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US Air's president, CEO abruptly quits

US Airways president and chief executive David Siegel, whose demands for cost cuts created animosity among union leaders, resigned Monday from the nation’s seventh-largest airline.
/ Source: The Associated Press

US Airways Group Inc. president and chief executive David Siegel, whose demands for cost cuts created animosity with union leaders, resigned Monday from the nation’s seventh-largest airline.

He will be replaced by Bruce Lakefield, a member of US Airways’ board of directors and a close ally of US Airways chairman David Bronner, who has enjoyed better relations with labor groups.

Siegel said his resignation reflects a “belief that my leaving is in the best interests of the company, as management seeks to secure the necessary changes to make the airline competitive.”

“I have great affection for the airline and its outstanding employees, and I want to see the company succeed. 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,” Siegel said. “I hope that today’s announcement is the first step in a healing process that will enable the company to complete its restructuring.”

Siegel led the company out of bankruptcy protection a year ago after a short eight-month stay in Chapter 11. The company cut costs by nearly $2 billion a year, including about $1 billion in concessions from labor groups.

But union groups were critical of Siegel’s leadership. In December, the Air Line Pilots Association called for Siegel’s resignation.

When Siegel said earlier this year that another round of cost cuts of more than $1 billion would be needed to keep the company afloat, nearly all labor groups balked at entering a new round of talks.

A spokesman for the US Airways unit of the pilots’ union said pilots welcomed the change.

“Basically we’re pleased that Dr. Bronner listened,” spokesman Jack Stephan said. “A leadership change is a very important first step toward what we’ve been hammering as our mantra: the need to change the corporate culture.”

Stephan called Lakefield “a man of integrity, business acumen ... and I think he has a track record of team building.”

Joe Tiberi, a spokesman for the International Association of Machinists, said the change in leadership does not affect the union’s stance on negotiations. He said the union is willing to discuss cost savings that can be obtained under the existing labor agreement but will not renegotiate the contract.

In the past, Tiberi said, Bronner has been willing to consider suggestions from the union that were rejected by Siegel’s management team.

“Dr. Bronner is a businessman who doesn’t ignore the opportunity to save a substantial amount of money,” he said.

Bronner and Lakefield assumed their roles on the board as US Airways emerged from bankruptcy last year. Bronner heads the Retirement Systems of Alabama — an agency with a history of relatively unconventional investments for a public pension fund — which bankrolled US Airways’ emergence, with the help of a $900 million federally guaranteed loan.

Bronner said Siegel “has done an admirable job leading the company through a critical period, securing necessary cost cuts and new financing, making the tough decisions that needed to be made in a restructuring, and building a business plan that has put the company back on the right path.”

Lakefield, 60, served as chairman and CEO of Lehman Brothers International from 1995 to 1999, when he retired.

He “is an experienced and seasoned executive who will work tirelessly for the airline and its customers, business partners and financial backers, employees and shareholders,” Bronner said. “They all should embrace the fact that we recognize that the airline marketplace has changed dramatically, and that we are confronting those realities, rather than hoping they will go away.”

Last month, US Airways restructured the terms of its government-backed loan to avoid a potential default. Auditors have expressed concern that US Airways may face another bankruptcy filing.

Siegel spoke starkly of the need for cost cuts and concessions from labor. Last month he warned that the airline’s survival was at stake with low-fare carrier Southwest Airlines beginning flights in May in Philadelphia, one of US Airways’ three hubs.

“They’re coming for one reason. They’re coming to kill us,” Siegel told employees.

The airline has struggled to compete against low-fare carriers and never recovered from the Sept. 11, 2001, attacks, which hurt the airline industry as a whole and US Airways in particular.