Updated from April 19

After two years at the helm of US Airways ( UAIR), CEO David Siegel has resigned, under fire from labor unions unwilling to accept wage concessions as bankruptcy rumors continue to plague the company.

Siegel's departure comes as the airline tries to stave off a second bankruptcy filing in as many years. Siegel had told employees the company needs to reduce labor costs by another 25% to be competitive, but after giving up their pension and billions of dollars in wage concessions, unions have balked at the request to cut their pay again. In December, pilots called for Siegel's resignation, while flight attendants sued the company for breach of contract.

"I have great affection for the airline and its outstanding employees, and I want to see the company succeed. Unfortunately, the past two years have been difficult for all of us, and I believe our ability to move forward and make additional changes require a change in leadership," Siegel said in a statement after the markets had closed Monday. "I hope that today's announcement is the first step in a healing process that will enable the company to complete its restructuring."

The news not only pleases unions, it also puts the nation's seventh largest airline further under the control of David Bronner, US Airways' non-executive chairman and CEO of the Retirement Systems of Alabama, which has a $300 million, or 37%, equity stake in the company. One of the pension fund's representatives to the board, Bruce Lakefield, former chairman and CEO of Lehman Brothers, will replace Siegel as CEO.

One major issue to be settled is Siegel's severance package, which is valued at more than $4.5 million. Under the terms of his deal, revealed in an April 9 proxy statement, Siegel would be entitled to a big payout if he left the company before April 30. In March, Siegel vowed to stay on at US Airways and fight the company's problems, telling employees he wasn't going to take his golden parachute.

The airline industry has undergone a management shake up in the two-and-a-half years since the World Trade Center attacks. Five airlines have announced the resignation of their CEOs, with Delta Air Lines ( DAL), Continental Airlines ( CAL) and US Airways announcing shake ups in the last six months.

With Siegel out, US Airways needs to regroup in order to take on Southwest Airlines ( LUV), which plans on debuting service from Philadelphia, a US Airways hub, in May. Last month, Siegel warned the impact of competition could be dire, in an address to employees. "They're coming for one reason: they're coming to kill us," he said "They beat us on the West Coast, and they beat us in Baltimore. If they beat us in Philadelphia, they're going to kill us."

Indeed, Southwest recently announced plans to boost the number of cities it will serve from Philadelphia, not only smelling blood, but also saying advance bookings have been the strongest they've ever seen for a new city. The low-cost carrier will expand its initial daily service from six cities and 14 departures to 14 cities and 28 departures.

The situation at US Airways is getting bleak. In order to raise cash, the carrier is already looking into the sale of some assets, including hubs and its east coast shuttle. The carrier continues to post losses, see its credit rating fall and last month, almost defaulted on a $1 billion loan guaranteed by the Air Transportation Stabilization Board.

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