Air Transport World

Fine-tuning Delta.(Company Profile)

Leo Mullin's first year at the top was a highly successful one. But challenges loom...

ATLANTA--When his first anniversary with Delta Lines passed in August, Leo F. Muffin was satisfied with the first fruits of his tenure as president and CEO. But he believes the carrier has a long way to go and many challenges to face.

Airlines in the U.S. generally are riding a healthy economic wave and Delta is with the leaders. It carried a world-leading 103.3 million passengers in 1997, the first commercial airline to surpass 100 million, and was third in RPKs behind United and American.

Delta's management also seemed pleased with the financial returns: A record $934 million for the year, tripling its 1996 results. Revenues were up 7.7% to $13.5 billion, while operating expenses fell 0.5%, the only profitable U.S. Major to reduce expenses. Operating profit also was a record at $1.7 billion. For the fiscal year ended June 30, the net was $1 billion, with an operating margin of 12%.

Still, Mullin is wary of his airline's posture for the future. "My biggest concern," he told ATW, "is these are the best of times." Muffin's focus is on preparing for the down years.

Delta's plan sticks with the carrier's conservative nature- light on dramatic and aggressive moves and heavy on fine-tuning the airline into a better "business," maximizing the strengths it already has, making it a more efficient profit maker. One of the keys to this appears to be attracting the business flier, currently representing about 40% of Delta's passengers.

Mullin acknowledges that Delta's dramatic Leadership 7.5 program under the Ronald W. Alien management (ATW, 5/95, p. 28) reduced costs at a terrible price to the airline, resulting in a decline in its traditional superior service standards. One of Muffin's four key goals is to restore these (see box).

As do many other business-oriented carriers, Delta considers on-time performance to be one of the key measures of airline service standards. For many years, Delta held its own in this category. But last year, it fell to dead last among the 10 U.S. Majors. Thus far in 1998, Delta has climbed back up to fourth place.

Mullin says his second goal has been to maintain the cost advantage Delta worked so hard to achieve under the 7.5 program, and even to improve its cost efficiencies to maintain what he claims is Delta's 5% advantage over the other hub carriers. He says that both goals-improve service and improve cost efficiencies-must be reached, adding: "The best companies do both."

The third Mullin goal is to restore "employee satisfaction," an item that took a severe hit during the 7.5 program, when Delta actually furloughed employees, almost unheard of at the airline. He says employees felt "disenfranchised" after 7.5. But he adds that employee satisfaction must be improved without increasing costs so that the 7.5 program is not needed again. …

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