Delta Air Lines Chairman, CEO to Step Down

ATLANTA – Delta Air Lines (DAL) chief executive Leo F. Mullin (search), who led the nation's third-largest airline through the aftermath of a terrorist attack, a controversy over his pay and the still unresolved task of getting wage concessions from pilots, is leaving the company.

In a move that caught Wall Street and Delta's pilots union by surprise, Mullin said Monday he will step down after more than six years as chief executive on Jan. 1 and leave as chairman of the Atlanta-based airline's board after Delta's annual shareholders' meeting in late April.

The announcement comes as Delta is seeking wage concessions from its pilots, has warned of the possibility of further job cuts and is recovering from controversy over the compensation of top executives. Mullin, who is 60, and the board did not immediately say how those issues factored in the decision.

No. 1 carrier American Airlines (AMR) and No. 2 carrier United Air Lines (UAL) have also made switches at the top since the industry fell into its worst downturn following the Sept. 11, 2001, terrorist attacks. Like Delta, Donald Carty's April 24 resignation as CEO at American earlier this year came amid tough wage concession talks and ire over executive pay. American ultimately won wage concessions. James Goodwin resigned under pressure as United's chief on Oct. 28, 2001. His successor, Jack Creighton, left a year later.

"He might be thinking it's the best benefit for the company," Ray Neidl, an analyst with Blaylock & Partners in New York, said of Mullin. "He had the run-in with his executive compensation. You're kind of not in the best light for negotiating (for pilot concessions) when you go through something like that."

Veteran Delta board member Gerald Grinstein (search), 71, who is taking over for Mullin as CEO, has a good record of negotiating wage concessions dating back to his days as head of Western Air Lines from 1985 to 1987, said Neidl.

"He did a commendable job in getting their cost structure down," Neidl said of Grinstein. "He saved Western Airlines. They would have gone bankrupt if not for him."

Grinstein, of Bellevue, Wash., has been on the Delta board since 1987, when the company acquired Western Air Lines in a merger.

Delta also said Monday that John F. Smith Jr., a former chairman and CEO of General Motors Corp., would take over as chairman of the board at the April shareholders' meeting.

Mullin's decision to step down followed discussions he initiated with Delta's board earlier this year regarding his desire to retire, the company said in a statement.

Mullin and the board finalized the move at a meeting on Sunday.

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

In morning trading on the New York Stock Exchange, Delta shares rose 38 cents, or 3.3 percent, to $11.81.

One of the hardest tasks Mullin has faced in recent months is getting pilots to agree to deep wage cuts, concessions he has said the airline needs as part of its survival.

Delta's pilots union said that while the news of Mullin's departure was unexpected, it remains focused on protecting the pilots and helping Delta return to profitability.

"This remains unchanged regardless of the leadership team in place at Delta," the union said in a statement. "The union wishes Mr. Mullin the best in his retirement and looks forward to a productive working relationship with new CEO Gerald Grinstein."

In an interview with The Associated Press earlier this month, Mullin said Delta, which has already laid off 16,000 workers since the terrorist attacks, might have to lay off more workers if it doesn't get the concessions. He stressed no further layoffs are currently planned.

Mullin joined Delta as CEO on Aug. 14, 1997.

"You know, there isn't a lot I would have done differently. I felt like in response to the Sept. 11 situation, the necessity to run the place for cash to me was obvious," Mullin said in the interview earlier this month. "We knew what we needed to do to avoid bankruptcy and we went at it. I think from that standpoint, it was the right decision."

"A regret that I had was that some of our customer service metrics did slip."

Prior to joining Delta, Mullin served as vice chairman of Unicom Corp. and its chief subsidiary, Commonwealth Edison, from 1995 to 1997.

Mullin said in the interview he regretted the controversy about the compensation of top executives earlier this year. It was revealed that, amid the layoffs, a select group of executives had received millions in company payments to a program to protect their pensions.

After the uproar, Delta canceled the final payment to participants of its supplemental executive retirement plan and discontinued the program, which would have been fully funded at $65 million by next year.

Mullin said the pension protection payments were needed in the wake of the 2001 terrorist attacks.

"It's kind of like you had to be there to know what the heck was going on; we were in the middle of a crisis and those decisions looked appropriate at the time, and maybe they didn't look quite appropriate a couple of years later," he said in the interview. "But that's 20/20 hindsight. And all I can do is sort of recognize that it created an issue within the company and I certainly have done my best to show that I'm sorry the issue got created and to back it by taking some actions."