Veteran of Continental Ran Avis Rent a Car By Keith L. Alexander Washington Post Staff Writer Thursday, March 7, 2002; Page E01 US Airways yesterday named David N. Siegel, chief executive of Avis Rent a Car System Inc., president and chief executive. The appointment came three months after Rakesh Gangwal resigned as chief executive of the struggling Arlington-based airline. Siegel, who will join US Airways on Monday, takes over as the nation's sixth-largest airline tries to shrink its operations, reduce costs, restore profitability and ensure long-term survival. US Airways lost $1.97 billion last year as it tried to defend its East Coast routes against low-cost competitors such as Southwest, Jet Blue and Air Tran. US Airways is negotiating with its pilots union to add smaller regional planes to its fleet in place of larger, fuel-guzzling jets. "While this is a particularly challenging time for the airline industry, I'm delighted to return to commercial aviation, where I spent much of my career," said Siegel, 40. "I have long viewed US Airways as an airline with a strong franchise and tremendous potential, and I look forward to working with the company's 36,000 employees in charting our future direction." Siegel's appointment also sets up the retirement of US Airways Chairman Stephen M. Wolf, sources close to the airline said. Wolf, 60, who has served as US Airways' chief executive and chairman since Gangwal's resignation, will remain chairman of the airline. But he will be removed from day-to-day operations, and Siegel will report directly to the airline's board. When Gangwal was chief executive, he reported to Wolf. Sources close to the airline said Wolf had planned to leave US Airways if his proposed deal to sell the carrier to United Airlines had been successful. When the sale fell apart last year over antitrust concerns, Wolf remained to create an alternative long-term survival plan for the struggling carrier. Wolf joined the American Airlines management-training program in 1966 after graduating from San Francisco State University. He has been working in the airline industry longer than almost any other airline executive. ABN Amro airline analyst Raymond Neidl said adding more regional jets, which are less costly to operate, and smoothing employee relations will be Siegel's most immediate challenge. "He has a lot of work to do in the labor area. The airline either makes some changes or they won't survive long term," Neidl said. "There was a lot of friction between Wolf and labor. Bringing on a new face could make things better." The airline's pilot's union said it welcomes Siegel. "Part of the problem was that many of the senior management's dedication to the company has fallen short of the employees' commitment and dedication to the company," said Roy Freundlich, spokesman for the union. "We look forward to establishing an effective and cooperative relationship with him." Freundlich said the union and management met this week and are "making progress" on adding regional jets. US Airways wants to add 420 smaller planes while the union has offered to accept 245. Pilots fear that a switch to regional jets could result in lower pay. Before his appointment to Avis in September by Cendant Corp., the car-rental company's parent, Siegel held various executive positions during his seven years at Continental Airlines, including head of the airline's regional jet unit, Continental Express. Siegel was credited with the mid-1990s turnaround of Continental Airlines. Before joining Continental in 1993, Siegel was head of corporate planning for Northwest Airlines. He has a bachelor's degree in applied mathematics and economics from Brown University and a master's of business administration from Harvard. "David is one of the best airline guys in the business," Continental chief executive Gordon Bethune said. "He knows the business inside and out. He's a true find for US Airways." After the planned sale to United fell apart, some analysts warned that US Airways could be headed for bankruptcy, but Wolf always denied that. Last month, Wolf said the airline was "near" announcing a marketing alliance with a major airline. Also, last month, US Airways filled more than 67 percent of its seats, the most since the Sept. 11 attacks. Airline executives have said they expect to be "cash positive" by April. One source close to the airline said Wolf began searching for Gangwal's replacement in January. The airline interviewed four candidates, some in the industry and some who had worked in the industry in the past. "We wanted to bring in fresh eyes and a fresh perspective," the source said. © 2002 The Washington Post Company