A Southwest Airlines aircraft takes off from Hollywood Burbank Airport in Burbank, California, above other Southwest aircraft on July 25, 2024.
Mario Tama |
Southwest Airlines said Tuesday that executive chairman and former CEO Gary Kelly will retire next year and announced a board shakeup. The moves come as activist investor Elliott Investment Management pressures the airline to make changes.
“Now is the time for change. It's time to shake things up, not just mess things up a bit,” Kelly said in a letter to shareholders. “The wisdom lies in knowing what to change and what not to change.”
Kelly, who has worked for Southwest for nearly four decades and has been chairman since the airline's co-founder Herb Kelleher retired in 2008, announced his resignation hours after meeting with Elliott, who had called for a leadership change at the Dallas-based airline.
Elliott disclosed in June that he had a nearly $2 billion stake in Southwest and sought to oust its top management, including CEO Bob Jordan, who also spent nearly four decades at the airline. The company said Southwest had performed “astonishingly poorly” under his leadership.
Kelly's statement on Tuesday said Southwest's board and management “unanimously support Bob Jordan as CEO.”
Six Southwest board members will retire in November and the company will appoint four new independent directors “in the near future,” with due consideration given to up to three of Elliott's nominees, Kelly said.
The activist investor last week crossed the 10% threshold needed to call a special meeting. Elliott did not immediately respond to a request for comment. Elliott has previously campaigned at companies including AT&T, Salesforce and Texas Instruments, but has never publicly pushed for change at an airline before.
Southwest has also brought in outside experts, including Bob Fornaro, former CEO of Spirit Airlines and AirTran, which were acquired by Southwest.
The airline is struggling with oversupply in the US domestic market, higher costs and delays in the delivery of aircraft by its sole supplier, Boeing.
For years, Southwest resisted changes to its simple business model that revolutionized U.S. airlines and generated almost uninterrupted profits for decades, helping the company earn an investment-grade balance sheet.
But in July, the airline announced it would add more legroom to its planes and abandon its open-seat policy – the biggest changes in its more than 50-year history. It also plans to stop flying at night, or so-called “redeye,” flights next year.
Southwest has planned an investor day in Dallas on September 26 to further explain these and other initiatives.
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