Gary Kelly, Chairman of Southwest Airlines, Set to Retire Due to Investor Pressure
Southwest Airlines announced on Tuesday that it will be making some significant changes to its board, including the retirement of chairman Gary Kelly. The airline assured its support for CEO Bob Jordan as it faces demands for a restructuring from activist investor Elliott Investment Management.
The airline, based in Dallas, stated that Kelly will retire voluntarily following Southwest’s annual meeting scheduled for next year. Furthermore, six other directors are also set to step down voluntarily after the board’s meeting in November.
In the near future, Southwest intends to bring on board four new independent directors, possibly including up to three candidates suggested by Elliott.
This announcement came a day after Kelly and two independent directors from Southwest met with representatives from Elliott.
Elliott, which owns 10% of Southwest’s common stock, has threatened to initiate a proxy fight to implement major changes within the company’s leadership. The hedge fund blames the airline’s poor performance on its management’s adherence to outdated practices.
In a letter to shareholders, Kelly mentioned that the company had shared a detailed framework with Elliott to tackle concerns regarding corporate governance and performance.
“We are committed to engaging constructively toward a collaborative resolution in the near term,” Kelly stated.
Elliott has not responded yet to a request for comment from Reuters.
Since the COVID-19 pandemic, Southwest has encountered challenges in maintaining profitability and has been implementing various strategies for recovery, such as adding seats with increased legroom and transitioning from its traditional open-seating format to assigned seating.
The airline has also faced difficulties due to delays in jet deliveries from Boeing and elevated operational costs, including high expenses related to labor and aircraft maintenance.
Recently, Elliott proposed ten candidates for the 15-member board of Southwest, which includes former Virgin America CEO David Cush and Robert Milton, the ex-CEO of Air Canada.
