of this team in guiding the airline through this difficult period, and we have every confidence that those efforts will continue as the company moves out of the immediate crisis and begins the road toward recovery from its devastating impact to our business. Therefore, the ability to both retain our talented leaders and attract new ones when needed has been and will continue to be a strong focus for this committee.

Pay for performance has long been at the core of Delta’s compensation philosophy and our program has always placed a significant portion of our executive’s compensation at risk based both on the achievement of challenging business goals as well as the performance of our stock price. As a result of this structure and the impact of COVID-19, the compensation they have received over the past few years is worth significantly less than when it was awarded, declining by more than half of its grant date value.

In addition, the performance measures and goals we approved in early February 2020, especially under our annual incentive plan, no longer reflect our current reality. This crisis will not just affect Delta over the near-term; like many companies, our longer-term business strategies must also be carefully considered when we fully understand the extent of the impact. In the coming months, this Committee will need to reevaluate our incentive plans to ensure they reflect goals that focus our company and our leadership team on Delta’s path to recovery and a strong future.

Even though I will be retiring from the Board prior to the annual meeting, I leave knowing that the Committee is well positioned to support Delta and its employees during this time.

Thank you for your continued support of Delta.

 

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Compensation Discussion and Analysis

This section of the proxy statement describes the compensation of our named executive officers for 2019. It also discusses how our executive compensation program reflects our compensation philosophy and objectives, including the importance of linking pay to performance.

 

2019 Named Executive Officers

 

Name

Position

 

 

EDWARD H. BASTIAN

Chief Executive Officer

 

 

GLEN W. HAUENSTEIN

President

 

 

W. GIL WEST

Senior Executive Vice President & Chief Operating Officer

 

 

PAUL A. JACOBSON

Executive Vice President & Chief Financial Officer

 

 

PETER W. CARTER

Executive Vice President & Chief Legal Officer and Corporate Secretary

 

 

HUMAN CAPITAL MANAGEMENT

We believe Delta’s most important competitive advantage is our approximately 90,000 employees who are the face of our brand. Effectively attracting, engaging, developing, retaining and rewarding our people is a priority of Delta and its Board of Directors. In February 2020, the Board approved updates to the Personnel & Compensation Committee’s charter to memorialize the Committee’s role in oversight of the policies and strategies relating to human capital management.

Our Employee Commitment

Delta delivered strong financial, operational and customer service results in 2019. This would not have been possible without the dedication and determination of our people. During 2019, we continued our commitment to promoting a culture of open, honest and direct communications, making Delta a great place to work and building an environment that encourages diversity, integrity and respect.

In 2020, we have been humbled by the continued dedication and determination of our people in response to the challenges Delta is facing due to the COVID-19 pandemic. Not only have they graciously accepted a temporary reduction in work hours as we have had to reduce our operations, but 37,000 of our employees have volunteered to take unpaid leaves of absence ranging from 30 days to one year in duration. And we have supported them through this crisis as well in a variety of ways, including covering the cost of employee benefit premiums for unpaid leave takers, providing special COVID-19-related pay protection, and more. We have long known that our people and our culture are the foundations of our success and the sacrifices they have made during this time are a true testament to the Delta difference.

Investing nearly $13 billion

in our people, which includes salaries, pension funding, health and welfare benefits, 401(k) plan contributions, the Profit Sharing and Shared Rewards Programs, training and travel benefits. Key actions in 2019 include:

   

Profit Sharing Program

Paying $1.6 billion in February 2020 under the Profit Sharing Program in recognition of the achievements of our employees in meeting Delta’s financial targets in 2019 — the largest in our history and the sixth consecutive year our employees received payouts exceeding $1 billion.

   

Shared Rewards Program

Awarding $84 million under Delta’s broad-based shared rewards program (Shared Rewards Program) based on the hard work of our employees in meeting key operational performance goals during 2019 (on-time arrival, baggage handling, flight completion factors and net promoter score), recognizing that superior performance by our front-line employees directly affects customer satisfaction.

   

Defined Contribution and Defined Benefit Retirement Plans

Contributing over $2 billion to Delta’s broad-based defined contribution and defined benefit retirement plans. This included $1 billion in excess contributions to our defined benefit plans.

   

Health and Wellness Benefits

Investing more than $800 million in comprehensive health and wellness benefits. This included medical and dental benefits, amounts paid directly to employees through Delta’s incentive-based wellness program, as well as mental health benefits.

 

 

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In addition to these significant investments, we strive to make Delta a great place to work by listening to our employees so we can provide programs and resources that fully engage them, help them deepen their skill sets and further their careers at Delta. We are committed to creating a diverse and inclusive workforce, empowering professional growth and development and investing in our employees’ physical, emotional and financial health and wellness. We are also committed to internal pay parity based on role, qualifications, experience and merit.

These efforts have been recognized internally and, as shown below, externally. In a 2019 employee survey in which more than 37,000 Delta people participated (over 40% of Delta’s employees), 81% said they are happy to work at Delta.

 

 

 

 

 

Talent Planning and Development

Talent planning and development are important at all levels within Delta—from the executive ranks to our frontline employees. The Personnel & Compensation Committee continued to make this effort a high priority in 2019 and it will be the highest priority in the months to come. The Board of Directors is regularly updated on key talent indicators for our leaders, including recruiting and development programs. The Board members interact with potential future leaders through formal presentations and informal events.

Diversity and Inclusion

As a global airline, we believe that our company must reflect the diversity of the world and serve as a model of inclusiveness. With a goal to strengthen our connections from the inside out, Delta’s diversity and inclusion strategy focuses on three strategic imperatives: seeking diversity, promoting inclusion and driving accountability. This effort is driven by Delta’s Diversity & Inclusion Council — a senior cross-divisional group that meets regularly to evaluate corporate and divisional metrics, programs and proposals that align with the company’s strategic imperatives. The Personnel & Compensation Committee oversees the company’s progress with this strategy and has incorporated a diversity update as a standing meeting agenda item.

 

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Administration of the Executive Compensation Program

PERSONNEL & COMPENSATION COMMITTEE

The Personnel & Compensation Committee oversees and approves Delta’s executive compensation program to reinforce our culture by ensuring a strong connection between pay and performance as well as alignment between our executives, employees and shareholders. This includes:

 

Establishing Delta’s executive compensation philosophy and objectives in consultation with an independent compensation consultant and company management

Overseeing the development and implementation of our executive compensation programs

Reviewing and approving the compensation structure and performance measures for our Chief Executive Officer and other executive officers

Evaluating the performance of the Chief Executive Officer in meeting corporate goals and objectives

Reviewing and advising the Board of Directors on management succession planning

Overseeing Delta’s policies and strategies relating to talent development and human capital management, including diversity and inclusion

Making recommendations to the Board of Directors on the election of officers

Reviewing tally sheets, competitive market data for our peer group, and individual contributions to establish target compensation for our executive officers

 

INDEPENDENT COMPENSATION CONSULTANT

In 2019, after considering the factors provided under the NYSE listing standards and Item 407(e)(3)(iii) of SEC Regulation SK, the Personnel & Compensation Committee engaged Frederic W. Cook & Co., Inc. (FW Cook) as its executive compensation consultant. In this role, FW Cook provides advice to our Personnel & Compensation Committee regarding Delta’s executive and director compensation programs. This includes:

 

Providing advice regarding Delta’s executive compensation programs based on the company’s business strategy, compensation philosophy, prevailing market practices and relevant regulatory mandates

Providing annual recommendations directly to the Personnel & Compensation Committee on Chief Executive Officer compensation

Advising the Corporate Governance Committee on the compensation for the non-executive Chairman of the Board and non-employee directors

Providing advice on the Company’s compensation peer group

Updating and advising the Personnel & Compensation Committee on key executive compensation trends in the industry and general market

Periodically working directly with management on behalf of and under the control and supervision of the Personnel & Compensation Committee

The Personnel & Compensation Committee considered FW Cook’s advice when determining executive compensation plan design and award levels in 2019.

 

DELTA MANAGEMENT

Delta’s management team provides input to the Personnel & Compensation Committee on Delta’s executive compensation program structure and, under the supervision of the Personnel & Compensation Committee, is responsible for the ongoing administration of the program. This includes:

 

Developing Flight Plan goals and providing input on business strategy and performance

Providing updates to the Personnel & Compensation Committee on key executive compensation trends in the industry and general market

Evaluating the financial and legal implications of executive compensation proposals and confirming proposed payouts to executive officers under our incentive compensation plans are calculated correctly and comply with plan terms

The Chief Executive Officer making recommendations for the compensation of executive officers other than himself

 

 

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Executive Compensation Philosophy and Objectives

Our executive compensation philosophy is to achieve Delta’s short-term and long-term business goals, which we refer to as our Flight Plan, by closely linking pay to performance and by aligning the interests of all Delta people with the interests of our customers and shareholders. Based on this philosophy, the Personnel & Compensation Committee develops the executive compensation program to promote a pay for performance culture that:

 

Pay for Performance

Pay for performance is the foundation of our compensation philosophy for all employees, driving a strong sense of team work and continual improvement of business results. Our executive compensation program places a substantial portion of total compensation at risk. In 2019, 94% of total compensation for the Chief Executive Officer and 90% of total compensation for the other named executive officers was contingent on Delta achieving ambitious financial, operational and customer service goals or varied with stock price performance. Furthermore, the majority of their total compensation is paid in Delta stock, which, together with our stock ownership and retention guidelines, aligns the interests of management to the interest of shareholders.

The Personnel & Compensation Committee sets stretch performance goals under our annual and long-term incentive plans to drive Delta’s business strategy and to deliver value to our shareholders. Based on our strong performance in 2019, we paid 185.92% of target under our annual incentive plan and 144.74% of target under the 2017 long-term incentive program.

Our incentive plans closely align the interests of management with those of frontline employees in two respects. First, many of the same financial, operational and customer service performance measures are used in both our executive and broad-based employee compensation programs. Second, we have long structured both our annual and long-term incentive plans to ensure that executives do not receive their full incentive payouts unless our people also receive payment under the Profit Sharing Program for the year.

 

 

 

 

Say on Pay Voting Results

At our 2019 annual meeting, we asked shareholders for a non-binding “say on pay” advisory vote to approve the 2018 compensation of the named executive officers. Similar to previous years, the holders of over 95% of the shares present and entitled to vote at the 2019 annual meeting voted for approval of the compensation of the named executive officers. The Personnel & Compensation Committee took these results into account by continuing to emphasize our pay for performance philosophy utilizing challenging performance measures that provide incentives to deliver value to our shareholders.

 

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Corporate Governance and Compensation Practices

Our executive compensation program reflects corporate governance policies and compensation practices that are transparent and consistent with best practices. The following chart highlights the policies and practices we consider instrumental in driving company performance while mitigating risk, as well as the practices we avoid:

 

What We Do:

Subject officers’ incentive compensation to compensation clawback provisions

Apply stock ownership and retention guidelines to executive officers and directors

Follow objective, standardized criteria for the timing of equity award grants

Include “double trigger” change in control provisions in our incentive awards

Prohibit hedging and pledging by our employees

Require a one-year minimum vesting period for performance-based awards under our equity compensation plan

Fully disclose our incentive plan performance measures

Engage with institutional investors regarding our executive compensation program

What We Don’t Do:

No employment contracts

No excise tax reimbursement for payments made in connection with a change in control

No repricing, cash buyouts or share recycling of stock options and stock appreciation rights under our equity compensation plan

No loss on sale for residence relocation protection for named executive officers

No supplemental executive retirement or deferred compensation plans

No company-provided:

personal club memberships

executive life insurance

home security

financial planning


     

 

Comparative Market Data and 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 for target total direct compensation opportunities to be competitive with the peer group, with individual variation based on the individual’s performance, experience and role within Delta.

Our peer group is composed of three major U.S. airlines and eighteen other companies in the hotel/leisure, transportation/ distribution, machinery/aerospace/defense and retail industries. We selected these industries because we believe it is important that our peer group have business characteristics that are similar to Delta’s, including revenue size, market capitalization, number of employees, operating margin and global presence. In order to retain and attract the talent we need, Delta must compete with these types of companies, and if the peer group was limited to the airline industry, we would have to include companies that are a fraction of the size and scope of Delta. 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. There were no changes to the peer group in 2019. The companies in our peer group are:

 

 

 

 

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.

L3 Technologies

Textron Inc.

United Technologies Corporation

Retail:

Best Buy Co., Inc.

The Home Depot, Inc.

Lowe’s Corporation

Target Corporation

 

 

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Peer Group

Revenue ($)(1)

Market Capitalization ($)(2)

International Operations as

Percentage of Revenue (%)(3)

75th Percentile

77,350

126,817

41

Median

44,514

57,794

29

25th Percentile

22,248

32,861

10

DELTA AIR LINES

47,007

37,681

29

Source: Standard & Poors Capital IQ

(1)

Last 12 months from most recent quarter ended on or before December 31, 2019. In millions.

(2)

As of December 31, 2019. In millions.

(3)

As of the most recent fiscal year-end.

2019 Compensation Decisions

The following changes, which are discussed further below, were made to our executive compensation program in 2019:

As part of our annual executive compensation review, in February 2019, the Personnel & Compensation Committee approved:

An increase to Mr. Bastian’s base salary. Even with this increase, the base salaries for Mr. Bastian and our other executive officers remain positioned well below the market median; and

Increases to the target award opportunities under the long-term incentive program for Mr. Bastian, Mr. Hauenstein and Mr. West to reward their continued leadership in achieving the Company’s outstanding financial and operational performance.

In December 2019, the Personnel & Compensation Committee granted Mr. Carter a restricted stock award to recognize his achievements during the year.

The Personnel & Compensation Committee approved changes to the 2019 annual incentive plan to calculate achievement based on an annual earned salary amount, consistent with the approach used to calculate payouts under the Profit Sharing Program for frontline employees.

 

In recognition of the unprecedented challenges facing Delta in 2020 as a result of the COVID-19 pandemic, Mr. Bastian is forgoing 100% of his base salary for six months beginning April 1, 2020. In addition, the other named executive officers are forgoing 50% of their base salaries for the same period.

Elements of Compensation

Compensation elements for our executive officers include:

Type

Component

Objective

Fixed Compensation

Base Salary

Provides a fixed amount of compensation for performing day-to-day functions based on level of responsibility, experience and individual performance

Performance-Based Compensation

Annual Incentive Plan

Rewards short-term financial and operational performance on a relative and absolute basis using pre-established performance criteria that support the Flight Plan

 

Long-Term Incentive Program

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

Benefits

Health, Welfare and Retirement Benefit Plans

Helps attract and retain highly qualified executives

 

 

Delta does not have a specific compensation target for each element of compensation. As shown in the compensation mix charts on page 24, at-risk compensation is the largest portion of the total compensation opportunity for the Chief Executive Officer and the other named executive officers. The Personnel & Compensation Committee believes this is the appropriate approach for aligning the interests of the named executive officers and shareholders.

 

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The Personnel & Compensation Committee considers a number of factors, including competitive market data, internal equity, role and responsibilities, business and industry conditions, management succession planning and individual experience and performance in determining executive compensation. When making specific compensation decisions, the Personnel & Compensation Committee also reviews compensation “tally sheets” prepared by the compensation consultant. The tally sheets detail the total compensation and benefits for each executive officer, including the compensation and benefits the officer would receive under hypothetical termination of employment scenarios.

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 the interests of our key stakeholders. Recognizing that the performance measures used under our annual and long-term incentive plans may need to change over time to reflect evolving priorities, 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 they remain consistent with Delta’s long-term strategic plan and our annual Flight Plan goals.

To achieve our mission that no one better connects the world, the Company’s 2019 Flight Plan focused on four core pillars: our people, our customers, our partners and communities and our owners. With Delta’s culture as the foundation, our 2019 Flight Plan goals included being the airline of choice for customers, running the industry’s best operation, expanding Delta’s global reach, delivering industry-leading financial results and investing for the future. The mix of absolute and relative performance measures included in our 2019 annual and long-term incentive plans are distinct and demonstrate how the Personnel & Compensation Committee incorporates the elements of our Flight Plan to drive performance.

We made changes to our annual and long-term incentive performance measures in 2017 to support a focus on positive revenue growth and global alliances. Given the positive momentum in these areas over the last two years and their continued focus for future years, the Personnel & Compensation Committee determined not to make any further changes to the performance measures for 2019.

In setting the annual and long-term performance goals for each performance measure, the Personnel & Compensation Committee reviews our business plans and considers other factors, including our past variance to targeted performance, our historical performance, economic and industry conditions and the performance of other airlines. In certain cases, this analysis may cause the Committee to set lower targets than in previous years. We set challenging, but achievable goals, including those that are realizable only as a result of exceptional performance, for the company and the named executive officers to drive the achievement of our short- and long-term objectives.

 

 

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Annual Incentive Plan

2019 Flight Plan Objectives

Performance Measure

Description

Deliver Industry-Leading
Financial Results

***

Our Culture is the Foundation

Absolute Financial — Pre-Tax Income

 

Based on business plan targets approved each year by the Board of Directors as part of Delta’s annual operating plan

Also serves as the measure used under the Profit Sharing Program, thereby aligning the interests of Delta management with our people

Run the Industry’s Best
Operation

***

Our Culture is the Foundation

***

Be the Airline of Choice for Customers

Operational Performance —

Delta and Delta Connection

Based on the broad-based Shared Rewards Program’s on-time arrival, baggage handling, flight completion and net promoter score goals, as well as on-time arrival and flight completion goals for our Delta Connection carriers

Satisfaction of these measures are determined based on achievement of either internal goals or first place performance relative to airline peers (other than net promoter scores)

Deliver Industry-Leading
Financial Results

***

Expand Delta’s Global Reach

Relative Financial — Annual
Pre-Tax Income Margin

Compares our pre-tax income margin relative to our airline peers. The Personnel & Compensation Committee has determined that using pre-tax margin better evaluates the results of our equity investments in global airlines

 

Long-Term Incentive Program

2019 Flight Plan Objectives

Performance Measure

Description

Deliver Industry-Leading
Financial Results

Total Revenue per Available Seat Mile (TRASM)

A unit revenue measure that includes revenue from our ancillary businesses and other revenue sources as well as passenger revenue

Encourages focus on developing distinctive approaches to achieving top-line revenue growth while emphasizing disciplined capacity growth and revenue management

Be the Airline of Choice for Customers

Customer Service Performance

Based on Delta’s domestic and international net promoter scores, this measure further emphasizes the importance of earning and maintaining customer preference and loyalty

Invest for the Future

Return on Invested Capital

Determined on an after-tax basis and calculated using gross (rather than net) debt, which discourages the holding of excess cash

Deliver Industry-Leading
Financial Results

Relative Total Shareholder

Return

Compares our long-term total shareholder return relative to all other S&P 500 member companies

 

BASE SALARY

The Personnel & Compensation Committee reviews the base salaries of our executive officers annually. There is no set schedule for base salary increases. The Personnel & Compensation Committee approved a base salary increase for Mr. Bastian effective February 1, 2019, to $950,000. This change was based on individual performance, internal parity considerations and a competitive market review. Even with this increase, the base salaries of our Chief Executive Officer and our other named executive officers remain below the median of the peer group for their respective positions.

In recognition of the unprecedented challenges facing Delta in 2020 as a result of the COVID-19 pandemic, Mr. Bastian is forgoing 100% of his base salary for six months beginning April 1, 2020. In addition, the other named executive officers are forgoing 50% of their base salaries for the same period.

 

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ANNUAL INCENTIVE

The 2019 Management Incentive Plan (2019 MIP) links pay and performance by providing management employees with a compensation opportunity based on Delta’s achievement of certain Flight Plan goals in 2019. The 2019 MIP also aligns the interests of Delta management and employees by using metrics that are consistent with the goals that drive payouts under Delta’s Profit Sharing and Shared Rewards Programs.

Typically, payments under the 2019 MIP are provided in cash, however, to provide further alignment between our executive officers and our people, the executive officers’ 2019 MIP awards are subject to the following conditions if there is no Profit Sharing Program payout to employees for the year:

The actual MIP award, if any, will be capped at the target award opportunity, even if Delta’s performance for operational and relative financial goals exceeds the target level.

Any awards earned by executive officers will be made in restricted stock that will not vest until there is a payment under the Profit Sharing Program or under certain termination of employment scenarios.

The following chart shows the performance measures for the named executive officers under the 2019 MIP and the actual performance for each measure in 2019.

 

(1)

This column reflects the percentage of the target award earned after application of the performance measure weightings.

(2)

“Pre-tax income” as defined in Delta’s broad-based Profit Sharing Program, means Delta’s annual consolidated pre-tax income calculated in accordance with GAAP and as reported in Delta’s SEC filings, but excluding (a) asset write downs related to long-term assets; (b) gains or losses with respect to special, unusual, or nonrecurring items; and (c) expense accrued with respect to any employee profit sharing plan, program or similar arrangement.

(3)

For purposes of the 2019 MIP, the Industry Group consists of Alaska Airlines, American Airlines, JetBlue Airways, Southwest Airlines and United Airlines.

 

 

 

 

The target award opportunities under the 2019 MIP, which have not changed since 2016, are expressed as a percentage of each participant’s base salary. For this purpose, beginning with the 2019 MIP, a participant’s base salary will be his or her actual base salary earned during the year, rather than the base salary in effect at the end of the calendar year. The Personnel & Compensation Committee made this change to better align with how payouts are calculated under our broad-based Profit Sharing Program. The 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 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 2019 MIP awards earned by each named executive officer. Because there was a payout under the Profit Sharing Program for 2019, payments under the 2019 MIP were made in cash.

 

 

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Named Executive Officer

Base Salary

Target Award

(as % of base salary)

 

Target Award

Percentage of

Target Award Earned

 

Total 2019

MIP Award

Mr. Bastian

$

945,833

200%

$

1,891,667

185.92%

 

$

3,516,987

Mr. Hauenstein

$

700,000

175%

$

1,225,000

185.92%

 

$

2,227,520

Mr. West

$

700,000

175%

$

1,225,000

185.92%

 

$

2,227,520

Mr. Jacobson

$

550,000

150%

$

825,000

185.92%

 

$

1,533,840

Mr. Carter

$

550,000

125%

$

687,500

185.92%

 

$

1,278,200

 

LONG-TERM INCENTIVES

2019 Long-Term Incentive Program

The 2019 Long-Term Incentive Program (2019 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 price 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.

The 2019 LTIP target awards are the largest component of each executive officer’s compensation opportunity. The Personnel & Compensation Committee determined the target award opportunities so each participant’s total direct compensation opportunity is competitive with the peer group.

The award allocations shown below were selected to balance the incentive opportunity between Delta’s financial performance relative to other airlines, internal company performance and stock price performance. This mix and the other terms of the 2019 LTIP are intended to balance the performance and retention incentives with the volatility of airline stocks.

 

 

Performance Awards

Performance awards are dollar-denominated long-term incentive opportunities payable in Delta stock to executive officers and in cash to other participants. The chart on the following page shows the range of potential payments of the performance awards based on the 2019 LTIP’s four performance measures over the three-year period ending December 31, 2021. Any payouts under this award will occur in 2022.

 

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(1)

For purposes of the 2019 LTIP, the Industry Group consists of: Alaska Airlines, American Airlines, JetBlue Airways, Southwest Airlines and United Airlines.

 

Restricted Stock

The 2019 LTIP provides that restricted stock will vest in three equal installments on February 1, 2020, February 1, 2021 and February 1, 2022, subject to forfeiture in certain circumstances. Restricted stock is eligible for dividends, but dividends will not become payable until the restrictions on the underlying stock lapse. The value of a participant’s restricted stock award will depend on the price of Delta stock when the award vests.

Performance Stock Options

Stock options are inherently performance-based, as they provide realized value only if the stock price appreciates. Nevertheless, 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 the interests of our people. The 2019 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:

Performance Measure

 

Vesting Dates

Employees receive a payout under the Profit Sharing Program for 2019

 13 of performance stock option award

February 1, 2020

 13 of performance stock option award

February 1, 2021

 

 13 of performance stock option award

February 1, 2022

If there is no Profit Sharing Program payout for 2019, but employees receive a payout under the Profit Sharing Program for 2020

23 of performance stock option award

February 1, 2021

 

1/3 of performance stock option award

February 1, 2022

Employees receive no Profit Sharing Program payout for either 2019 or 2020

The entire performance stock option award will be forfeited (even if employees receive a payout under the Profit Sharing Program for 2021).

 

 

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Because our people received a payout under the Profit Sharing Program for 2019, one-third of the named executive officers’ performance stock options vested and became exercisable on February 5, 2020 (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, 2021 and February 1, 2022, subject to forfeiture in certain circumstances.

For additional information about the vesting and possible forfeiture of the 2019 LTIP awards, see “Post-Employment Compensation—Potential Post-Employment Benefits upon Termination or Change in Control—Long-Term Incentive Programs” on page 43.

The 2017 Long-Term Incentive Program Payouts

In 2017, the Personnel & Compensation Committee granted the named executive officers performance awards under the 2017 Long-Term Incentive Program (2017 LTIP). We reported these award opportunities in our 2018 proxy statement.

The performance awards were denominated in cash but paid in shares of Delta stock to the named executive officers. The payout of these award opportunities is based on the total revenue per available seat mile (TRASM) relative to the performance of an industry peer group, Delta’s customer service performance, return on invested capital and total shareholder return relative to all other S&P 500 companies over the three-year performance period ended December 31, 2019.

Summarized in the chart below are the performance results certified by the Personnel & Compensation Committee for the performance awards under the 2017 LTIP and the resulting percentage of target award opportunity earned:

 

 

 

(1)

This column reflects the percentage of the target award earned after application of the performance measure weightings.

 

BENEFITS

Our named executive officers participate in the same ongoing retirement plans as our frontline employees, including a defined contribution plan and, for certain officers, a frozen defined benefit pension plan. We do not provide any supplemental executive retirement plans or deferred compensation plans. The named executive officers also receive the same health and welfare benefits

 

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provided to all Delta employees, except for basic life insurance coverage, which all other employees receive and our officers do not. In addition, Delta requires officers to regularly complete a comprehensive physical examination. Delta pays the cost of this examination. Every domestic full-time Delta employee is eligible for a free physical under the company’s health plans. Other than eligibility for flight benefits (for the executive officer, immediate family members and other designees and, in certain circumstances, the executive officer’s surviving spouse), Delta provides no perquisites to any of our officers. Delta provides certain flight benefits to all employees and eligible retirees and survivors. These benefits are a low-cost, highly valued tool for attracting and retaining talent and are consistent with industry practice. See the Summary Compensation Table and the related footnotes on page 36 for information regarding benefits received in 2019 by the named executive officers.

Risk Assessment

The Personnel & Compensation Committee requested FW Cook conduct a risk assessment of Delta’s executive compensation program. Based on this review, FW Cook determined that the executive compensation program does not encourage unnecessary risk-taking, and the Personnel & Compensation Committee and company management agree with this assessment. The Personnel & Compensation Committee notes the executive compensation program includes: (1) a compensation clawback policy for officers; (2) stock ownership and retention guidelines for executive officers; (3) incentive compensation capped at specified levels; (4) an emphasis on longer-term compensation; (5) use of multiple performance measures, both annual and long-term; and (6) an anti-hedging and anti-pledging policy for all employees. These features are designed to align the interests of executives with preserving and enhancing shareholder value.

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, described below, are consistent with our executive compensation philosophy, align with shareholder interests and foster responsible behavior.

CLAWBACK POLICY

The compensation clawback policy holds officers accountable in the event of 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 this purpose, incentive compensation includes annual and long-term incentive awards and all forms of equity compensation.

STOCK OWNERSHIP GUIDELINES

Under Delta’s stock ownership guidelines, executive officers are required to own shares of Delta stock as shown below:

 

Shares Equal to a

Multiple of Base Salary

OR

Shares

Chief Executive Officer

8x

 

400,000

President/Senior Executive Vice President

6x

 

200,000

Executive Vice Presidents

4x

 

150,000

 

 

 

Executive officers must achieve the applicable ownership level within five years of the date they become subject to the guidelines. 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 applicable stock ownership guideline is achieved. For this purpose, “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 stock on the NYSE. As of December 31, 2019, all of our named 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 and Board of Director members are prohibited from engaging in transactions in Delta securities involving publicly traded options, short sales and

 

 

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hedging transactions because they may create the appearance of unlawful insider trading and, in certain circumstances, present a conflict of interest. In addition, employees and Board of Director members are prohibited from holding Delta securities in a margin account or otherwise pledging Delta securities as collateral for a loan.

Compensation for Mr. Bastian

The Personnel & Compensation Committee evaluates Mr. Bastian’s performance and makes compensation decisions based on his delivery of the Flight Plan and his progress toward meeting Delta’s long-term business strategies. In 2019, Mr. Bastian led Delta to exceed its operational, customer-service and financial goals, while also advancing the company’s future success by developing our global relationships, upgrading our fleet, making technology a competitive advantage and prioritizing the company’s diversity, inclusion and sustainability efforts.

The Personnel & Compensation Committee recognized Mr. Bastian’s performance by increasing his target award opportunity under the 2019 LTIP to $12.5 million. This change is consistent with our pay for performance philosophy and provides incentive for him to focus on long-term improvements in company performance that will lead to greater shareholder value. The actual payout Mr. Bastian realizes on his 2019 LTIP award will depend upon achievement of the plan’s performance measures and stock price performance over the three-year performance period ending in 2021. In addition, after also reviewing market and internal equity factors, the Personnel & Compensation Committee increased Mr. Bastian’s base salary to $950,000, effective February 1, 2019. With these changes, Mr. Bastian’s total compensation is within the median range of the peer group.

In recognition of the unprecedented challenges facing Delta in 2020 as a result of the COVID-19 pandemic, Mr. Bastian is forgoing 100% of his base salary for six months beginning April 1, 2020.

As the following graphs illustrate, a substantial percentage of Mr. Bastian’s compensation is at-risk and concentrated in equity-based awards.

 

 

 

 

 

 

 

 

See the Summary Compensation Table and the related footnotes on page 36 for additional information about Mr. Bastian’s 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 programs for the named executive officers are described in “Post-Employment Compensation — Potential Post-Employment Benefits upon Termination or Change in Control” on page 42.

Tax and Accounting Impact and Policy

The financial and tax consequences to Delta of the executive compensation program are important considerations for the Personnel & Compensation Committee when analyzing the overall design and mix of compensation. The Personnel & Compensation Committee seeks to balance an effective compensation program with an appropriate impact on reported earnings and other financial measures.

Internal Revenue Code Section 162(m) limits deductions for certain compensation to any covered executive to $1 million per

 

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year. Prior to 2018, this limitation did not apply to the chief financial officer or compensation that met the tax code requirements for qualifying performance-based compensation. Changes in the tax law effective January 1, 2018, expanded the limitation on deductibility to include the chief financial officer and eliminated the performance-based exception (except in the case of certain arrangements in place as of November 2, 2017). The elimination of the performance-based exception has not altered the Personnel & Compensation Committee’s commitment in this area because pay for performance is a foundational principle of our executive compensation philosophy.

Equity awards granted under our executive compensation program are expensed in accordance with Statement of Financial Accounting Standards Codification Topic 718, Stock Compensation.

Compensation Committee Report

The Personnel & Compensation Committee has reviewed and discussed with Delta management the Compensation Discussion and Analysis and, based on such review and discussion, the Personnel & Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

THE PERSONNEL & COMPENSATION COMMITTEE

Daniel A. Carp, Chair
Francis S. Blake
Jeanne P. Jackson
George N. Mattson
Sergio A. L. Rial
David S. Taylor

Compensation Committee Interlocks and Insider Participation

None of the members of the Personnel & Compensation Committee is a former or current officer or employee of Delta or has any interlocking relationships as set forth in applicable SEC rules.

 

 

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Executive Compensation Tables

The table below contains information about the compensation of the following named executive officers during 2019: (1) Mr. Bastian, Delta’s principal executive officer; (2) Mr. Jacobson, Delta’s principal financial officer; and (3) Mr. Hauenstein, Mr. West and Mr. Carter, who were Delta’s three other most highly compensated executive officers on December 31, 2019.

As of the publication of this Proxy Statement, Delta’s stock price has declined significantly, along with the airline industry as a whole, due to the sudden, precipitous reduction in airline travel caused by the COVID-19 pandemic. As required by applicable regulations, the amounts shown in the “Stock Awards” and “Option Awards” columns below for 2019 are based on the closing price of Delta common stock of $50.52 on February 6, 2019, the award’s grant date. As of April 15, 2020, the closing price of Delta common stock was $24.35 per share. This stock price decline has reduced the stated value of the stock and option awards by almost 52 percent. At this time, all outstanding performance stock options from 2019 and prior year awards have zero intrinsic value.

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

2019

945,833

-

8,375,463

4,125,096

3,516,987

33,393

328,606

 

17,325,379

2018

891,667

-

7,705,118

3,795,014

2,277,090

-

313,559

 

14,982,448

2017

800,004

-

6,700,177

3,300,030

2,119,531

32,292

253,669

 

13,205,703

Glen W. Hauenstein

President

2019

700,000

-

4,522,932

2,227,509

2,227,520

-

239,872

 

9,967,833

2018

693,750

-

4,020,040

1,980,072

1,549,686

-

220,252

 

8,463,800

2017

625,000

-

4,020,106

1,980,082

1,448,891

-

153,110

 

8,227,189

W. Gil West

Senior Executive Vice President & Chief Operating Officer

2019

700,000

-

4,522,932

2,227,509

2,227,520

 

208,756

 

9,936,717

2018

693,750

-

4,020,040

1,980,072

1,549,686

-

198,813

 

8,442,361

2017

625,000

-

3,937,615

1,312,597

1,448,891

-

167,087

 

7,491,190

Paul A. Jacobson

Executive Vice President & Chief Financial Officer

2019

550,000

-

3,000,236

1,000,033

1,533,840

29,327

169,716

 

6,283,152

2018

547,917

-

3,000,035

1,000,048

1,043,666

-

158,317

 

5,749,983

2017

525,000

-

3,000,393

1,000,028

1,043,201

17,223

153,712

 

5,739,557

Peter W. Carter

Executive Vice President & Chief Legal Officer

2019

550,000

-

2,350,193

700,056

1,278,200

-

159,010

 

5,037,459

2018

545,833

-

1,912,657

637,529

869,722

-

151,433

 

4,117,174

2017

500,000

-

1,912,683

637,602

827,938

-

139,990

 

4,018,213

(1) 

The amounts in the “Stock Awards” and “Option Awards” columns do not represent amounts the named executive officers received or are entitled to receive. Rather, the reported amounts represent the aggregate fair value of awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation (FASB ASC Topic 718), on the applicable grant date or, if earlier, the service inception date. The reported amounts do not reflect the risk the stock awards may be forfeited in certain circumstances; for awards subject to performance conditions, the risk there is no payout; or in the case of performance stock options, that there is no vesting because the performance conditions are not met. The fair value of restricted stock awards is based on the closing price of Delta common stock on the grant date.

 

The reported amounts for 2019, 2018 and 2017 in the “Stock Awards” column reflect award opportunities under Delta’s long-term incentive programs. For additional information, see footnotes 2 and 3 below.

(2) 

The 2019 Long-Term Incentive Program (2019 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 2019 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 2019 LTIP vests in equal installments on February 1, 2020, 2021 and 2022, subject to forfeiture in certain circumstances. See “Compensation Discussion and Analysis — Elements of Compensation — Long-Term Incentives” on page 30 for details about the 2019 LTIP.

 

The reported amounts for 2019 in the “Stock Awards” column include the fair value of the performance awards and restricted stock under the 2019 LTIP, computed in accordance with FASB ASC Topic 718 on February 6, 2019, the date the 2019 LTIP awards became effective and, in addition for Mr. Carter, the fair value of a restricted stock award, computed in accordance with FASB ASC Topic 718 on December 4, 2019, the date such award became effective.

 

See footnote 4 below for additional information regarding the performance stock options.

 

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(3) 

For awards in the “Stock Awards” column that are subject to performance conditions, the fair value is computed in accordance with FASB ASC Topic 718 based on the probable outcome of the performance condition as of the applicable grant date or, if earlier, the service inception date. For these purposes, the fair value of the performance awards under the 2019 LTIP is computed based on performance at the target level.

If the performance awards were assumed to pay out at the maximum level, the aggregate fair value of such awards, which does not include the restricted stock or performance stock option component of the 2019 LTIP, for the named executive officers would be as follows:

Name

2019 ($)

2018 ($)

2017 ($)

Edward H. Bastian

8,500,000

7,820,000

6,800,000

Glen W. Hauenstein

4,590,000

4,080,000

4,080,000

W. Gil West

4,590,000

4,080,000

3,990,000

Paul A. Jacobson

3,040,000

3,040,000

3,040,000

Peter W. Carter

2,128,000

1,938,000

1,938,000

 

(4) 

The stock options granted under the 2019 LTIP are subject to performance conditions. Because the conditions for vesting have been met, the stock options vest in equal installments on each of February 5, 2020, February 1, 2021 and February 1, 2022 We determined the grant date fair value of stock options based on achievement of the target level under an option pricing model using the following assumptions: (1) a 1.47% risk-free interest rate, (2) a 27% expected volatility of common stock and (3) a 5.2 year expected life.

(5) 

The 2019 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 Incentive” on page 29 for details about the 2019 MIP, including a description of Delta’s 2019 MIP performance.

(6) 

The reported amounts for 2019 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, 2018 to December 31, 2019. Mr. Hauenstein, Mr. West and Mr. Carter are not participants in this plan. See “Post-Employment Compensation — Defined Benefit Pension Benefits” on page 41 for a description of this plan, including its eligibility requirements.

(7) 

The reported amounts of all other compensation for 2019 include the following items:

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

25,200

264,863

20,698

17,844

Glen W. Hauenstein

25,200

177,272

19,839

17,561

W. Gil West

25,200

177,272

6,284

0

Paul A. Jacobson

25,200

118,230

15,192

11,094

Peter W. Carter

25,200

102,575

17,251

13,984

(a) 

Represents Delta’s contributions to the Delta 401(k) Retirement Plan, a broad-based tax qualified defined contribution plan, based on the same fixed and matching contribution formula applicable to all participants in this plan.

(b) 

Represents amounts paid directly to the named executive officer that Delta would have contributed to the officer’s account under the Delta 401(k) Retirement Plan absent limits applicable to such plans under the Internal Revenue Code. These payments are based on the same fixed and matching contribution formula applicable to all participants in this plan and are available to any plan participant affected by such limits.

(c) 

Represents tax reimbursements for flight benefits as described below.

(d) 

The amounts consist of an annual physical examination for officers and flight benefits as described below. 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.

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.

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, each named executive officer was eligible to 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.

(8) 

As required by SEC rules, the amount in the “Total” column for each named executive officer represents the sum of the amounts in all the other columns. As discussed in footnote (1) above, the amounts in the “Stock Awards” and “Option Awards” columns do not represent amounts the named executive officers received or are entitled to receive. Rather, these amounts represent the aggregate fair value of awards computed in accordance with FASB ASC Topic 718 on the applicable grant date or, if earlier, the service inception date. The amounts do not reflect the risk the awards may be forfeited in certain circumstances, for awards subject to performance conditions, the risk there is no payout or in the case of performance stock options, there is no vesting, because the performance conditions are not met.

 

 

  2020 PROXY STATEMENT     37


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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 2019 under the 2019 MIP and the 2019 LTIP and, in addition, for Mr. Carter a restricted stock award under the Delta Air Lines, Inc. Performance Compensation Plan. These award opportunities are described in the “Compensation Discussion and Analysis” section of the proxy statement under “Elements of Compensation — Annual Incentive” and “Elements of Compensation — Long-Term Incentives” beginning on page 29.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

2019 MIP

1/1/2019

12/11/2018

945,834

1,891,667

3,783,334

 

 

 

 

 

 

 

 

2019 LTIP - Performance Award

2/6/2019

2/6/2019

 

 

 

 

2,125,000

4,250,000

8,500,000

 

 

 

4,250,000

2019 LTIP - Restricted Stock

2/6/2019

2/6/2019

 

 

 

 

 

 

 

81,660

 

 

4,125,463

2019 LTIP - Performance
Stock Options

2/6/2019

2/6/2019

 

 

 

 

 

 

 

 

381,600

50.52

4,125,096

Glen W. Hauenstein

 

 

 

 

 

 

 

 

 

 

 

 

 

2019 MIP

1/1/2019

12/11/2018

612,500

1,225,000

2,450,000

 

 

 

 

 

 

 

 

2019 LTIP - Performance Award

2/6/2019

2/6/2019

 

 

 

 

1,147,500

2,295,000

4,590,000

 

 

 

2,295,000

2019 LTIP - Restricted Stock

2/6/2019

2/6/2019

 

 

 

 

 

 

 

44,100

 

 

2,227,932

2019 LTIP - Performance
Stock Options

2/6/2019

2/6/2019

 

 

 

 

 

 

 

 

206,060

50.52

2,227,509

W. Gil West

 

 

 

 

 

 

 

 

 

 

 

 

 

2019 MIP

1/1/2019

12/11/2018

612,500

1,225,000

2,450,000

 

 

 

 

 

 

 

 

2019 LTIP - Performance Award

2/6/2019

2/6/2019

 

 

 

 

1,147,500

2,295,000

4,590,000

 

 

 

2,295,000

2019 LTIP - Restricted Stock

2/6/2019

2/6/2019

 

 

 

 

 

 

 

44,100

 

 

2,227,932

2019 LTIP - Performance
Stock Options

2/6/2019

2/6/2019

 

 

 

 

 

 

 

 

206,060

50.52

2,227,509

Paul A. Jacobson

 

 

 

 

 

 

 

 

 

 

 

 

 

2019 MIP

1/1/2019

12/11/2018

412,500

825,000

1,650,000

 

 

 

 

 

 

 

 

2019 LTIP - Performance Award

2/6/2019

2/6/2019

 

 

 

 

760,000

1,520,000

3,040,000

 

 

 

1,520,000

2019 LTIP - Restricted Stock

2/6/2019

2/6/2019

 

 

 

 

 

 

 

29,300

 

 

1,480,236

2019 LTIP - Performance
Stock Options

2/6/2019

2/6/2019

 

 

 

 

 

 

 

 

92,510

50.52

1,000,033

Peter W. Carter

 

 

 

 

 

 

 

 

 

 

 

 

 

2019 MIP

1/1/2019

12/11/2018

343,750

687,500

1,375,000

 

 

 

 

 

 

 

 

2019 LTIP - Performance Award

2/6/2019

2/6/2019

 

 

 

 

532,000

1,064,000

2,128,000

 

 

 

1,064,000

2019 LTIP - Restricted Stock

2/6/2019

2/6/2019

 

 

 

 

 

 

 

20,510

 

 

1,036,165

2019 LTIP - Performance
Stock Options

2/6/2019

2/6/2019

 

 

 

 

 

 

 

 

64,760

50.52

700,056

2019 Restricted Stock

12/4/2019

12/4/2019

 

 

 

 

 

 

 

4,460

 

 

250,028

(1) 

For purposes of this column, the grant date for the 2019 MIP is the date the performance period began. The grant date for the 2019 LTIP is the grant date or, if earlier, the service inception date determined under FASB ASC Topic 718.

(2) 

These columns show the annual award opportunities under the 2019 MIP. For additional information about the 2019 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 Incentive” on page 29.

(3)

These columns show the long-term award opportunities under the performance award component of the 2019 LTIP. For additional information about the 2019 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 30.

(4) 

This column shows the restricted stock component of the 2019 LTIP and, in addition for Mr. Carter, a restricted stock award.

(5) 

This column shows the performance stock option component of the 2019 LTIP. For additional information about the performance stock option component of the 2019 LTIP, see footnote 4 to the Summary Compensation Table.

(6) 

The exercise price is equal to the closing price of Delta common stock on the NYSE on the date of grant.

(7) 

The amounts in this column do not represent amounts the named executive officers received or are entitled to receive. Rather, the reported amounts represent the fair value of the awards computed in accordance with FASB ASC Topic 718 on the applicable grant date or, if earlier, the service inception date. For awards subject to performance conditions, the value shown is based on the probable outcome of the performance condition as of the applicable grant date or, if earlier, the service inception date. The amounts do not reflect the risk that the awards may be forfeited in certain circumstances or, in the case of performance awards, that there is no payout, or in the case of performance stock options, that there is no vesting, if the required performance measures are not met.

 

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  2020 PROXY STATEMENT     38


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Outstanding Equity Awards at Fiscal Year-End Table

The following table provides information regarding the outstanding equity awards on December 31, 2019 for each of the named executive officers.

Name

Grant

Date(1)

Option Awards

 

Stock Awards

Number of

Securities

Underlying

Unexercised

Options

Exercisable

(#)

Number of

Securities

Underlying

Unexercised

Options

Unexercisable

(#)

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)(2)

Option

Exercise

Price

($)(3)

Option

Expiration

Date

Number

of Shares

or Units

of Stock

That

Have Not

Vested

(#)(4)

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

($)(5)

Equity

Incentive

Plan Awards:

Number of

Unearned

Shares, Units

or Other

Rights That

Have Not

Vested (#)(6)

Equity

Incentive

Plan Awards:

Market or

Payout Value

of Unearned

Shares, Units

or Other

Rights That

Have Not

Vested ($)

Edward H. Bastian

 

 

 

 

 

 

 

 

 

 

 

2017 LTIP - Restricted Stock

2/9/2017

-

-

-

-

-

 

22,300

1,304,104

-

-

2018 LTIP - Restricted Stock

2/8/2018

-

-

-

-

-

 

49,386

2,888,093

-

-

2019 LTIP - Restricted Stock

2/6/2019

-

-

-

-

-

 

81,660

4,775,477

-

-

2014 LTIP - Performance Stock Options

2/6/2014

71,840

-

-

30.89

2/5/2024

 

-

-

-

-

2015 LTIP - Performance Stock Options

2/5/2015

91,710

-

-

46.14

2/4/2025

 

-

-

-

-

2016 LTIP - Performance Stock Options

2/2/2016

173,230

-

-

43.61

2/1/2026

 

-

-

-

-

2017 LTIP Performance Stock Options

2/9/2017

137,674

68,836

-

49.33

2/8/2027

 

-

-

-

-

2018 LTIP Performance Stock Options

2/8/2018

102,347

204,693

-

51.23

2/7/2028

 

-

-

-

-

2019 LTIP Performance Stock Options

2/6/2019

-

-

381,600

50.52

2/5/2029

 

-

-

-

-

Glen W. Hauenstein

 

 

 

 

 

 

 

 

 

 

 

2017 LTIP - Restricted Stock

2/9/2017

-

-

-

-

-

 

13,380

782,462

-

-

2018 LTIP - Restricted Stock

2/8/2018

-

-

-

-

-

 

25,766

1,506,796

-

-

2019 LTIP - Restricted Stock

2/6/2019

-

-

-

-

-

 

44,100

2,578,968

-

-

2017 LTIP Performance Stock Options

2/9/2017

82,607

41,303

-

49.33

2/8/2027

 

-

-

-

-

2018 LTIP Performance Stock Options

2/8/2018

53,400

106,800

-

51.23

2/7/2028

 

-

-

-

-

2019 LTIP Performance Stock Options

2/6/2019

-

-

206,060

50.52

2/5/2029

 

-

-

-

-

W. Gil West

 

 

 

 

 

 

 

 

 

 

 

2017 LTIP - Restricted Stock

2/9/2017

-

-

-

-

-

 

13,126

767,608

-

-

2018 LTIP - Restricted Stock

2/8/2018

-

-

-

-

-

 

25,766

1,506,796

-

-

2019 LTIP - Restricted Stock

2/6/2019

-

-

-

-

-

 

44,100

2,578,968

-

-

2017 LTIP Performance Stock Options

2/9/2017

54,760

27,380

-

49.33

2/8/2027

 

-

-

-

-

2018 LTIP Performance Stock Options

2/8/2018

53,400

106,800

-

51.23

2/7/2028

 

-

-

-

-

2019 LTIP Performance Stock Options

2/6/2019

-

-

206,060

50.52

2/5/2029

 

-

-

-

-

 

 

  2020 PROXY STATEMENT     39


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Name

Grant

Date(1)

Option Awards

 

Stock Awards

Number of

Securities

Underlying

Unexercised

Options

Exercisable

(#)

Number of

Securities

Underlying

Unexercised

Options

Unexercisable

(#)

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)(2)

Option

Exercise

Price

($)(3)

Option

Expiration

Date

Number

of Shares

or Units

of Stock

That

Have Not

Vested

(#)(4)

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

($)(5)

Equity

Incentive

Plan Awards:

Number of

Unearned

Shares, Units

or Other

Rights That

Have Not

Vested (#)(6)

Equity

Incentive

Plan Awards:

Market or

Payout Value

of Unearned

Shares, Units

or Other

Rights That

Have Not

Vested ($)

Paul A. Jacobson

 

 

 

 

 

 

 

 

 

 

 

2017 LTIP - Restricted Stock

2/9/2017

-

-

-

-

-

 

10,003

584,975

-

-

2018 LTIP - Restricted Stock

2/8/2018

-

-

-

-

-

 

19,260

1,126,325

-

-

2019 LTIP - Restricted Stock

2/6/2019

-

-

-

-

-

 

29,300

1,713,464

-

-

2017 LTIP Performance Stock Options

2/9/2017

41,720

20,860

-

49.33

2/8/2027

 

-

-

-

-

2018 LTIP Performance Stock Options

2/8/2018

26,970

53,940

-

51.23

2/7/2028

 

-

-

-

-

2019 LTIP Performance Stock Options

2/6/2019

-

-

92,510

50.52

2/5/2029

 

-

-

-

-

Peter W. Carter

 

 

 

 

 

 

 

 

 

 

 

2017 LTIP - Restricted Stock

2/9/2017

-

-

-

-

-

 

6,376

372,868

-

-

2018 LTIP - Restricted Stock

2/8/2018

-

-

-

-

-

 

12,280

718,134

-

-

2019 LTIP - Restricted Stock

2/6/2019

-

-

-

-

-

 

20,510

1,199,425

-

-

2019 Restricted Stock

12/4/2019

-

-

-

-

-

 

4,460

260,821

-

-

2017 LTIP - Performance Stock Options

2/9/2017

26,600

13,300

-

49.33

2/8/2027

 

-

-

-

-

2018 LTIP Performance Stock Options

2/8/2018

17,194

34,386

-

51.23

2/7/2028

 

-

-

-

-

2019 LTIP Performance Stock Options

2/6/2019

-

-

64,760

50.52

2/5/2029

 

-

-

-

-

(1) 

For purposes of this column, the grant date for the awards is the grant date or, if earlier, the service inception date determined under FASB ASC Topic 718.

(2) 

The 2019 LTIP Performance Stock Options vest as follows: (a) if there is a payout under the Profit Sharing Program for 2019, then ratably over three years with 1/3 vesting on each of February 1, 2020, 2021 and 2022; (b) if there is no payout under the Profit Sharing Program for 2019, but there is a payout for 2020, then 2/3 vest on February 1, 2021 and 1/3 vest on February 1, 2022; and (c) if there is no payout for 2019 or 2020 under the Profit Sharing Program, then the options will be forfeited. Because there was a payout for 2019 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 5, 2020, 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.

(3) 

The exercise price of the stock options is the closing price of Delta common stock on the NYSE on the applicable grant date.

(4) 

These shares of restricted stock vest as follows:

February 9, 2017 LTIP Grant Date. In equal installments on February 1, 2018, 2019 and 2020.

February 8, 2018 LTIP Grant Date. In equal installments on February 1, 2019, 2020 and 2021.

February 6, 2019 LTIP Grant Date. In equal installments on February 1, 2020, 2021 and 2022.

2019 Restricted Stock grant to Mr. Carter. In equal installments on December 4, 2020, 2021 and 2022.

Restricted stock is subject to forfeiture in certain circumstances.

(5) 

In accordance with SEC rules, the amounts in this column for the market value of restricted stock are based on the $58.48 closing price of Delta common stock on the NYSE on December 31, 2019.

(6) 

This table does not include the performance award component of the 2019 LTIP, 2018 LTIP and the 2017 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 2019 LTIP, see footnote 2 to the Summary Compensation Table and the Grants of Plan-Based Awards Table above.

 

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  2020 PROXY STATEMENT     40


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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 2019.

Name

Option Awards

 

Stock Awards

Number of Shares

Acquired on

Exercise (#)

Value Realized

on Exercise

($)

Number of Shares

Acquired on

Vesting (#)

Value Realized

on Vesting

($)(1)

Edward H. Bastian

-

-

 

155,786

8,526,424

Glen W. Hauenstein

-

-

 

99,337

5,408,659

W. Gil West

-

-

 

93,198

5,092,279

Paul A. Jacobson

-

-

 

72,282

3,973,428

Peter W. Carter

-

-

 

46,080

2,513,952

(1) 

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 2016, 2017 and 2018.

Post-Employment Compensation

Defined Benefit Pension Benefits

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. Retirement Plan participants 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.

 

 

  2020 PROXY STATEMENT     41


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Pension Benefits Table

The table below shows certain pension benefit information for Mr. Bastian and Mr. Jacobson as of December 31, 2019.

Name

Plan Name

Number of Years

of Credited Service

(as of December 31, 2019)(1)

Present Value of

Accumulated Benefits ($)(2)

Payments During

Last Fiscal Year

Mr. Bastian(3)

Delta Retirement Plan

6 years, 10 months

FAE Formula: 301,878

Cash Balance Formula: 70,272

0

Mr. Jacobson(4)

Delta Retirement Plan

8 years, 2 months

FAE Formula: 119,754

Cash Balance Formula: 9,283

0

(1) 

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.

(2) 

Benefits were calculated using interest rate and mortality rate assumptions consistent with those used in our financial statements (see “Assumptions” in Note 10 of the Notes to the Consolidated Financial Statements in Delta’s 2019 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.

(3) 

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.

(4) 

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.

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, 2019.

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.

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.

 

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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 2017, 2018 and 2019 and a restricted stock award provided to Mr. Carter under various termination of employment scenarios.

 

 

Termination Scenario

LTIP Award Treatment

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, restricted stock award and performance stock option award pursuant to the same vesting, performance and general payment provisions as if his employment had continued.(1)(2)

Mr. Carter and Mr. Jacobson

The named executive officer will receive a prorated performance award and 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, restricted stock award and performance stock option award pursuant to the same vesting, performance and general payment provisions as if his employment had continued.(1)(2)

Mr. Carter and Mr. Jacobson

The named executive officer’s performance award, restricted stock award and performance stock option award will be immediately forfeited.

Termination for Cause

The named executive officer’s performance award, restricted stock award and performance stock option award will be immediately forfeited.

Termination due to Death

or Disability

The named executive officer’s performance award, restricted stock award and 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, restricted stock award and performance stock option award will immediately vest, with the performance award paid at the target level.

(1)

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, 2017 under the 2017 LTIP; (iii) October 1, 2018 under the 2018 LTIP; and (iii) October 1, 2019 under the 2019 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.

(2)

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.

ANNUAL INCENTIVE PLAN

Delta’s 2019 Management Incentive Plan (MIP) generally provides that a participant whose employment with Delta terminates prior to the end of the workday on December 31, 2019 is not eligible for a 2019 MIP payment. If, however, the participant’s employment is terminated (1) due to death or disability; (2) due to retirement; or (3) 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 2019 MIP payment based on (a) the number of days during 2019 the participant was employed in a MIP-qualified position and (b) the terms and conditions of the 2019 MIP that would have applied if his or her employment had continued through December 31, 2019.

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.

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.

Change in control means, in general, the occurrence of any of the following events: (1) any person becomes the beneficial

 

 

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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.

Disability means long-term or permanent disability as determined under the applicable Delta disability plan.

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.

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. In addition, for purposes of the Retiree Flight Benefits described below, Retirement also means a termination of employment by Delta without cause or for any other reason that would entitle the person to benefits under the Severance Plan if the person’s combined age and years of service equal 60 or more.

RETIREE FLIGHT BENEFITS

A named executive officer who retires from Delta under the definition of retirement described above may continue to receive Flight Benefits (see footnote 7(d) to the Summary Compensation Table on page 37 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

The following table describes the termination benefits for each named executive officer, assuming termination of employment on December 31, 2019. 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, 2019, the named executive officer would have earned his 2019 MIP award and the performance award under the 2017 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, 2019, only Mr. Bastian, Mr. Hauenstein and Mr. West 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.

 

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