Sept 10 (Askume) – Southwest Airlines Co (LUV.N) announced board changes on Tuesday, including the retirement of Chairman Gary Kelly, butActivist investor Elliott Investment Management reiterated its support for CEO Bob Jordan despite calls for change .
Kelly has been with American Airlines for nearly four decades and has been the company’s chairman since founder Herb Kelleher retired in 2008. He served as the company’s chief executive for 18 years before handing the reins to Jordan in 2022.
Elliott, one of the world’s most powerful activist investors, launched a boardroom battle to force Kelly and Jordan to step down. He wants Southwest to change management’s “rigid commitment to decades-old practices”Plans are underway to replace two-thirds of the board’s 15 directors .
Elliott now has a large enough stake in the company that he can call a special shareholder meeting.
After meeting with Elliott in New York on Monday, Kelly said in a letter to shareholders that his role as chairman has been transformational and will end after Southwest’s annual meeting next spring.
Both Southwest and Kelly have expressed confidence in Jordan’s leadership.
“Bob has a proven track record spanning decades,” Kelly said. “Most importantly, he has the ability to lead Southwest through a significant transformation.”
As part of the restructuring, six directors will voluntarily resign in November. Southwest plans to appoint four new independent directors in the near future, which could include the three candidates proposed by Elliott .
The airline’s board of directors has established a new finance committee to oversee finances, operations, business planning, strategy and capital structure.
Southwest shares, which have fallen about 38% over the past three years, were down about 3.5% to $28.70 in afternoon trading.
Citi analysts said the board changes were “an adjustment of Southwest’s strategic positioning” rather than “an attempt to re-invent the wheel”.
Elliott called the changes “unprecedented” and said he was pleased that Southwest’s board “is starting to recognize the amount of change the company needs to make.”
“Southwest still needs thoughtful and deliberate change,” the statement said. The company also said its nominee was “the right person to stabilize the board and chart a new path for the airline.”
Southwest is working to strengthen its position post-pandemic. Due to regulatory and safety strugglesBoeing Co (BA.N) suffered heavy losses as the shutdown crippled the jet maker’s ability to deliver new planes, which rely heavily on its fleet.
The company is also facing pricing pressure due to industry-wide capacity and falling air ticket prices in the domestic market.
To turn its fortunes around, the airline plans to offer fixed seats and seats with extra legroom and introduce night flights to attract premium passengers.
More details will be announced on September 26.
