Delta CEO Apologizes for Pay

By Deborah Gage  |  Posted 2003-04-27 Email Print this article Print

Update: The airline's top executive said he'd been insensitive to concerns about his pay package in the face of Delta layoffs and contract concessions.

Delta Air Lines CEO Leo Mullin apologized on Friday for his insensitivity to concerns about his pay package in light of the economic pressures on Delta's employees. Delta will finish laying off another 8,000 or so workers by mid-May and is now forced to ask its pilots for concessions on their contract, which does not expire until 2005. The pilots are completing a review of Delta's books and will then decide whether to talk to Delta.

Although it is still considered the healthiest of the network carriers, Atlanta-based Delta this month reported a first quarter loss of $466 million or $3.81 per share and increased its cash burn to $165 million. Delta's cost per seat mile rose from 10.49 to 11.11 year over year, an increase Delta attributed to high fuel costs and lower demand due to the war in Iraq.

Mullin defended the decisions that led to his compensation as having merit when they were made. In early 2002, he said, it became apparent that the airline crisis precipitated by the September 11 terrorist attacks was not short-lived and that "the clear continuity of Delta's management team" was essential to the airline. Last November, his five-year employment agreement with Delta expired.

"This program was established in response to 9/11," Mullin said during the question-and-answer session. "We were worrying about every single airplane. This group [the management team] had no protection for their pensions, and we were getting calls deep into the night."

On April 3, after being blasted by Senate Commerce Committee Chairman John McCain, to whom Mullin and other airline executives had appealed for government aid, Mullin took a 25% salary cut and gave up his 2003 salary, plus his new bonus and stock options.

But he continues to hang on to and defend Delta's executive-retirement plan, which protects the pensions of top management should Delta file for bankruptcy. Mullin said that employees making up to $200,000 per year at Delta are well-protected, while employees above that salary level had no extra protection.

A retired flight attendant disagreed with Mullin, saying that government-backed pensions are not 100% secure in bankruptcy and that Delta should have protected more than just the top management.

Mullin's contrition did not stop Delta's shareholders from approving two proposals put forward by Delta's pilots—one to expense stock options on Delta's income statement and one to require the board to approve executive severance agreements that exceed 2.99 times salary and bonus—despite the opposition of Delta's board. The proposals are advisory.

Meanwhile, American Airlines CEO Don Carty resigned Thursday night, after failing to inform American's unions of the details of his pay package before asking them for concessions to avoid a bankruptcy filing. American appointed President Gerard Arpey and board member Edward Brennan to replace Carty as CEO and chairman and has reached agreement with its unions, avoiding bankruptcy for now.

Senior Writer
Based in Silicon Valley, Debbie was a founding member of Ziff Davis Media's Sm@rt Partner, where she developed investigative projects and wrote a column on start-ups. She has covered the high-tech industry since 1994 and has also worked for Minnesota Public Radio, covering state politics. She has written freelance op-ed pieces on public education for the San Jose Mercury News, and has also won several national awards for her work co-producing a documentary. She has a B.A. from Minnesota State University.


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