Delta Air Lines chairman and CEO Leo Mullin this morning announced that next year he will retire after more than six years at the helm of the world's third-largest airline. On Jan. 1, he will hand CEO duties to long-time Delta director and former Western Airlines CEO Gerald Grinstein. Mullin, who made a "personal decision," will remain chairman until late April. John F. Smith Jr., also a current Delta director, will succeed him as non-executive chairman, effective May 1, 2004.
Grinstein's immediate duties will be significant, including the delicate task of negotiating concessions with the airline's pilots union. Delta's pilots, the carrier's only unionized group, have one of the more lucrative contracts in the industry and are not bound to make changes until 2005. Mullin, however, has said concessions are required to keep Delta competitive.
Deutsche Bank analyst Susan Donofrio said Grinstein "may be a better fit" than Mullin in dealing with the pilots union's contract. "Not only does he have the airline background to quickly assume the leadership role," she said, "but Grinstein also contributes seasoned labor negotiation experience from his prior days at Burlington Northern railroad."
Grinstein also must oversee growth of Delta's lower-cost Song unit, work with domestic and international alliance partners to develop the SkyTeam partnership and keep it competitive against Oneworld and the Star Alliance and continue Delta's cost-cutting initiatives. Excluding a second-quarter profit attributable to government relief, Delta has not finished in the black since the fourth quarter of 2000. Its third-quarter loss this year, inclusive of all one-time items, was $164 million.
Grinstein, 71, has been on Delta's board since 1987, including a stint in the late 1990s as non-executive chairman. Prior to his Delta experience, he served as president, chief operating officer and CEO of Western, which merged with Delta in 1987. Following the transaction, Grinstein was hired by Burlington Northern and became CEO in 1989. He then served as chairman of the merged Burlington Northern-Santa Fe Corp. entity through 1995. He also served as non-executive chairman of Agilent Technologies through 2002 and currently sits on the boards of PACCAR Inc., Vans Inc., and The Brinks Co.
Mullin came to Delta as CEO in August 1997, following the now-infamous reign of Ron Allen. During Mullin's tenure, Delta exited the Atlantic Excellence partnership in favor of a global alliance with Air France, a precursor to the larger SkyTeam alliance. More recently, in response to a codeshare agreement between United Airlines and US Airways, Mullin brought Delta into a domestic alliance with Continental and Northwest airlines.
Under Mullin's leadership, Delta in March 2002 completely abolished base commissions for travel agencies, a move matched immediately by the other Big Six airlines. The end of base commissions, a seven-year process begun by Delta, signaled the beginning of a new client-focused era for travel management companies involving pay-for-performance models. With Mullin at the top, Delta also merged its first and business classes into BusinessElite--a move that solidified the trend toward hybrid premium cabins--and in 1998 developed an electronic commerce unit, dubbed E-Delta, that served as a precursor to many current distribution strategies and Web-based products and services.
Delta in 1999 also acquired Delta Connection affiliates Atlantic Southeast Airlines and Comair and struck a codeshare deal with Atlantic Coast Airlines, strengthening Delta's position as a dominating force in the growing regional jet market.
After the Sept. 11, 2001, terrorist attacks, Mullin became a spokesman for the industry and lobbied heavily and successfully for government support. Less than a year earlier, he signed a huge, industry-leading pilots contract that followed the signing of what had been an industry-leading contract at United. Delta now is seeking to recoup some of the costs.
In January of this year, Mullin suggested 2003 could become one of the most important years in the industry's 100-year history
(BTN, Jan. 20). In what turns out to be his last year at Delta's helm, 2003 again has been an active one for Delta. The airline launched Song, a lower-cost, low-fare carrier intended to fend off advancing low-cost competitors, and dramatically enhanced airport services to offset security-related delays. Mullin also presided over Delta's decision--made in conjunction with American and Northwest airlines--to sell its 40 percent stake in global distribution system provider Worldspan and began alliance cooperation with Continental and Northwest.
Earlier this year, Mullin faced scandal when executive compensation and retention packages were disclosed as the airline sought labor concessions. He managed to hang onto his job, unlike Don Carty, who was ousted as CEO of American Airlines parent AMR for not disclosing golden parachute programs crafted for that company's top executives.
During his time at Delta, Mullin served on the boards of the Air Transport Association and the International Air Transport Association.