ATLANTA — The day Leo F. Mullin was hired as chief executive of Delta Air Lines, he sought a meeting with the chairman of the powerful Air Line Pilots Association and emerged to declare they got off on the right foot.

Two weeks later, when he landed at Atlanta's airport for his first day of work, Mullin was greeted by a line of pilots picketing over contract gripes.

This was his first clue that he was dealing with some prickly personalities. It certainly wasn't his last. Like a Hollywood studio executive who can't control his top stars or a basketball coach with a team of hotshots, Mullin has been vexed by the challenge of handling the talent. As a strike threat loomed in recent months, many in the 9,800-strong pilot corps, which is well-financed and impeccably organized, staged a refusal to work overtime that forced major flight cancellations and damaged the carrier's public image.

"I've not encountered a union like ALPA," says Mullin, a former banker who also worked in the railroad and electric-utility industries but had no prior airline experience. "It's unique in its strength, in its commitment to control, as opposed to participation."

The pilots' tenacity largely paid off. On Sunday, the two sides reached a tentative contract agreement that would make Delta pilots the highest paid in the industry, slightly topping the new pay scale set last year between UAL Corp.'s United Airlines and its pilots. Although the Delta pilots didn't get the seat on the board they wanted, they did get a greater role in setting the airline's strategic direction. And the pay gains come at a time when airlines are facing the most challenging economic environment in years.

The 58-year-old Mullin still faces a patch of management turbulence. Many pilots remain alienated by the carrier's move to sue them in federal court over their no-overtime campaign. And the pilots' union, which has repeatedly outflanked Delta in wooing the hearts and minds of the pilots, will only be emboldened by its success in the contract talks.

It wasn't supposed to turn out this way. When Delta's board tapped Mullin to be CEO in August 1997, he was expected to mend relations with its demoralized workers after a traumatic downsizing.

Pilots, blessed with the time, smarts and resources to challenge their employers, have frustrated airline executives for decades. At United and Northwest Airlines, pilots earned equity and board seats in exchange for contract concessions. One frustration for Delta executives is that their pilots own a relatively small portion of their company but still have strong opinions on how to run it.

"More than half the pilots at Delta could be the CEO or chairman of the board," says pilot leader Charles S. Giambusso, a 50-year-old, hard-liner with a business degree to match Mullin's. "These are highly talented guys."

Many pilots have graduate degrees in business or law, and except for recent hires, many are ex-military officers with leadership skills and a yearning for control. Though none can claim experience running a big public company, second-guessing management is a favorite sport. Mullin often gets long letters from pilots, with advice on how he could do better.

While he reads each letter and sits down with individual pilots when they come to visit, Mullin believes he represents a far broader constituency. "They never get the holistic approach," he says.

Delta's pilots say that they don't want to run the airline but that it's only natural for them to have an intense interest in its direction. Because better job opportunities are tied to seniority, pilots typically spend their working life at a single carrier, unless the carrier goes out of business. "We're here our entire careers," says Kingsley Roberts, a Delta pilot.

At times, Delta's pilots act almost like an opposition government. Last year, a team of Delta pilots designed a software program that monitors monthly crew schedules and spits out company errors in assigning and paying pilots. The union has begun presenting management with a monthly list of scheduling mistakes flagged by the program. The result: $18,000 to $25,000 a month in extra pay, says Capt. Kim Welch, chairman of ALPA's scheduling committee.

The union has long had its own investment bankers and economists to counter management's resources at the bargaining table. But that's just the beginning. Every month, a professional polling firm gauges the Delta pilots' attitudes on the airline and their own leaders. The union can instantly reach nearly all its pilots through e-mail, easily outflanking Delta, which still relies largely on the U.S. mail.

From the day he arrived, Mullin has faced relentless testing by the pilots. Many had turned from Delta loyalists to union activists amid a harsh downsizing that ultimately cost Mullin's predecessor, Ronald W. Allen, his job.

Within months, union officials began goading Mullin for a midcontract raise in light of the company's improved profits. Mullin reasoned they had a contract in place and refused.

But pilots soon seized on another opportunity to agitate for higher wages when negotiations opened on pay rates for the Boeing 777, the new flagship of Delta's fleet. Introducing a new plane means a carrier has to negotiate a pay scale for the aircraft's pilots. But Delta pilots threatened to park the jumbo jets unless the company anted up hefty pay rates for the new planes.

Calling the pilots' bluff, Mullin halted delivery of a big order of Boeing 777s and threatened to sell the few the carrier already owned. ALPA leaders took a hard line, and Delta ended up paying Boeing 777 captains $250 an hour, or about $225,000 a year in base salary with yearly raises thereafter. It set a new high for the industry for that type of aircraft. In the course of negotiations, Mullin also agreed to an interim raise for the other pilots.

Union officials were quick to portray even Mullin's good intentions as missteps. Four months into his job, Mullin made a bold bid to buy Continental Airlines, but the question of how to merge the pilot groups helped scuttle the January 1998 deal. The ALPA contract with Delta would have left Continental pilots at a seniority disadvantage, and Mullin refused to promise Continental executives he would meet their pilots' concerns. Continental, Delta's most logical strategic partner, instead forged a powerful alliance with Northwest Airlines, leaving Delta as an industry wallflower as consolidation unfolds. After the fact, Delta pilots complained that their union should have been brought into the talks to facilitate a compromise.

Four months after the Continental bid failed, a big marketing pact with United unraveled when Mullin rejected his pilots' demand for a voting board seat in exchange for their approval.

Mullin had to cancel a press conference in Manhattan just hours before United and Delta were set to unveil their big plans. He hopped a flight to Portland, Ore., where ALPA's master executive council was meeting, to plead with the pilots to keep the deal alive. ALPA officials stressed the importance of the board seat as a condition of their support, and Mullin agreed to take the issue to Delta's board.

In August 1998, he called Capt. Giambusso to his office and told him Delta's board had turned down the pilot board seat on "corporate governance" grounds: Board members shouldn't represent narrow interests, and the pilots weren't even major shareholders.

Capt. Giambusso, who had just assumed the post as chairman of the master executive council at Delta's pilots' union, packed up his papers and walked out. Taken aback, Mullin said he never realized the board seat was a deal-killer. "I told him there was nothing to talk about," says Capt. Giambusso.

By contrast, at the corporate headquarters, many managers warmed to Mullin's enthusiastic, coach-like style. At meetings, he plants himself at the middle of the table, instead of the head, and solicits debate. He shuns many of the trappings of a CEO. After a mechanic complained about work conditions at the Atlanta airport, Mullin set his alarm for 3 a.m. and joined him on the night shift.

But the pilots bog him down in what he sees as an endless sea of rules. "We have to argue about seat configuration and assignment processes," he complains.

Many pilots came to see Mullin and his management team as bean-counters. Mullin spent much of his career at First Chicago Corp., where he was in line to be CEO of the big banking company before its acquisition by NBD Corp. At Delta, he never tried to revive the culture of the "Delta family" that prevailed before the downsizing.

"It's just not a term that I would use," Mullin said in a recent interview. "There's a distinction between what I truly think are families and kind of being in business."

His relationship with the pilots took a sharp dive last October. The union laid out an opening contract proposal so high that Delta figured it would wipe out the company's pretax profits. Then Delta, after months of promising "top pay for top performance," unveiled its opener: an arcane plan linking pilots' pay to financial performance and pilot efficiency.

The proposal bombed. Within days, most pilots stopped volunteering for overtime trips in protest. Delta relies on such volunteers to sign up to be on call for an extra trip during the month, in addition to their normal flying schedules of about 75 hours. Delta faced mounting cancellations.

At Capt. Giambusso's urging, Mullin agreed to request federal mediation on a 90-day timeline. If the parties didn't settle by Feb. 28, they would seek release from the fixed process to begin a 30-day countdown to a possible strike.

Despite the fast-track plan, the pilots didn't end their overtime protest. Mullin gave the green light to sue the union and 49 individual pilots in federal court.

The lawsuit proved to be a big headache. Delta lost the first round when a federal judge refused to enjoin the union. Then an appeals court declined to set a hearing until Jan. 9 — after the holidays were over. Delta trimmed its schedule to reduce its reliance on overtime flying, but it wasn't enough to prevent a holiday fiasco. Hundreds of cancellations left passengers fuming. By the time Delta got an injunction in February, the damage was done.

In February, Mullin offered to give the pilots the highest pay in the industry. Many pilots liked the rich pay offer, but the union didn't budge on the remaining tough issues.

With time running short, Mullin arranged a meeting Feb. 14 at the White House with Lawrence Lindsey, President Bush's chief economic adviser, and pleaded for intervention, if necessary. Two days earlier, ALPA reported that 97% of the pilots had given it approval to call a strike. "We're talking about something that is extraordinarily harmful to the public interest," said Mullin in an interview earlier this month.

His concerns were echoed by other airlines in similar straits, and on March 9 President Bush announced he would "take the necessary steps" to prevent airline strikes this year. A presidential emergency board could deter a strike for 60 days while it tried to broker a solution.

When talks resumed last Wednesday under the guidance of the National Mediation Board, Norman Mineta, the Transportation Secretary, was prodding the two sides to settle in order to avert the need for presidential intervention.

Delta negotiators were willing to give on money issues but were reluctant to cede too much managerial control. Mullin managed to squelch an effort to give the pilots a voting board seat.

Still, the union scored big gains in mapping Delta's strategy, particularly in the area of regional jets, which are flown by a separate group of commuter pilots who have much lower pay scales. Delta acquiesced to limits on the use of the regional jets to bypass hubs such as Atlanta. It bowed to caps on the distance the small jets are allowed to fly.

Delta also agreed to increase its mainline fleet in proportion to expansion of its fleet of 50-seat regional jets. While Delta retained the right to buy up to 57 of the larger 70-seat regional jets already in its plans, it will have to increase the size of its mainline fleet if it wants to buy more.

Meanwhile, Delta agreed to largely eliminate lower pay rates at Delta's low-fare unit, Delta Express, making it harder for that venture to compete with low-fare carriers such as Southwest Airlines. The best Delta could achieve was to preserve some flexible work rules at the low-fare unit and to win the right to expand it, using new Boeing 737-700s.

Mullin says he's now eager to move ahead to heal the wounds. "I feel very good about the prospects of rebuilding the sense of trust and respect that I wanted to build at Delta." As for Capt. Giambusso, he says he hasn't spoken to Mullin since December.


Via The Associated Press