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Delta's CEO Plans to Retire Next Year

The airline's shares rise more than 7% as Leo Mullin announces his departure. Two board members will split his duties.

November 25, 2003|From Reuters

Delta Air Lines Inc. Chief Executive Leo Mullin unexpectedly announced his retirement Monday in the midst of crucial contract talks with pilots, becoming the latest casualty of the airline industry's precipitous decline.

Mullin, who steered Delta through a cash crunch after the Sept. 11 terrorist attacks, has come under increasing pressure from employees over his hefty compensation. He will retire as CEO on Jan. 1 and step down as chairman May 1.

Delta's stock jumped more than 7% on the news. Industry analysts cited hopes that the departure would help the No. 3 U.S. airline win cuts in its pilots' industry-leading pay rates.

But analysts also had questions about Mullin's successors. Two members of Delta's board of directors, both older than the 60-year-old Mullin, will split his duties.

Jack Smith, 65, a former head of General Motors Corp., will become chairman of the Atlanta-based airline. Gerald Grinstein, 71, who once headed both Burlington Northern railroad (now Burlington Northern Santa Fe Corp.) and the former Western Airlines, will become CEO.

Credit Suisse First Boston analyst Jim Higgins wondered whether the move signaled further management shake-ups.

"Of interest to us is that two people we had believed were essentially in retirement are assuming the top two roles at Delta, yet the current president, Fred Reid, maintains his position," Higgins said.

Grinstein, a long-standing Delta board member, sold Western Airlines to Delta in 1984 and was a key figure in Delta's decision to hire Mullin as CEO six years ago.

Mullin came under fire this year after retention bonuses and pension perks given to senior Delta management inflamed workers and shareholders. In response, Delta said it would stop contributing to a pension plan for retaining executives, and Mullin took a pay cut of $9.1 million.

Mullin will get a $16-million pretax retirement package, which Delta said had already been mostly funded and disclosed. His departure leaves each of the top three U.S. airlines with new leaders since 9/11.

A Delta spokeswoman said Mullin had been thinking about leaving for quite a while and had not bowed to pressure from labor over the compensation issue.

But in an industry known for enmity between labor and management, the pressure can be intense. The CEO of AMR Corp.'s American Airlines, Donald Carty, recently resigned after infuriating unions with an untimely disclosure on executive retention plans. And James Goodwin was forced to retire as CEO of UAL Corp.'s United Airlines when a firestorm erupted after he told workers the airline might "perish" without massive cost cuts.

Shares of Delta closed 82 cents higher, up 7.2%, at $12.25 on the New York Stock Exchange.

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