Alaska Airlines and Horizon Air 2014 Annual Report Download - page 57
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Annual target performance measures reflect
financial and operational goals that are
consistent with the strategic plan. Maximum
goals correlate to superior performance, while
threshold goals generally correlate to an
acceptable but minimal level of improvement
over the prior year’s performance. The 2014
Alaska Air Group profitability target of $550
million corresponded to a forecasted 2014
return on invested capital (ROIC) of 10.6%. The
Company’s goal is to achieve an average 10%
ROIC over the business cycle, which the
Company believes will allow it to grow profitably.
The safety and employee engagement measures
were set at levels the Committee believes will
drive continuous improvement and maintain the
Company’s reputation as a leader in the industry
in these areas. The cost per available seat mile
excluding fuel and special items (CASM) metric
was similarly chosen to support the Company’s
achievement of its strategic plan.
The Committee believes that using adjusted non-
GAAP measures, such as CASM (excluding fuel
and special items) and adjusted pre-tax profit,
rather than GAAP measures more closely ties
results to elements of performance that can be
controlled by the decisions and actions of
employees, thereby providing a more direct link
between performance and reward. In addition, by
removing the short-term impact of certain
business decisions (such as the gain or loss on
disposition of capital assets), the use of
adjusted measures encourages executives to
make decisions that are in the best interest of
the Company over the long term.
Following is an example of the calculation of the 2014 Performance-Based Pay Plan payout for one of
the Named Executive Officers:
2014 Performance-Based Pay Calculation*
Metrics Actual
% of Target
Achieved Weight Payout %
Safety Risk Level 3+ Events .06 200.0 % 10.0 % 20.0 %
Employee Engagement/Customer Satisfaction 12 months 200.0 % 10.0 % 20.0 %
CASM <7.45¢ 200.0 % 10.0 % 20.0 %
Alaska Air Group Profitability $1.05 billion 200.0 % 70.0 % 140.0 %
Total Payout % 200.0 %
Participation Rate** x 75.0 %
Payout asa%ofBase Salary = 150.0 %
*Based on Alaska Airlines’ performance.
**Participation rates vary by position. The participation rate used in this example is for one of the Named
Executive Officers.
ŠProxy
EXECUTIVE COMPENSATION 45