Newsmaker: Allen To Retire After Lifetime With Delta

After 10 years of transforming Delta Air Lines into a global carrier, chairman, president and CEO Ron Allen will retire July 31.

Neither Allen nor Delta gave a reason for the move. When asked for comments from sales executives, a Delta spokesperson said, "They're really sticking to the press release," which indicates only that Allen's employment contract expires in July.

The airline industry, however, is speculating all the way from Atlanta to Wall Street to Seattle.

The most popular theory is that Allen tried to replace CFO Thomas Roeck without informing the board of directors, one of whom--Gerald Grinstein--has been a close friend of Roeck's since the two joined Delta as part of the merger with Salt Lake City-based Western Airlines in 1987. With Allen's contract about to expire and his relations with the board souring, he was forced out at a special board meeting May 9, reports said.

Other observers wondered whether Allen's retirement has anything to do with the Continental-Delta merger talks of last year (BTN, Dec. 16, 1996). Some said at the time that Allen was against the merger.

Continental chairman Gordon Bethune, who worked at Western Airlines between 1982 and 1984, is already being mentioned as a possible successor to Allen. Bethune said, however, that he had not been contacted by Delta.

During his career at Delta, which began in 1963 on a part-time basis while he was in college, Allen had a strong impact on the company and on the travel industry. In 1991, his bold decision to purchase Pan Am's assets propelled Delta into the top tier of world airlines but also became a major drag on Delta's earnings, contributing to the serious losses of 1992-93. The company has since recovered and over the past two years recorded the highest profits in the U.S. airline industry.

Allen's announcement in 1994 of a multimillion-dollar cost-cutting program--dubbed Leadership 7.5--resulted in the reduction of Delta's work force by 15,000 and an extremely tight focus on distribution costs. As part of that effort, Delta in 1995 announced a cap on travel agency commissions that most major carriers matched, something observers said was the most significant development in the U.S. travel trade since deregulation. Also significant was Delta's creation of a successful East Coast low-cost carrier, only a few short years after Continental scrapped its CALite initiative.

"Ron Allen has done a tremendous job for Delta," said Danny Hood, president of corporate travel and technology for Atlanta-based WorldTravel Partners. "They muddled through some tough situations, but are now more aggressive and better risk takers because of him. He has done an excellent, loyal job as a lifer."

Allen would only say in an official statement, "My personal goals during the past three years were to lead Delta Air Lines back to sustained profitability and position our company to be poised for growth--to make Delta a leader. Delta has realized great progress in both of these areas, and the company is in excellent condition."

Maurice Worth, Delta's executive vice president of customer service, will run the airline as acting chief operating officer while the board searches for a new CEO.

Delta has formed a search committee, which will consider candidates from both within the company and elsewhere. Allen will serve on the Delta board as a consultant and an advisory director, and to help find a successor.