Mullin Retiring, Grinstein Rising

Delta Air Lines chairman and CEO Leo Mullin next year 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 longtime Delta director and former Western Airlines CEO Gerald Grinstein. Mullin, who made a "personal decision," will remain chairman of the board until late April, when John F. Smith Jr., also a current Delta director, will succeed him as non-executive chairman. Fred Reid, previously considered by many as Mullin's successor, remains president and COO.

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 but are not bound to make changes until 2005. Mullin 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. "Not only does he have the airline background to quickly assume the leadership role, but Grinstein also contributes seasoned labor negotiation experience from his prior days at Burlington Northern railroad," Donofrio said. "We also expect Grinstein to assume a leadership role on airline issues in Washington, given his background as chief counsel for the Senate Commerce Committee."

The Delta Air Line Pilots Association said it "remains focused on protecting the piloting profession and helping Delta Air Lines return to profitability, regardless of the leadership team in place." The union and management, including Grinstein, currently are engaged in negotiations. At press time, the two sides remained far apart on proposals to replace an industry-leading contract signed by Mullin and DALPA in 2001.

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 continue Delta's cost-cutting initiatives. Excluding a second-quarter profit attributable to government relief, Delta has not finished in the black since 4Q00 and expects another large loss for the current quarter.

"We must further reduce Delta's costs substantially and permanently," Grinstein stated. "That is an unshakable imperative if Delta is to be competitive in an industry adapting to the economics of low-cost carriers and restructured hub-and-spoke airlines." Grinstein, 71, has been on Delta's board since 1987. Prior to his Delta experience, he served as president, COO 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.

Mullin joined Delta as CEO in August 1997. During his tenure, Delta exited the Atlantic Excellence partnership in favor of a global alliance with Air France, co-founded the SkyTeam alliance and built 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 was a seven-year process begun by Delta.

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, 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 in the growing regional jet market.

In 2003, Delta launched low-cost Song and decided—with American and Northwest airlines—to sell its 40 percent stake in global distribution system provider Worldspan.