Avis CEO to head US Air
Siegel returns to airline industry after less than 6 months at car rental company.
March 6, 2002: 1:52 p.m. ET
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NEW YORK (CNN/Money) - Avis Rent A Car Inc. CEO David Siegel is leaving the company after less than six months to become CEO of troubled airline US Airways Group, the two companies announced Wednesday.
Siegel, 40, joined Avis in late September, only two weeks after the terrorist attack caused a sharp drop in demand for both air travel and rental cars. He had worked as an airline executive before joining Avis, including four years as president of Continental Express, the feeder airline subsidiary of Continental Airlines (CAL: up $0.65 to $33.89, Research, Estimates).
"After a very successful record as an airline executive, David could not resist the opportunity to head up an independent, publicly traded airline," said a statement from John Chidsey, chairman of the vehicle services division of Avis parent company Cendant Corp. (CD: up $0.34 to $18.80, Research, Estimates). "While David's time at Avis has been short, we can certainly understand his decision."
Siegel fills a job previously held by Rakesh Gangwal, who left US Airways in November. The post had been filled on an interim basis by company chairman Stephen Wolf, who will stay with US Air (U: up $0.30 to $6.45, Research, Estimates) once again as a non-executive chairman.
Even before the terrorist attack, US Airways was facing significant financial challenges. U.S. regulators last summer blocked a proposed $4.3 billion purchase of the company by United Airlines parent UAL Corp.
Today US Air has a market capitalization about one-tenth of that proposed purchase price, and unlike many other major carriers who have seen their share prices recover much of value they lost in the wake of the attack, US Air stock is still only at 55 percent of pre-attack levels.
While all airlines have been hurt by the drop in air traffic since the attack, US Airways has been particularly hard hit because of a drop in demand on its formerly lucrative Washington D.C.-New York shuttle. Security concerns that have increased check-in times have hurt the time advantage the shuttle has over competing ground service, such as Amtrak's Northeast corridor service.
Analysts surveyed by earnings tracker First Call forecast losses continuing through next year at that the Arlington, Va.-based airline, the nation's sixth largest. The forecast is for losses of $11.60 a share this year, down from the $17.35-a-share loss in 2001, and losses of $4.20 a share next year. The company has not posted a quarterly profit since the second quarter of 2000, and in the two quarters since the attack it has posted losses larger than analysts' forecasts.
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When the UAL deal was cancelled, US Airways announced a plan to return to profitability by shifting more of the flights to the regional jets that have generally been used primarily by feeder airlines such as Continental Express. That plan faced strong opposition from US Airways unions, though, especially its pilots. 
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