Regional vision: when CEO Leo Mullin took charge at Delta, the US airline had virtually no flights into Latin America. That's all changed

Latin CEO: Executive Strategies for the Americas, May, 2001 by Carlos Frias

RUMOR HAS IT THAT Delta Air Lines' former CEO Ron Allen used to boast that as long as he was at the helm, Delta would never venture into Latin America. True or not, Delta's route system reflected that sentiment. During Allen's tenure, the only Delta flights to the region were byproducts of a merger with Western Airlines in the late 1980s. Delta cigarettes and Delta faucets, two brands with no connection to the airline, were better known in Latin America than this US carrier.

In less than four years, Leo Mullin has changed all that.

Delta's CEO has aggressively transformed a once-regional US airline into a global heavyweight. The company overcame a small-town mindset, harsh critics and three entrenched US giants to become a top US airline in Latin America. "It was the first and most strategic decision I made on my watch," Mullin says. "I was a believer."

Delta--currently the world's No. 3 carrier--in April launched a new route to Buenos Aires, the latest piece of the puzzle in its strategy for tapping the Latin American market. Next, the airline wants to buy a stake in Mexican carrier Aeromexico.

"This has been huge for Delta," says Raymond Neidl, an equities analyst for ING Barings. "[Delta] has successfully moved into being a major player in Latin America."

When Mullin began his airline's push into the region, he was well aware of the risk/reward formula. As an executive at First Chicago Bank for 15 years (the last three as COO), Mullin witnessed the crash of Latin American economies in the 1980s, their rebound in the early 1990s and the subsequent "tequila crisis" and recovery.

Convinced that Latin America was entering a new era of growth and stability, Mullin jumped at the chance to enter the Brazilian market when routes became available just months after he took over as CEO of Delta in 1997. It was the beginning of what would become a 52 percent expansion of Delta's flight network, the largest expansion in company history, dwarfing its push into Europe and Asia in the 1980s.

Industry experts predicted Delta would get its nose bloodied when it tried to enter a market already saturated by American, Continental and United airlines. Delta was a virtual unknown to anyone outside of Mexico, the only market it served at the time. None of which bothered Mullin. "We don't have to be a household name," he says. "As word spreads, the traveler learns."

Delta had a simple plan. Rather than cater to tourists like its competitors, it would focus on serving business travelers. And it would use Atlanta's airport, already its main hub, to route them between business centers in the US and Latin America. "You're not going to win just by doing what the other guy is doing just a little bit better," says Mullin.

In effect, Mullin wanted to pit Atlanta against Miami, positioning Atlanta's Hartsfield International Airport as a Grand Central Station for businessmen moving between Latin America and cities in the US heartland--different from Miami's role as a destination, and as a hub between Latin American cities.

Within seven months of Mullin's arrival, Delta was flying to cities in five Latin American countries, including Mexico City and Sao Paulo. It currently serves 18 destinations in the region, with 30 daily flights. While American Airlines has 50 daily flights to Latin America from Miami, Mullin believes most of these are carrying travelers from Miami, rather than from other US cities.

"The crucial part of this is a strategy that is fundamentally different than what American did in Miami. And guess what? It worked," says Mullin. "Miami's connection from Latin America to the [rest of the] US is dwarfed by Atlanta. It's not even in the same league."

With connections to Miami from cities such as Chicago, Dallas, Tampa and Savannah, American Airlines strongly disagrees with Mullin's assessment that it serves just Miami. Where Delta may have some edge, however, is in smaller secondary markets. Delta seats business travelers on regional jets for a short hop to Atlanta, then straight to points beyond.

"The businessman wants to get from anywhere to everywhere," Mullin says, smiling at what has become Delta's mantra and chief advertising slogan. "When you can get somebody from Greensboro, N.C., to Sao Paulo, Brazil, that's big." A fact that Jorge Fernandez, Delta's director for Latin America, likes to throw around is that from Atlanta, you can reach 80 percent of the rest of the United States in less than 2.5 hours.

Now, Delta is considering expanding into the region vis-a-vis ownership of Latin American airlines themselves. A few weeks ago Mullin announced that Delta would be interested in taking an equity position in Aeromexico, already a partner with Delta in its "SkyTeam" global alliance. The sale has been put on hold for at least six months, and Mexican officials are expected to limit any foreign investor to a 25 percent interest. Nonetheless, says Mullin, "If that were the amount of shares sold to a foreign partner, we would definitely be interested in a stake."