Delta CEO who is stepping down draws mixed reviews

By Billy Corriher

Dave Montedonico, a 12-year employee of Delta Air Lines, says the retirement of Chief Executive Officer Leo Mullin is drawing mixed reactions from employees.

"Half of us thought he did a good job, and half of us thought it was time for him to go," Montedonico, an aircraft inspector, said. "He's done a lot of good and he's made some mistakes."

Mullin, 60, drew praise from employees for guiding the airline industry in the wake of September 11, 2001. But his standing with employees diminished after it was revealed this spring that Mullin and other executives were awarded millions of dollars in large bonuses and bankruptcy-proof pensions last year despite layoffs and vast financial problems.

David Field, editor of Airline Business Magazine, agreed that, in addition to the company's financial woes, the scandal likely led to pressure for Mullin to retire. "He's known that he's been in the crosshairs since then," he said.

On Sunday, the board of directors finalized Mullin's plan to retire as CEO on Jan. 1, 2004 and step down as chairman of the board on April 23, 2004. Gerald Grinstein, 16-year member of the board, will serve as interim CEO and John Smith, Jr., a board member since 2000, will chair the board of directors.

Delta, in a statement issued on Mullin's decision, said Mullin will receive a $16 million retirement benefit, most of which was previously funded and disclosed, as part of his pension and his agreement with the board when he arrived in 1997.

Delta, which uses Hartsfield-Jackson Atlanta International Airport as its main hub, announced last month a third-quarter loss of $164 million, signaling that this year will be the company's third straight year of operating in the red.

"Delta is at a transition point between the good work of the past and the hard tasks ahead," Mullin said in the release. "This is a good time for me to move on to new challenges."

One challenge Mullin has faced recently is his attempt to negotiate a pay cut with the company's pilots to reduce costs. These discussions have led to a wave of pilots' retirements, which have amplified Delta's financial troubles. After the discussions, about twice as many pilots retired than the company expected, Field said.

Montedonico said the scandal over executive bonuses might be a reason for Mullin's departure because it negatively affected his attempts to negotiate with pilots. Now, his retirement could benefit the troubled company by encouraging Delta's pilots to negotiate with management, he said.

But Karen Miller, spokeswoman for the Delta Air Lines Pilots' Association, said the pilots have always supported negotiations and a change in leadership will not affect discussions with Delta management.

"We've agreed (the negotiations) are appropriate to help the company," Miller said.

But Field said he thinks the appointment of Grinstein as CEO will be "enormously helpful" in negotiations with the pilot's association. Grinstein has valuable experience negotiating wage concessions when he was president of Western Air Lines in the mid-1980's, Field said.

Without pay cuts for pilots, further layoffs by Delta are "inevitable," Field said. Delta, one of the largest employers in Clayton County, has already laid off 16,000 workers since 2001.

Grinstein acknowledged, in a statement on Mullin's retirement, that the company "must further reduce Delta's costs substantially and permanently" to stay competitive.

Mullin expressed confidence in the ability of Grinstein and Smith to lead the company until a new CEO is found.

"Jerry and Jack each have led major companies in fiercely competitive industries in difficult times," Mullin said.

Fred Reid, Delta's chief operating officer, is the most likely contender inside the company for the permanent CEO position, Field said.

"Fred Reid is basically one of the smartest people in the airline industry," he said. "He's almost always been the behind the scenes guy when something good happens."