November 24, 2003
Dear Fellow Pilot:
As I write this letter, many of you are just learning that Leo Mullin has announced his retirement as Delta CEO effective January 1, 2004. While this is unexpected news, your union remains focused on our goals of protecting the piloting profession and helping Delta return to profitability. Despite the change in corporate leadership, these objectives have not changed, and the MEC has invested time, resources and considerable expertise into developing a business-like plan to help us achieve them. With that said, reassessing our environment to ensure were on the right course makes good business sense. Therefore, I have scheduled a special MEC meeting on December 3-4 in Atlanta.
I believe its important your elected representatives hear from our new CEO directly. I spoke with Mr. Grinstein this morning to congratulate him on his new position and invite him to the MEC meeting. We had a cordial, candid discussion that should set the stage for productive dialogue with the MEC.
In the meantime, our negotiating session scheduled for November 25 has been postponed until December 3. ALPA last made a counter-proposal on November 13. We will keep you updated of any developments regarding the mid-contract negotiations. I also want to caution you that in the coming weeks you will hear a great deal about reducing costs.Mr. Grinstein is quoted today as saying that to make Delta consistently profitable, we must further reduce Deltas costs substantially and permanently. While we acknowledge the need to reduce costs, we remain focused on our goal of protecting the profession.
In closing, I want to acknowledge the leadership Mr. Mullin provided to Delta and the entire airline industry in the challenging days following September 11. In those most difficult of times, he offered much needed clarity and direction. Looking forward, however, all of us should remember that we, the employees of Delta, are the company. We are the only constant, and we will continue to focus on what is on our long term best interests.
Fraternally,
Capt. John Malone
Chairman, Delta MEC
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Internal Memorandum
Date: November 24, 2003
To: All Delta Employees
From: Leo F. Mullin - Chairman and CEO
Subject: A Few Words Of Appreciation
This morning, I announced my upcoming retirement from Delta Air Lines. I will step down from my position as CEO effective January 1, 2004, and as Chairman of the Board effective with the shareholders meeting on April 23, 2004. This deeply personal decision will mark the culmination of a journey both tumultuous and rewarding, which has been shared with people whose spirit and resolve are unequaled. I am proud of what we as a team have accomplished together and where we stand today. And, it seems an appropriate time to share some thoughts about the journey.
When I joined Delta in 1997, the company was emerging from what was then regarded as its most challenging period. Battered by the effects of the Gulf War and a difficult economy, our airline had suffered in the most crucial areas customer service, employee morale and financial performance. What had not changed, however, was Delta employeesbelief in this great company, manifested in their certainty that successful completion of the tough recovery job ahead was the only option.
The results were stunning. Your efforts quickly returned Delta to the forefront of the industrys customer service indexes. We invested in new airplanes both mainline and regional jets. Progress in technology was immense, with Delta moving from a position of deficiency to industry leadership. Priceline helped launch the world of aviation into e-business contributing a huge $1 billion profit gain to Delta along the way. Delta and Air France co-founded SkyTeam, our fast-expanding global alliance. With Atlanta established as a new hub for service to Latin America, destinations soon included all the major capitals throughout the region. From anywhere to everywherebecame our byword. Deltas safety record remained impeccable. Financial performance soared and employee morale improved as we marched confidently into the new millennium.
Then came the terrible tragedy of September 11. Yet, even in the face of so much grief and loss, people around the world stepped forward, restoring our faith in humanity with their courage, resiliency and compassion. Nobody carried that banner more visibly or with more dignity and constancy than you, even though our industry had been especially hard hit by the events of 9/11. The skies went eerily silent as we brought all aircraft safely to ground, cared for our passengers and our fellow employees dispersed across the globe, and reinvented aviation security virtually overnight to ensure safe and secure operation.
Then when all was ready you quickly, valiantly, and safely launched the nations air transportation service once more. One of the first aircraft back in the skies was a Delta plane; it would be hard for me to accurately convey the depth of pride I felt at that moment for this company and for each and every one of you.
The 1990s had taught us that recovery would not be easy. We had no idea, however, about the depth of the challenge ahead. The events of 9/11 were followed by a bleak economic era which far surpassed our expectations. The revenue equation changed forever as passengers flown and yields dropped to unprecedented levels. Almost overnight, Delta and the other airlines faced an annual loss of 25 percent or more in revenues a staggering blow to an industry also facing rapidly escalating costs, from increased aviation security requirements to skyrocketing insurance rates.
In 2002 and 2003, the cumulative effects of the industry situation became nearly calamitous. Business travel dropped sharply, many passengers expressed fear of flying, and still others were reluctant to face the increased hassle of airport security. The industry operated with the constant threat of bankruptcy, and several competitors became insolvent. No carrier was immune, including low-cost carriers typically cushioned by their lower cost structures.
Again and again, the people of Delta met with their trademark courage what seemed to be an endless array of difficulties. In 2002, as the dangerous period ahead began to take shape, we battened down the hatches, emphasizing the minimization of daily cash burn and concentrating on building a balance sheet strong enough to ensure solvency. We had mobilized on all fronts leading in the air and on the ground, with the financial community and the government. By 2003, the specter of bankruptcy for Delta had receded.
Survival, however, has never been Deltas only goal. So, earlier this year, we expanded our companys vision to encompass a stronger focus on customer satisfaction and workplace excellence. And we riveted our attention on the need to completely revamp costs to reflect new economic and competitive realities.
In many respects, 2003 has been a good year. We are reinvesting in customers; we have launched Song; and we are forging a powerful new domestic alliance with Northwest and Continental. Yet we must recognize that Deltas financial performance continues to require massive improvement. Tough programs are in place to address these problems, and their ability to turn the situation around will depend on the support of Delta employees. With the record of achievement recorded so far, and with Jerry Grinstein and Jack Smith as the companys new senior leaders, I am confident that this airline has the strategic vision, experience and talent at every level to achieve the long-term success that is Deltas ultimate goal.
And so, I reach this point with several conflicting emotions: Pride in what we have accomplished together; a realization that the job is not nor can it ever truly be complete; and an abiding affection for a remarkable team of employees for whom I have great respect and admiration.
There is one experience in particular that crystallizes the legendary spirit of Delta people and what it has meant to me. Following September 11, as aviation was struggling to regain a footing, I was unexpectedly called upon to serve as spokesman for Delta and the industry. The stakes were high and the situation we faced was unprecedented. What I recall most clearly about that period of crisis, and what helped sustain me throughout, is the full flow of support from Delta people. I believe what I felt at that time was the true spirit of Delta. I will always treasure that memory, and I am grateful to have had the opportunity to work with all of you.
Leo Mullin
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Internal Memorandum
Date: November 24, 2003
To: All Delta Employees
From: Jerry Grinstein - Chief Executive Officer, effective Jan. 1, 2004
Subject: Joining You At Delta
Delta Air Lines has been an important part of my life since joining the Board of Directors 16 years ago. During that time, I've gained a tremendous respect for this company, its history of outstanding customer service and, most especially, for all of you, the people of Delta. I know many of you. I intend to meet many more of you soon. It is a great honor to have this opportunity to be your chief executive officer.
The Board appreciates your hard work and sacrifices during the past few years. Thank you. We need your continued support. Working together, we can make Delta the best airline in the world.
Leo Mullin and the senior management team have worked hard and effectively for Delta. During the first years of Leo's tenure as Delta's CEO, he, the management team and all of the people of Delta rebuilt the company's spirit, its focus on the customer and its financial standing. Since the tragic events of September 11, 2001, Leo has led our company with strength and determination through the most unsettled time in its history. Those are significant and notable achievements. The Board regrets that Leo has made the decision to retire. He has our thanks and deep appreciation for what he accomplished. He will work closely with me in the transition, and that is important.
We are fortunate to have Jack Smith as our non-executive chairman of the Board when Leo retires. Jack led General Motors, one of the world's great corporations, during times of tough competitive and financial challenges. He is a savvy and proven executive and a trusted friend. He intends to be very active in his new role at Delta starting immediately, and that is good news.
During the next several weeks, I will travel around the system to meet and talk with as many Delta people as possible. Your thoughts are important, and your active participation in the work that lies ahead is absolutely critical. We also will create an e-mail site where you can contact me with your comments, questions and concerns. I will do my best to answer as many of you as possible.
Working with the management team, we also will review our operations and our business. As always in our fast-moving industry, events and outlooks can change quickly. As we look deeply into our company over the coming months, we will make adjustments as they are necessary to meet the changing reality of our business and put Delta in position to fight and win.
There is hard work ahead. As a long-time member of the Board, I am keenly aware and appreciative of the good work you have done, but also of the serious financial and strategic challenges Delta faces. We have had continuing financial losses for the past three years. Delta had $2.7 billion on cash on hand at the end of the third quarter-- and cash is critically important in times like these. But we also have large debt and operating lease obligations totaling more than $20 billion, making Delta's future repayments a heavy burden for us to carry.
It is very clear that low-cost airlines and the restructured hub-and-spoke airlines are our most dangerous competition. Their low costs allow them to be profitable at fares that are often below the basic cost structure at Delta. It is an urgent task to get our costs down close to the levels of our competition so that we, too, can prosper in the new low-fare world. You have done a terrific job so far in the hard work of reducing costs, but to become competitive, we must face head-on the cost issues anywhere in the company that stand between us and renewed financial strength.
While we do that work, we will not forget the fundamental need to serve our customers well. You know how to do that. You are the best in the business. We count on you to keep the Delta tradition of service alive.
My wife, Lyn, will soon be in Atlanta to find a home for us. My time will be spent in the coming weeks in the Atlanta office and in Delta locations and I will be full-time at Delta after January 1.
During the next few years, all of us will be challenged as airline professionals. There is no easy path to the success we want to achieve. But I know Delta and Delta people well. You and this company have been tested before and emerged as a premier airline in the world. We will do that again. I look forward to leading Delta.
Jerry Grinstein
