Southwest Airlines Executive Chairman and former CEO Gary Kelly will retire following a Monday meeting with activist investor Elliot Investment Management, according to a letter from Kelly shared with shareholders Tuesday.
Elliot has sought leadership change since revealing they’d acquired a roughly $2 billion stake in the airline in June, pushing to oust various members of Southwest’s C-Suite — including CEO Bob Jordan — due to what the investment firm described as “stunning underperformance,” CNBC reported. Jordan’s job appears safe for the moment, with Kelly stating in his letter that “the Board and leadership of Southwest unanimously support Bob Jordan as CEO,” but the airline will still undergo a major shakeup in leadership, with six of its board members now set to retire in November.
“Bob Jordan has the right team and the right plan for Southwest’s future, and he has all the tools and expertise needed to ensure its successful execution,” Kelly wrote in the letter. “The Company has a tremendous amount of work to do but the path is clear.”
Southwest’s former CEO Gary Kelly will stand down as executive chair, and six board members will resign amid a corporate governance shakeup, as Southwest tries to stave off a hostile takeover. pic.twitter.com/BqGPMb9ia4
— David Slotnick (@David_Slotnick) September 10, 2024
In addition to the personnel changes on its board, Southwest has brought in former CEO of Spirit Airlines and AirTran Airways Robert Fornaro, Kelly’s letter to shareholders stated.
Southwest announced plans to implement assigned seating in July, ending a nearly 60-year tradition of allowing passengers to choose their own seats onboard the aircraft. The company also said it intended to redesign its boarding process, introduce red eye flights and offer premium seating with extra legroom.
Prior to the July announcement, Southwest had long resisted changes to its business model as it experienced a nearly unbroken stream of profits for decades, CNBC reported. However, the company has recently run into challenges, facing cost increases and delivery delays from Boeing, its aircraft supplier, as well as a major system failure during the 2023 Christmas holidays that led to 16,700 flight cancellations and left roughly 2 million passengers stranded, according to CNN.
Partially as a result, the airline has shown signs of financial duress in recent months, announcing plans to fire roughly 2,000 employees and cancel service to four airports in April.
Southwest Airlines did not immediately respond to a request for comment.
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