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Despite assurances he'd stay and fix US Airways' problems, CEO David Siegel suddenly stepped down Monday -- fueling speculation the nation's seventh-largest airline could be headed for liquidation or possibly a merger.

Experts said pressure from resentful labor groups led to Siegel's resignation. After wresting two rounds of concessions in 2002 worth $1.03 billion a year from labor, the CEO began pushing unions for $1.5 billion more late last year.

Effective immediately, the board replaced Siegel with board director and former Lehman Brothers chief executive Bruce Lakefield, 60. He joined the board when the airline emerged from bankruptcy in March 2003 and was instrumental in labor talks recently with US Airways' pilots and flight attendants.

Lakefield, who chairs the board's finance and strategy committee, was recruited by Chairman David Bronner, head of the Retirement Systems of Alabama. The pension fund, which controls 37 percent of US Airways stock, out-bid another investment group that had Siegel's support to become the airline's financial backer when it was in bankruptcy.

Bronner said in a statement that the board accepted Siegel's resignation "with regret, but share his view that this should be the start of a healing process for labor and management."

Bronner added that US Airways passengers, creditors and employees must realize Lakefield and the board "recognize that the airline marketplace has changed dramatically, and that we are confronting those realities, rather than hoping they will go away."

The company announced Siegel's departure after a meeting of the US Airways board. Siegel had been expected to present his restructuring plan for a board vote.

According to his contract, Siegel is entitled to receive roughly $4.4 million in severance if he left by April 30. He had told employees as recently as April 9 that he planned to fight on to turn around US Airways.

Siegel said in a statement his "leaving is in the best interests of the company, as management seeks to secure the necessary changes to make the airline competitive."

Siegel's resignation also comes as the parent company, US Airways Group, prepares to report today a loss estimated by one analyst at $197 million.

US Airways has nearly 8,000 employees in the Pittsburgh area. Before the Sept. 11, 2001, terrorist attacks, the airline had 11,700 workers in the area.

The airline accounts for about 80 percent of the passenger traffic at Pittsburgh International Airport.

Reaction from labor to Siegel's departure and the naming of Lakefield as CEO was mixed.

"He's Bronner's right-hand man, but I wasn't impressed," said Teddy Xidas, president of the Association of Flight Attendants Local 490, Oakdale, referring to the meeting Bronner and Lakefield held last month with flight attendants.

"To run an airline, I would have to see some clear insight and a creative business plan," she said. "Do (Bronner and Lakefield) know how to run an airline? There is a big question mark in my mind."

"Bruce Lakefield brings tremendous integrity, maturity and a track record for team building," Air Line Pilots Association spokesman Jack Stephan said. His union had openly called for Siegel's resignation in December.

Union leaders were cool to Siegel's company-wide Internet broadcast on March 24, when he said low-cost carriers -- especially Southwest Airline's upcoming entry into Philadelphia on May 9 -- are out to kill the airline. Siegel added that employees who couldn't stomach further concessions should still approve the additional cuts while looking for new jobs.

"He's burned many bridges," Stephan said.

The International Association of Machinists, which represents 1,900 aircraft mechanics here, adamantly insists it will accept no further concessions. But spokesman Joe Tiberi said his group "remains prepared to work with US Airways and Mr. Lakefield" to implement productivity measures the union has identified.

Siegel, 42, succeeded Stephen Wolf as CEO in March 2002. Siegel was credited with helping turn around Continental Airlines in the mid-1990s when he was head of its express airline affiliate.

But many observers -- not just in labor circles -- doubt whether another $1.5 billion in cost cuts would save US Airways. They have been critical because Siegel had not yet implemented a restructuring plan.

"I don't think this development has either positive or negative implications for Pittsburgh," said William Lauer, head of Allegheny Capital Management Inc., Tarentum. "But on one level, the pilots won."

"I don't know that those labor cost concessions would really win the day here anyway, aside from their merits," he said. "This could grease the skids for a liquidation or some kind of consolidation into United Airlines."

In 2000, United and US Airways had agreed to combine in a proposed mega-airline merger that U.S. antitrust enforcers opposed in July 2001. While United is currently in bankruptcy, some observers think the pair would fit well together.

"The company hit the iceberg, and now the captain has jumped overboard -- along with his golden parachute," said Robert Mann, head of R.W. Mann & Co. Inc., an airline consultancy based on Long Island.

Some analysts think Siegel's exit -- as well as his replacement with a retired investment banker -- could prompt US Airways to sell assets. Earlier this year, the airline retained Morgan Stanley to shop such US Airways assets as the lucrative North East shuttle, landing slots at major airports and express carriers, such as PSA or Piedmont-Allegheny Airlines.

"I think asset sales will happen sooner, rather than later," Mann said. He said perhaps British magnate Richard Branson, head of Virgin Atlantic Airways, would acquire US Airways' assets to help realize his aim of launching a carrier in the United States.

"Maybe Siegel's departure will give them some shelter to explain to employees these cuts are needed to save the company and their jobs," said Ray Neidl, analyst for Blaylock & Partners, New York. "But they don't have a lot of time -- probably only until this summer."

Allegheny County Executive Dan Onorato said he wants to meet with Lakefield "as soon as possible" to talk about ways of maintaining the company's presence in Pittsburgh. But Siegel's exit does not change Onorato's plan for working with the airline.

"We have laid out our strategy and have been consistent: we are not going to give US Airways, the company, any money, but we are going to work to reduce the debt out at the airport to make it competitive for all airlines," Onorato said.

The head of the Allegheny Conference on Community Development said it would continue to support Onorato's efforts to reduce debt and attract new carriers here. F. Michael Langley, chief executive of the conference, said efforts to provide critical routes were necessary "to assure employers across the region that they will continue to remain competitive.

"No matter who is CEO of US Airways, we will be consistent in our strategy to seek continued debt reduction at Pittsburgh International Airport and to seek diversification of the carrier base," Langley said.

US Airways is expected to have a roughly $197 million loss for the three months ended March 31, an industry analyst said yesterday.

That would be a significant improvement over first-quarter 2003. And passenger revenue in the current period probably will come in considerably higher, too.

"If that $197 million (loss) proves true, it would still be $85 million better than last year, and with better operating margins," said Glenn Engel, an airline analyst for Goldman Sachs, New York.

US Airways' first-quarter results were skewed by $1 billion in federal loan proceeds and other special gains. But stripping out one-time items, the airline lost $282 million.

Engel also forecasts US Airways will post passenger revenue of nearly $1.75 billion this past quarter. That would be 14 percent higher than year-ago levels.

"They've been in a pretty deep hole, and it takes a long time to come out of that," said Engel of US Airways' financial footing. "But people always underestimate the longevity of airlines."

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