The Southwest Airlines board is facing a major overhaul after a meeting was held between the carrier and the activist investor Elliott Investment Management in New York.
The two sides met on September 9, 2024, after Southwest invited the hedge-fund to “participate in refreshment efforts and other corporate governance changes”.
Elliott has criticized the running of Southwest since the summer, including a call for the resignation of CEO Robert Jordan, and has built a 10% stake since investing almost $2 billon in the airline in June 2024.
In a statement on September 10, 2024, Southwest confirmed that Chairman Gary Kelly will voluntarily retire from the board following the 2025 Annual Meeting.
In a letter to shareholders, Kelly said it had been a “great honor and privilege” to serve Southwest Airlines for the past 38 years, 18 of which were as the CEO before stepping down in 2022.
‘CEO Bob Jordan has the Board’s unanimous support’
While acknowledging that “significant changes” were necessary at the airline, Kelly told shareholders that “CEO Bob Jordan has the Board’s unanimous support”.
“While my heart will always be with Southwest and a part of me would love to continue supporting this great Company day-to-day, I recognize it is critical to demonstrate my immense confidence and support for Bob Jordan as CEO to all our Stakeholders. He and his extremely dedicated, talented and proven leadership team are vital to executing these plans,” Kelly wrote.
In addition to Kelly, six current directors have “informed the Board of their plans to voluntarily step down immediately after the Company’s regularly scheduled Board meeting in November”.
They include David Biegler (Compensation Committee Chairman), Veronica Biggins (Nominating and Corporate Governance Committee Chair), Senator Roy Blunt, Dr. William Cunningham (Lead Director), Dr. Thomas Gilligan (Audit Committee Chairman) and Jill Soltau.
Four new independent directors will be appointed to the board that could “potentially include” candidates proposed by Elliott.
Elliott had previously blamed what it called Southwest Airlines’ outdated IT systems and processes for the general outage which grounded a large portion of the airline’s fleet in December 2022 and left millions of passengers stranded.
Elliott also blames Southwest management for a drop in the airline’s value over the last three years since the COVID-19 pandemic and has called for modernization of the carrier.
In recent months, Southwest has brought in several changes that moved away from its traditional model that saw the airline post profits for 50 years continuously.
Assigned seating, offering more premium options and red-eye flights have all been introduced this year in an effort to modernize.
“We learned yesterday, which was made public today, that nearly half of Southwest’s Board of Directors had decided to resign based on shareholder feedback. In our experience, this is unprecedented. We are pleased that the Board is beginning to recognize the degree of change that will be required at Southwest, and we hope to engage with the remaining directors to align on the further necessary changes,” Elliott said in a statement.
The investor added: “The need for thoughtful, deliberate change at Southwest remains urgent, and we believe the highly qualified nominees we have put forward are the right people to steady the Board and chart a new course for the airline.”
