A Southwest Airlines plane takes off from Hollywood Burbank Airport above other Southwest planes on July 25, 2024 in Burbank, California.
Mario Tama | Getty Images
Southwest Airlines said Tuesday that Chief Executive Officer Gary Kelly will retire next year and announced a board reshuffle, moves that come as the airline faces pressure to make changes from activist investor Elliott Investment Management.
“The time has come for a change. It's time to shake things up, not just shake them up a bit,” Kelly said in a letter to shareholders. “Wisdom lies in knowing what to change and what not to change.”
Kelly, who has worked at Southwest for nearly four decades and has been president since the airline's co-founder Herb Kelleher retired in 2008, announced he would step down hours after a meeting with Elliott, who has been calling for leadership changes at the Dallas-based airline.
In June, Elliott disclosed a nearly $2 billion stake in Southwest, seeking to oust management including CEO Bob Jordan, who has also spent nearly four decades at the airline. The company said Southwest has had “shockingly underperformed” under his leadership.
On Tuesday, Kelly's statement said Southwest's board and leadership “unanimously support Bob Jordan as CEO.”
Six of Southwest's board members will retire in November and the company will appoint four new independent directors “in the near future, including giving due consideration to up to three of Elliott's nominees,” Kelly said.
The activist investor surpassed the 10% threshold needed to call a special meeting last week. Elliott did not immediately respond to a request for comment. Elliott has previously mounted campaigns at companies including AT&T, Salesforce and Texas Instruments, but has never before publicly pushed for change at an airline.
Southwest has also hired outside experts, including Bob Fornaro, former CEO of Spirit Airlines and AirTran, which Southwest acquired.
The airline has faced difficulties due to an oversupplied U.S. domestic market, higher costs and delays in aircraft deliveries from Boeing, its sole supplier.
Southwest for years resisted changes to its simple business model that transformed the U.S. airline industry and enjoyed decades of nearly uninterrupted profits that helped it build an investment-grade balance sheet.
But in July it announced it would offer more legroom on its planes and eliminate its open-seat policy, the biggest changes in its more than 50 years of flying. It also plans to replace overnight, or “redeye,” flights next year.
Southwest has an investor day scheduled for Sept. 26 in Dallas to expand on these and other initiatives.
