Southwest Airlines chairman to retire, 6 board members to resign after push from major shareholder
DALLAS – Southwest Airlines will revamp its board of directors, and longtime Chairman Gary Kelly will retire next year, the company announced Tuesday morning.
The Dallas-based airline has recently come under pressure from the hedge fund Elliott Investment Management, which has built a 10% stake in the airline and advocated for changes it says will improve Southwest's financial performance and stock price.
The two sides met on Monday. In SEC filings and a news release Tuesday morning, Southwest said that six directors will leave the board in November and it plans to appoint four new ones, who could include candidates put forward by Elliott.
Southwest leadership will also share an updated business plan later this month at the company's investor day in Dallas.
The shakeup also comes as Southwest makes other big changes, including ending its open seating policy and adding redeye flights to its schedule.
Elliott blames Southwest's management for the airline's stock price dropping by more than half over three years. The hedge fund wants to replace Robert Jordan, who has been CEO since early 2022, and Kelly, the airline's previous chief executive. Southwest said Tuesday that Kelly has agreed to retire after the company's annual meeting next year, but Jordan will stay in his role.
Elliott argues that Southwest leaders haven't adapted to changes in customers' preferences and failed to modernize Southwest's technology, contributing to massive flight cancellations in December 2022. That breakdown cost the airline more than $1 billion.
Southwest has improved its operations, and its cancellation rate since the start of 2023 is slightly lower than industry average and better than chief rivals United, American and Delta, according to FlightAware. However, Southwest planes have been involved in a series of troubling incidents this year, including a flight that came within 400 feet of crashing into the Pacific Ocean, leading the Federal Aviation Administration to increase its oversight of the airline.
Southwest was a profit machine for its first 50 years — it never suffered a full-year loss until the pandemic crushed air travel in 2020.
Since then, Southwest has been more profitable than American Airlines but far less so than Delta Air Lines and United Airlines. Through June, Southwest's operating margin in the previous 12 months was slightly negative compared with 10.3% at Delta, 8.8% at United and 5.3% at American, according to FactSet.