Departure of Delta's Song Unit Boss Stirs Questions

John Selvaggio may have announced his decision to retire as president of Delta Air Lines' ( DAL) low-cost unit Song, but his departure has drawn conflicting messages from the company, leaving Wall Street wondering where he may go next.

Delta is losing Song's leader at a critical time for the carrier, which plans to expand the low-cost unit as part of a restructuring plan to reduce costs by $2.7 billion through 2006 and avoid a Chapter 11 bankruptcy filing. Over the next year, Delta will boost Song's fleet by a dozen aircraft and add a number of flights, part of the largest schedule overhaul in the 75-year history of the airline.

"I share with you my decision to retire. While this was not an easy decision to make, it is the right decision and the right time to take this step," the 58-year-old Selvaggio said in a letter to Song employees. "I leave here knowing Song is well-positioned and fully supported as a strategic and vital part of Delta's transformation and future. Growth is assured, the road map is in place, and Song will be leading the way forward."

In an internal memo, Paul Madsen, Delta's chief marketing officer, had a slightly more conflicted take on Selvaggio's departure. "It is with mixed emotions that I announce that he has informed me that he plans to retire effective immediately to pursue personal interests," Madsen said in a memo.

After spending three decades in the airline industry and two years fighting for Song's survival, Selvaggio may have decided it was time to retire. But conflicting reports on the resignation had Wall Street wondering if Selvaggio was pursuing was another job in the industry.

"I read that he had retired. But I also read that he resigned to pursue other interests," said Helane Becker, airline analyst at The Benchmark Company, a New York-based brokerage. "The rumor that I've been hearing is that he's going to Virgin to join former Delta president and COO Fred Reid."

Indeed, Reid left Delta in March to become head of a U.S.-based version of Virgin Airways, Richard Branson's low-cost carrier that revolutionized European air travel by establishing high levels of service at lower prices.

Ultimately, Selvaggio's biggest legacy won't be starting Song -- but saving it. When CEO Gerald Grinstein took over at Delta last year, he quickly moved to freeze the nascent unit's growth and even quipped that it should be called "Swan Song." But as the company did a top-to-bottom evaluation of Delta's business while crafting its restructuring plan, Grinstein sang a new Song, recently quipping "you can teach an old dog new tricks."

During Selvaggio's tenure, Delta unveiled a number of new tricks, especially with regards to efficiency, cutting down on the time it took to get passengers on and off planes. Airport kiosks bloomed under his watch, as did new customer service initiatives, like Delta's food-for-sale program.

While the loss is notable, it is unlikely to disrupt the unit's growth because Song had a close-knit management team. Joanne Smith, Song's vice president of marketing, will become Song's interim head until a replacement is named.

"All in all, I think this is a nonevent," said Becker. "I think Song is bigger than one executive. And you don't need a zillion vice presidents to run a company."

In reaction to the news, shares of Delta rose 12 cents, or 3.5%, to $3.57.

More from Markets

Texas Instruments CEO Resigns After Violating Code of Conduct

Texas Instruments CEO Resigns After Violating Code of Conduct

Video: Here's How Goldman Sachs May Change Under David Solomon

Video: Here's How Goldman Sachs May Change Under David Solomon

Abbott's Capital Flexibility in Focus Ahead of Earnings Release

Abbott's Capital Flexibility in Focus Ahead of Earnings Release

Markets Close Higher After Fed Chair Powell's Capitol Hill Testimony

Markets Close Higher After Fed Chair Powell's Capitol Hill Testimony

Boeing Inks Freighter Deal, Lifts Industry Demand Forecast

Boeing Inks Freighter Deal, Lifts Industry Demand Forecast