Southwest Airlines will revamp its board and the chairman will retire next year, but it intends to keep CEO Robert Jordan after a meeting with the hedge fund Elliott Investment Managementwhich has sought a leadership shakeup at the airline, including Jordan’s suspension.
Southwest said Tuesday that six directors will leave the board in November and it plans to appoint four new ones, which could include candidates put forward by Elliott.
The shares of Southwest Airlines Co. rose slightly before the opening bell on Tuesday.
Elliott, the fund run by billionaire investor Paul Singer, has built a 10% stake in recent weeks, advocating changes it says will improve Southwest’s financial performance and stock price. The two sides met on Monday.
Elliott blames Southwest’s management for the airline’s share price falling by more than half in three years. The hedge fund wants replace Jordan who has been CEO since the beginning of 2022, and chairman of the board Gary Kellythe airline’s former CEO Southwest said Tuesday that Kelly has agreed to retire after the company’s annual meeting next year.
Elliott alleges that Southwest’s leaders have not adapted to changes in customer preferences and failed to modernize Southwest’s technology, contributing to massive flight cancellations in December 2022. That meltdown cost the airline more than $1 billion.
Southwest has improved its operations, and its cancellation rate since early 2023 is slightly lower than the industry average and better than chief rivals United, American and Delta, according to FlightAware. However, Southwest planes have been involved in a row disturbing incidents this year, including one flight that came within 400 feet of crashing into the Pacific Ocean, leading the Federal Aviation Administration to increase its oversight by the airline.
Southwest was a profit machine in its first 50 years — it never suffered a full-year loss until the pandemic crushed air travel in 2020.
Since then, Southwest has been more profitable than American Airlines but far less than Delta Air Lines and United Airlines. Through June, Southwest’s operating margin over the previous 12 months was slightly negative compared with 10.3% at Delta, 8.8% at United and 5.3% at American, according to FactSet.