Southwest Airlines to Overhaul Board After Talks with Elliott Investment
In a significant shift, Southwest Airlines is set to undergo a board overhaul following a pivotal meeting with activist investor Elliott Investment Management in New York on September 9, 2024. This development comes as Elliott, which has accumulated a 10% stake in the airline worth nearly $2 billion since June 2024, intensifies its criticism of the airline’s management.
During the meeting, initiated by Southwest to discuss corporate governance changes and board refreshment, it was revealed that Chairman Gary Kelly will retire voluntarily post the 2025 Annual Meeting. Kelly, who has been associated with Southwest for 38 years, including 18 years as CEO before stepping down in 2022, expressed his deep commitment to the airline but recognized the importance of supporting CEO Bob Jordan’s leadership.
Southwest’s board expressed unanimous support for CEO Jordan, amidst ongoing demands for strategic changes within the airline. “CEO Bob Jordan has the Board’s unanimous support,” Kelly stated, emphasizing the need for significant changes while showing confidence in Jordan’s capabilities.
In addition to Kelly’s upcoming retirement, six other board members have declared their intention to step down immediately after the board meeting scheduled for November 2024. The departing members include key figures such as David Biegler, Veronica Biggins, Senator Roy Blunt, Dr. William Cunningham, Dr. Thomas Gilligan, and Jill Soltau.
The airline will appoint four new independent directors, potentially including candidates proposed by Elliott. This change is part of a broader strategy to address the criticisms levelled by Elliott, particularly concerning Southwest’s outdated IT systems and management approaches, which were blamed for a massive operational outage in December 2022.
Elliott has also pointed to a decline in the airline’s value post the COVID-19 pandemic, advocating for a modernization of the carrier. Recently, Southwest has introduced several changes deviating from its traditional business model, such as assigned seating, premium options, and red-eye flights, signaling a move towards a more diversified service offering.
Elliott’s recent statement highlighted the significant board changes at Southwest, noting the unprecedented nature of nearly half of the board members resigning based on shareholder feedback. The investor emphasized the urgent need for deliberate change at Southwest and expressed confidence that the new nominees are aptly qualified to steer the company in a new direction.
These developments reflect a pivotal moment for Southwest Airlines as it embraces substantial governance changes to realign its strategic direction and operational execution in response to shareholder expectations and market demands.