This is not a good sign.....

US Airways CFO Leaves as Airline Fights to Survive

Troubled Carrier Says It Is Quickly Losing Managers

By Griff Witte Keith L. Alexander
Tuesday, October 26, 2004

The chief financial officer of financially troubled US Airways Group Inc. has resigned, less than six months after taking the job and just a month after the airline filed for bankruptcy protection for the second time in as many years, the company announced yesterday.

David M. Davis, 38, who joined the Arlington-based carrier as vice president of financial planning and analysis in April 2002 and was promoted to CFO in May this year, will leave the company next month to become CFO at Houston-based Kraton Polymers LLC, a chemical company. Davis will be replaced by Ronald E. Stanley, 57, who joined the company's board of directors in May and has chaired its audit committee.

A source close to the airline said Davis was not forced to resign and informed the airline's board of directors over the weekend that he had accepted the new position. He will not receive a severance package from the airline, a company spokesman said.

Airline industry observers said Davis's departure signals increased trouble for the airline. Davis was the lead executive who testified during the airline's bankruptcy hearing earlier this month.

"This doesn't look good," said Mike Boyd of the Boyd Group. "You don't want to shake up your senior management staff at a time like this."

Davis was not available for comment yesterday.

Analyst Helane Becker of the Benchmark Co. said Davis either thought the airline was not going to emerge from its Chapter 11 bankruptcy proceedings or assumed that if the carrier did emerge, a new management team would be brought in.

The airline has been struggling to emerge from reorganization and reinvent itself as a low-fare carrier. It recently cut senior executives' pay 5 to 10 percent. In addition, the bankruptcy court allowed the airline to implement a 21 percent cut for the majority of its workers through February.

"Talented individuals are being recruited away to other companies that pay better money than US Airways is paying or can pay," US Airways spokesman David Castelveter said yesterday. "We're losing management at a rate of 20 percent a month, which is a very high number."

Davis, a veteran of both Delta Air Lines Inc. and Northwest Airlines Corp., was making $319,550 a year at the time of his promotion to CFO in May, according to regulatory filings.

Davis's replacement, Stanley, has had previous experience in finance, including as chief operating officer and director of HSBC Equator Bank PLC.

US Airways also announced yesterday the election of George M. Philip, the executive director of the New York State Teachers' Retirement System, to its board of directors.
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Normally this kind of thing is not good news. It is not always bad news, but it's very rarely good news. My favorite is when people resign to "spend more time with family". Nobody who makes the kind of life commitment required to *get* to this kind of position puts family in very high regard - so why start now? That was Skilling's excuse for leaving Enron at the time. Or it's like insider transactions in publicy traded equity. Sometimes insiders sell because they know something and are bearish on the stock. Sometimes they sell simply because they need the money.

In this case, however, it looks a little different. Kraton is a TPG company - the same TPG that *should* have been the buyer of USAir before the 'Bama crowd stepped in - and being CFO of a profitable cash-generating firmed owned by a prestige name financial sponsor is not a bad gig I'd expect.

I just hope that they can find quality financial folks who are willing to join a firm like U under the circumstances. The current appointment looks like a real stopgap measure.

Normally this kind of thing is not good news. It is not always bad news, but it's very rarely good news. My favorite is when people resign to "spend more time with family". Nobody who makes the kind of life commitment required to *get* to this kind of position puts family in very high regard - so why start now? That was Skilling's excuse for leaving Enron at the time. Or it's like insider transactions in publicy traded equity. Sometimes insiders sell because they know something and are bearish on the stock. Sometimes they sell simply because they need the money.

In this case, however, it looks a little different. Kraton is a TPG company - the same TPG that *should* have been the buyer of USAir before the 'Bama crowd stepped in - and being CFO of a profitable cash-generating firmed owned by a prestige name financial sponsor is not a bad gig I'd expect.

I just hope that they can find quality financial folks who are willing to join a firm like U under the circumstances. The current appointment looks like a real stopgap measure.

Well--not that I want to take the side of the company, especially given the number of posts on here detailing the cuts of US frontline people, but I think this is where some of the staff folks maybe cutting of their collective nose to spite their face.

It doesn't say so in the articles, but I would guess that given US financial position, that he probably had some kind of retention package to make up for the risk that the job might be gone tomorrow. Given that he left anyway, it would seem that he didn't have high hopes for a future.

The point on losing management a a rate of 20% a month is really bad. I don't know how far down in their organization the 20% applies to, but if you start losing enough of that group of people, as someone once said to me, the only ones left will be the "unemployables".

If you start losing the upper management guys in finance or HR or flight operations, the FA's, mechanics, etc may be clapping, but you lose the people who are guiding the ship. At a 20% rate of management losss, they'll park the planes in January.

Again, not to be critical of US staff, but the reality is there is one CFO and several thousand front line staff. If you fired every manager from the vp level on up, you wouldn't save as much money as reducing the pay/benefits of thousands of employees. That is the ugly truth in a big organization. Management attrition at that rate will impact US a heck of a lot faster if it were to occur lower down the ladder.

Pretty soon, the only management people you'll be able to recruit to US are the ones who specialize in managing doomed companies and are good at functioning in that environment until the lights go out for the last time.

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