Southwest Chair Kelly to step down subsequent 12 months amid Elliott struggle

Southwest Airways stated Tuesday that govt chairman and former CEO Gary Kelly will retire subsequent 12 months and introduced a board shake-up, strikes that come because the service faces stress for modifications by activist investor Elliott Funding Administration.

“Now could be the time for change. It is time to shake issues up, not simply stir them a bit,” Kelly stated in a letter to shareholders. “The knowledge is available in figuring out what to alter and what to not change.”

Kelly, who has labored at Southwest for almost 4 a long time and has been chairman because the service’s co-founder, Herb Kelleher, retired in 2008, introduced he would step down hours after a gathering with Elliott, which has been calling for management modifications on the Dallas-based service.

Elliott in June revealed a virtually $2 billion stake in Southwest, searching for to oust management, together with CEO Bob Jordan, who has additionally spent nearly 4 a long time on the service. The agency stated Southwest has had “gorgeous underperformance” underneath their management.

On Tuesday, Kelly’s assertion stated Southwest’s board and management “unanimously assist Bob Jordan as CEO.”

Six of Southwest’s board members will retire in November, and the corporate will appoint 4 new unbiased administrators “within the close to future, together with due consideration of as much as three of Elliott’s candidates,” Kelly stated.

Elliott in an announcement stated the mass departure was “unprecedented.”

“We’re happy that the board is starting to acknowledge the diploma of change that can be required,” Elliott’s John Pike and Bobby Xu stated. However the activist stated additional change on the airline “stays pressing.”

The activist investor crossed the ten% threshold wanted to name a particular assembly final week. Elliott has beforehand mounted campaigns at firms like AT&T, Salesforce and Texas Devices, but it surely had by no means publicly pushed for change at an airline earlier than.

Southwest has additionally introduced in outdoors consultants, together with Bob Fornaro, former CEO of Spirit Airways and AirTran, which Southwest acquired.

The service has struggled because it faces an oversupplied home U.S. market, increased prices and plane supply delays from Boeing, its sole provider.

Southwest for years resisted modifications to its easy enterprise mannequin that modified the U.S. airline trade, and earned almost unbroken a long time of earnings, which helped it construct an investment-grade steadiness sheet.

However in July, it introduced it will provide further legroom on its plane and dispose of its open seating coverage, the most important modifications in its greater than 50 years of flying. It additionally plans to supply in a single day, or “redeye,” flights subsequent 12 months.

Southwest has an investor day scheduled for Sept. 26 in Dallas to increase on these and different initiatives.