Austrian Airlines plans to replace Chief Commercial Officer Andreas Bierwirth, industry sources tell Aviation Week. The decision, made by the board of directors, is expected to be announced Friday.

Bierwirth has been a member of the executive board since 2008. He ran Austrian as co-CEO with Peter Malanik for two interim periods while the airline was looking for a new, permanent CEO. Former Star Alliance executive Jaan Albrecht was named CEO late last year, and Bierwirth returned to his COO position.

The decision is understood to be linked to the airline’s difficult financial situation. Company sources say Albrecht and Chairman Stefan Lauer needed to demonstrate to the airline’s unions that they are serious in their rescue efforts and would not hesitate to make cuts at the top. However, Bierwirth is credited by industry sources with having performed to expectations in his job. The structural problems reside more in high staff costs. A successor has not yet been named.

In addition, industry sources say, Austrian’s parent company, Lufthansa, has developed a scenario to let Austrian go into insolvency, if no solution is found to the carrier’s structural cost disadvantages. As part of that option, a new carrier would be built based on Tyrolean Airways, Austrian’s regional subsidiary. A decision could come within weeks. An extraordinary meeting of the board of directors is scheduled for March 13.

Austrian failed to reach breakeven in 2011, which was the target when Lufthansa invested. The airline posted a €65 million operating loss in 2010 and, despite network rearrangements and cost-saving efforts, is believed to have suffered a similar result last year. Austrian’s financial results will be released this month, along with those of Lufthansa Group.

As part of the restructuring, Austrian laid off about one-fifth of its 2009 workforce. But without additional savings, its staff costs would reach about €440 million ($586 million) this year, roughly the same as three years ago. Large groups within the airline receive automatic salary increases to compensate for inflation. They also are entitled to automatic hikes as part of their careers. The automatic advances are built into legacy work agreements for pilots and cabin crew.

In January, Albrecht unveiled another €220 million restructuring program that includes network cuts. Austrian also will dispose of 11 Boeing 737s and replace them with seven Airbus A320s, provided an overall agreement with its workers materializes. He says that there has been significant progress in reducing supplier costs and negotiating lower fees at Vienna Airport, but the talks with unions are still stalled.

Two weeks ago, Albrecht terminated the collective bargaining agreements and urged unions to begin negotiations on lower-cost deals. But the pilots are preparing to go on strike and refuse to accept the proposed changes.

Lufthansa is understood to have indicated that it will inject further money into Austrian, but only if the old structures are abandoned. It has reached the conclusion internally that Austrian will not be able to return to profitability in its current set-up, even in a strong market upturn. The airline has taken a much tougher stance on other money-losing subsidiaries. It shut down Lufthansa Italia, an ill-planned short-haul carrier based at Milan Malpensa Airport, and it sold BMI to International Airlines Group.

Transferring operations to a former regional subsidiary is not uncommon among European airlines. When Swissair collapsed in late 2001, Swiss investors (and the government) created a new carrier based on former regional airline Crossair. This airline has since been renamed Swiss International Air Lines and is now a Lufthansa subsidiary. The same is true for Brussels Airlines. That carrier used to be called Delta Air Transport and flew regional services on behalf of Belgium’s former national carrier, Sabena, which collapsed along with Swissair, its main shareholder. Delta Air Transport was later renamed SN Brussels Airlines and merged with local low-fare rival Virgin Express. Lufthansa now holds a 45% stake in the carrier.