Southwest Airlines is set to overhaul its board of directors, with longtime Chairman Gary Kelly announcing his retirement next year, the company revealed.
This move on Tuesday comes after growing pressure from hedge fund Elliott Investment Management, which has acquired a 10% stake in the Dallas-based airline and pushed for changes aimed at boosting financial performance and stock value.
In response to these demands, Southwest stated that six of its board members would step down in November, with plans to appoint four new directors, potentially including candidates recommended by Elliott. This shift follows a meeting between the airline and the hedge fund on Monday.
The leadership changes coincide with Southwest’s broader operational updates, including the end of its open seating policy and the addition of redeye flights. These changes will be further detailed later this month during the airline’s investor day in Dallas.
Elliott has expressed dissatisfaction with the airline’s management, particularly criticizing CEO Robert Jordan and former CEO Gary Kelly, who has been chairman since stepping down from the top role. The hedge fund attributes Southwest’s declining stock price—down more than 50% over the last three years—to leadership’s failure to adapt to evolving customer preferences and modernize the airline’s technology. This includes a breakdown in December 2022, when widespread flight cancellations cost Southwest over $1 billion.
Although Kelly plans to retire following Southwest’s 2024 annual meeting, the company confirmed that Jordan will remain in his position as CEO.
Despite the airline’s operational improvements this year, including a lower cancellation rate than industry competitors, Southwest has faced a string of safety concerns, prompting increased oversight from the Federal Aviation Administration. The company, once known for consistent profitability, has struggled to regain its financial footing since the pandemic. While it has outperformed American Airlines, Southwest has lagged behind Delta and United in profitability, with a negative operating margin over the past year.
CBS News contributed to this report.
