Ex-banker aims to pilot Delta out of turbulence

Mr Leo Mullin cuts an unlikely figure as a US airline boss. In an industry generally noted for its swaggering, larger-than-life bosses, he is slight, brainy and bespectacled. It is as though an accountant had just walked into a cowboy saloon.

Last year, Mr Mullin (55) was brought in as chief executive of Delta Air Lines after Delta's board dumped Mr Ronald Allen, the previous incumbent, who had been with the airline all his working life.

Arguably, Delta needed a change. The airline used to be one of the world's finest, oozing quality from every rivet. But in the 1990s, heavy cost cutting had left it run-down and decrepit, services had deteriorated, and the board could no longer tolerate the rising tide of customer complaints.

Even so, Mr Mullin's appointment looked odd. A Harvard MBA, he came from the comparatively humdrum world of banking and electricity utilities, and his only previous experience of the US airline industry was as a passenger in business class collecting frequent-flyer miles.

Further, Mr Mullin had never had a job as chief executive. He came close to it at First Chicago, the retail bank, where he was chief operating officer and heir apparent. But the job eluded him when First Chicago was acquired by the National Bank of Detroit, and he moved on to become vice-chairman of Unicom, a Chicago utility.

But whatever else Mr Mullin may lack, it is not ambition. "I have one fundamental goal in the time that I am granted as Delta's leader," he says. "And that is to make it the best airline in the world."

As Mr Mullin recalls, it was not so very long ago that Delta, the third-biggest US airline, could justifiably have laid claim to that rank, or something very close to it. In the 1980s, he says, the company, based in Atlanta, Georgia, had a "southern gentility, a warmth" and flying Delta was the "most enjoyable experience in the airline business".

But in the early 1990s, Delta was hit by a combination of three events: the Gulf war; an economic downturn; and its costly acquisition of Pan Am's European routes. The airline plunged into a financial crisis. Suddenly, cost reduction became its primary goal.

Along the way, standards plummeted. There were massive job cuts. The aircraft became shabby, the in-flight food service declined, and employee morale disintegrated. Last year, Delta ranked bottom of the 10 largest US airlines for punctuality.

In Mr Mullin's view, this need never have happened. Yes, he says, Delta had to cut costs. And that was achieved. But customer service should not have been sacrificed along the way.

"In all of the messages I have conveyed to the employees of Delta, I have indicated that there are two crucial requirements that must be met," he says.

"First, we must become a customer-focused airline and provide excellent customer service, relative to our competitors. And second, we must be an extremely efficient airline, with a cost structure that is below the average cost structure of the rest of the industry."

These are not conflicting objectives, Mr Mullin says. For example, punctuality is the most important variable affecting customer satisfaction.

At the same time, it is crucial to the efficient delivery of services that rely on interconnections between flights.

"The greatest foul-up we can have is not to be on time, because it means everything all the way back through the system has to go into problem-solving mode rather than an efficient and streamlined operational mode," he says. It also results in very unhappy customers.

Mr Mullin says the best companies in the US are those that combine excellent customer service with efficiency for example, General Electric.

"GE has excellent customer satisfaction in all of its businesses," Mr Mullin says. "And yet there is a constant requirement placed on all GE businesses by Jack Welch [GE's chairman] to seek productivity improvements to fund the necessary initiatives to keep up that customer satisfaction.

"That is the kind of management mentality that has to be inculcated into Delta."

Mr Mullin has been bringing in other outsiders to the traditionally in-bred Delta. From General Electric, he has recruited Mr Warren Jenson, previously financial chief of GE's NBC television broadcasting subsidiary, as chief financial officer. A new information technology chief, Mr Charles Feld, came from the Burlington Northern Santa Fe railroad. And earlier in June, Mr Mullin poached Mr Frederick Reid, Lufthansa's chief operating officer, appointing him chief marketing officer.

Meanwhile, Mr Mullin has been speeding up the pace of aircraft refurbishment, funding it with productivity improvements achieved elsewhere. And with Delta lagging behind other US airlines in computer systems that set fares and schedules, he has set a target of installing the latest information technology throughout the company within two years.

One early setback suffered by Mr Mullin was losing a contest with Northwest Airlines to seal a marketing alliance with Continental Airlines, the fifth-biggest US airline, when Continental went looking for a partner at the end of last year. But he more than made up for it in May by signing a marketing agreement with United Airlines, the biggest US carrier.

If the deal is approved by the US antitrust authorities, United and Delta will link their frequent-flyer programmes and offer seats on each other's flights in cases where their own services do not serve the passenger's destination. That should increase passenger numbers.

Mr Mullin says the agreement is significant, but not fundamental to the company's future. Much more important is to build the company's powerful base in the south-east and eastern US and across the Atlantic.

"Those were the foundation elements of Delta, and there are enormous growth prospects within those business platforms."

In one sense, Mr Mullin has been lucky. A booming US economy and strong demand for air travel have given him breathing space to test his management techniques at Delta in exceptionally benign circumstances. His real test will come in the next downturn.

It is a point he is ready to concede. "We are not awash with money, but we have plenty of passengers. I am lucky in that respect. I've had good luck and I've had bad luck, and I'm very happy to take on good luck when it comes."