Southwest Airlines Co. Chairman Gary Kelly is stepping down along with six directors, a dramatic step after the carrier faced calls for a strategic overhaul from activist investor Elliott Investment Management.
Kelly, 69, will “voluntarily retire” from the board and his executive chairman position immediately after the 2025 annual meeting, Southwest said Tuesday in a statement. The six directors will depart after the November board meeting.
Southwest reaffirmed support for Chief Executive Officer Bob Jordan, who Elliott has been seeking to force out. It wasn’t immediately clear if the activist firm would accept Southwest’s plan, and Elliott didn’t immediately respond to requests for comment.
Southwest said it presented the plans to Elliott Monday and invited the firm to be part of the company’s turnaround. The airline will continue to seek a “collaborative resolution” with the activist, which has proposed 10 new directors for the 15-member board.
The board overhaul underscores the high stakes in the carrier’s battle with Elliott, which has pushed to oust Kelly and Jordan. The activist has accused the airline’s leaders of refusing to modernize operations, hurting shareholders and leaving Southwest unable to withstand operational and competitive challenges.
Southwest’s shares rose less than 1% before regular trading Tuesday in New York. The Dallas-based carrier, which has a market capitalization of about $18 billion, advanced 2.9% this year through Monday, compared with a 15% increase in the S&P 500.
New Leadership
Elliott, which disclosed a $1.9 billion stake in the carrier in June, has said Southwest needs “fresh, proven executive leadership from outside the company” and an internal review by a special committee to turn around its performance.
Southwest has taken multiple steps in response, including adopting a poison pill shareholder rights plan and naming a veteran airline executive to its board. The carrier also made strategic shifts to add a premium section onboard and adopt assigned seating after more than a half-century.
More recently, Southwest has been polling customers on the possibility of adding checked-bag fees for certain fares, which could end the airline’s “bags fly free” policy.
Kelly had been chairman since May 2008 and served as Southwest’s CEO for more than 17 years, during which he transformed the discounter into the largest US carrier by domestic passengers and extended its network abroad.
He took over in 2004 as the industry recovered from the 9/11 terrorist attacks and extended Southwest’s industry-best run of annual profits, which began in 1972 and ended in 2020 as the pandemic upended travel.
—With assistance from Crystal Tse and Ryan Beene.