The resignation of US Airways Chief Executive Officer David N. Siegel on Monday is a sign of an airline struggling to avoid financial collapse, according to union leaders and airline industry analysts.
US Airways, based in Arlington, is losing money daily as its routes and passengers increasingly are overtaken by low-fare carriers, particularly Southwest Airlines.
During his two-year tenure as head of US Airways, Mr. Siegel tried to compete by cutting costs sharply. Much of the cost cutting fell on labor contracts, which alienated employees and apparently led to Mr. Siegel’s resignation.
“Unfortunately, the past two years have been difficult for all of us, and I believe our ability to move forward and make additional changes require a change in leadership,” Mr. Siegel said as he announced his resignation Monday.
David Bronner, chairman of the US Airways board, appeared to be seeking better labor relations when he appointed Bruce R. Lakefield, a board member in charge of finance, strategy and human resources, to replace Mr. Siegel.
“The choice of Bruce Lakefield as the new CEO is an excellent one,” said Jack Stephan, spokesman for the 3,300 US Airways pilots represented by the Air Line Pilots Association. “He leads by example and not by just rhetoric.”
Nevertheless, labor costs still need to be reduced, according to industry analysts.
“If they don’t get those cost cuts, they most likely will go into bankruptcy as soon as this year, most likely this summer,” said Ray Neidl, an airline industry analyst with the Wall Street investment firm Blaylock & Partners. “This time they probably won’t come out.”
US Airways posted a $98 million loss on revenue of $3.4 billion in the fourth quarter of 2003.
The nation’s seventh-biggest airline owns 270 jet airplanes and carried 47.1 million passengers last year.
Its stock continued a downward slide yesterday, closing 2 percent lower at $3.35 per share on the Nasdaq. The stock has lost more than half its value in the past year.
Mr. Neidl said Mr. Lakefield’s appointment appeared to be an attempt to win cost cuts from unions that eluded Mr. Siegel.
“I think his sole purpose is to get the cost cuts,” Mr. Neidl said. “There’s not going to be an airline unless he gets the major modifications he needs. It’s going to be a whole bunch of things, but labor costs will account for a major part of it.”
About 36 percent of US Airways’ costs involve labor, Mr. Neidl said. He estimated that the airline loses one-quarter to one-third of a million dollars daily.
Mr. Siegel led the company out of bankruptcy a year ago after eight months in Chapter 11 protection.
He played a big role in slashing costs by nearly $2 billion a year, which included about $1 billion in labor concessions among the airline’s 28,300 employees.
However, unions criticized his tactics in blaming labor costs as a major factor in the airline’s financial problems. In December, the Air Line Pilots Association called for Mr. Siegel’s resignation.
When Mr. Siegel said last month that more than $1 billion in additional cost cuts are needed to keep the company afloat, only the pilots agreed to new talks.
The machinists refused any more concessions.
“US Airways is an airline in trouble, but it is an airline that could be saved and should be saved,” said Robert Roach Jr., general vice president of the International Association of Machinists and Aerospace Workers, which represents about 5,000 US Airways mechanics and ramp workers. “The missing piece has been effective leadership willing to work with employees, instead of attacking them.”
Regardless of new leadership, US Airways still must compete with low-fare carriers. Southwest has taken away most of US Airways’ business at Baltimore-Washington International Airport.
Next month, Southwest begins service at Philadelphia International Airport, one of three US Airways hubs.
Last month, US Airways restructured the terms of its government-backed loan to avoid a potential default. Auditors have expressed concern that the airline faces another bankruptcy filing.
Mr. Bronner and Mr. Lakefield assumed their roles on the board as US Airways emerged from bankruptcy last year. Mr. Bronner leads the Retirement Systems of Alabama, a public pension fund, which bankrolled US Airways’ emergence from bankruptcy with the help of a $900 million federally guaranteed loan.
Mr. Lakefield served as chairman and chief executive of Lehman Brothers International from 1995 to 1999, when he retired.
Mr. Bronner called Mr. Lakefield “an experienced and seasoned executive who will work tirelessly for the airline and its customers, business partners and financial backers, employees and shareholders.”
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