The Brancatelli File



March 27, 2003 -- Once in a while--not often, but occasionally--I get an E-mail from a business traveler who suggests that my columns about the mismanagement of the Big Six carriers would be more effective if I refrained from describing the big bosses as overpaid, incompetent, insensitive, self-aggrandizing, cowardly, stupid, corporate welfare junkies.

I don't agree. I believe in calling a spade a spade and a blowhard corporate martinet a blowhard corporate martinet. But I also believe in reader service. So, if some of you want "just the facts" about the state of Big Six management, I am happy to oblige.

I could focus on Wednesday's revelations from Reuters that Continental Airlines chief executive Gordon Bethune received "a pay package for 2002, excluding options, worth about $7.63 million, more than 82 percent above the $4.18 million he was awarded the previous year." But, frankly, Bethune is too easy a target and an increasing embarrassment even to his fellow airline executives.

Instead, here are facts--and just the facts--about the state of the management of Delta Air Lines. I'll refrain from characterization, but I do urge you to let me know the adjectives that you'd use to describe this kind of stewardship.

FACT: Delta Air Lines recorded a net loss of $1.3 billion in 2002 and a net loss of $1.2 billion in 2001.

FACT: Delta said Tuesday that its first-quarter 2003 results will be worse than the $397 million loss in last year's first quarter. There is no hope for profit in 2003 and "economic analysts indicate that recovery is unlikely before 2004, if then," chief executive Leo Mullin wrote in Delta's just released annual report.

FACT: In the annual report, Mullin said that Delta will have shed 16,000 jobs--or 21 percent of its pre-9/11 work force--by the middle of this year.

FACT: Delta's stock traded at $55.81 on July 24, 2000. On September 10, 2001, the day before the terrorist attacks, Delta shares had lost a third of their value and were selling at $37.25. On Wednesday, Delta closed at $9.95, meaning the company has lost 82 percent of its value during the last 32 months.

FACT: In a speech before a New York aviation group on Wednesday, Mullin claimed airlines "have undertaken [the] largest expenditure reduction program in history."

FACT: In its proxy statement filed on Tuesday with the Securities and Exchange Commission, Delta revealed that Mullin was paid a salary of $795,000 in 2002, 33.3 percent more than he received in 2001. His cash bonus in 2002 was $1.4 million compared to no bonus in 2001.

FACT: After analyzing his various payouts, said Tuesday that Mullin's "compensation package more than doubled in 2002 to $4.8 million." After calculating the value of all his options and other perks, Forbes magazine concluded that Mullin's pay package was worth "some $13 million, more than twice what he received in 2001."

FACT: According to a story analyzing the proxy statement that appeared in Wednesday's Atlanta Journal-Constitution, Mullin and Delta's four other top executives received total cash bonuses of $4.8 million in 2002. Fifty-five "second-tier" managers were paid a total of $12.5 million more. "Delta had given no executive bonuses in 2001, but last year retooled its bonus formula to make them possible despite $1.3 billion in losses," the paper reported.

FACT: Delta's proxy statement said that the airline's president and chief operating officer, Fredrick W. Reid, was paid $45,000 more in salary ($700,000) in 2002 than in 2001. His 2002 cash bonus: $1.233 million. M. Michele Burns, Delta's chief financial officer received $30,000 more in salary ($560,000) last year than in 2001. Her 2002 bonus was $846,000. Vicki Escarra, Delta's chief marketing officer, received a $29,000 salary boost ($540,000) and a $761,400 bonus in 2002.

FACT: Based on its 2002 net loss of $1.3 billion and his 2002 bonus payment of $1.4 million, Mullin received $100,000 in bonuses for every $92,778,000 that Delta lost last year. Based on the $13 million estimate of his total 2002 financial compensation, Mullin earned $1 million for every $100 million that Delta lost in 2002. Reid received $100,000 in bonuses for every $105 million that Delta lost last year.

FACT: The proxy statement reported that Delta diverted $25.5 million in cash to guarantee the pensions of certain executives in the case of bankruptcy. The move is similar to the actions at US Airways, which paid its three top departing executives $35 million in lump-sum retirement benefits before it declared bankruptcy last year. Using the protection of the bankruptcy court, US Airways then renounced its pension obligations to its pilots.

FACT: Effective March 1, the Delta proxy said, Mullin and Reid were reducing their salaries by 10 percent "for an indefinite period." The other officers were accepting an 8 percent salary cut. "These reductions demonstrate the commitment of the officer team to share the burden of Delta's cost-reduction goals," the proxy said.

FACT: Mullin, who began the public drumbeat for a second airline bailout last September with a disastrous appearance before a Congressional committee, continues to act as the Big Six's front man on a request for upwards of $10 billion of additional taxpayer funds. "I remain fairly optimistic that we will get some aid through this process," the Atlanta Journal-Constitution quoted him as saying yesterday.

This column originally appeared at

Copyright 1993-2004 by Joe Brancatelli. All rights reserved.