NEW YORK – The president and chief executive of US Airways, the nation's sixth-largest carrier, unexpectedly resigned on Tuesday and the company said chairman Stephen Wolf would take over both positions.
The Arlington, Va.-based carrier, which has struggled all year long and whose proposed merger with United Airlines fell apart, said Rakesh Gangwal quit to pursue a career in venture capital. Gangwal joined US Airways in February 1996 after stints at Air France and United Airlines.
Analysts described the management shakeup as a needed change for the embattled carrier, which lost $766 million in the third quarter and continues to lose millions of dollars each day because of weak travel demand.
"With the way the airline's been going, I'm thinking Stephen - the master turnaround artist - decided to roll up his sleeves and dig in," ABN Amro analyst Ray Neidl said.
In the late 1980s, Wolf helped turn around two smaller airlines, Republic Airlines and Flying Tiger Airline, which were later merged with Northwest Airlines and Federal Express, respectively.
After the midday announcement, shares of US Airways rose 6 cents to $8.47 on the New York Stock Exchange. US Airways shares traded above $40 when the year began.
In July, UAL Corp., which owns United, and US Airways Group called off their $4.3 billion deal after the Justice Department said it would sue to block the deal. Justice officials said the combination would have reduced competition, raised fares and harmed consumers.
Now, US Airways and United no longer employ the top executives who were unable to create what would have been the nation's largest carrier. James Goodwin resigned as chairman and chief executive of United in October.
In a statement released by US Airways, Wolf said the company was "disappointed with (Gangwal's) decision to seek a new career path."
"The company's focus going forward, working with a superb group of employees, will be on operational excellence and creating shareholder value," Wolf added.
US Airways staggering third quarter loss came as the entire industry battles to overcome high costs and reduced demand. The loss came despite a $331 million cash infusion that was part of the federal bailout.
Most major airlines reported big third-quarter losses in large part because of the Sept. 11 attacks. But US Airways' suffered particularly because it is the largest carrier at Washington's Reagan National Airport, which remained closed for weeks after the attacks.
At a conference held by Salomon Smith Barney in New York earlier this month, Gangwal told Wall Street analysts he was optimistic about the airline's future. He said the Sept. 11 attacks had allowed the airline to restructure and downsize in ways that would have been impossible otherwise.
"For the first time, we look like a normal airline," Gangwal said on Nov. 6.
Specifically, the attacks allowed the airline to invoke "force majeure" clauses in union contracts and eliminate unprofitable routes. Force majeure is the legal term for an uncontrollable event that releases a party from its contractual obligations.
Neidl said Gangwal, whose departure was "not a shocker," might have recently lost some credibility with employees because of the company's poor performance even after it laid off 11,000 employees.
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