Dallas-based Southwest Airlines
announced on Tuesday that its Executive Chairman and former CEO Gary Kelly will depart from the carrier next year after nearly four decades. It comes as the airline plans to “shake things up” as it deals with pressure for major changes from activist investor Elliot Investment Management.
Southwest’s current CEO, Bob Jordan, will remain in his role despite facing calls to resign. Kelly has maintained that the carrier’s board of directors and leadership will continue supporting Jordan.
“Not just stir them a bit”
Six board members will retire along with Kelly immediately after Southwest’s 2025 annual meeting. The board intends to appoint four new individuals to its panel of directors, which could potentially include candidates proposed by Elliott. Among the changes, the board will eliminate its current executive committee structure and will develop a new finance committee. Additionally, new committee chairs and a lead independent director will be appointed.
Photo: Gary Kelly
69-year-old Kelly formally announced his retirement in a letter to Southwest’s shareholders on Tuesday. He has worked at the airline for the past 38 years but has been chairman since 2008, when Southwest’s co-founder retired. Kelly explained that change is needed at the airline.
“Now is the time for change. It’s time to shake things up, not just stir them a bit. The wisdom comes in knowing what to change and what not to change. We know that changes are required to some of our historic business practices. We know we will need to continually bring in new talent – in leadership and on the Board. We know we will need to continue to invest and transform. All that is underway, while carefully evaluating the choices and executing with excellence the committed plans.”
Pressure to push Jordan out
According to CNBC, Elliot considered Southwest’s leadership changes as “unprecedented.” However, spokespeople John Pike and Bobby Xu, reportedly explained that the company is “pleased” with the move.
“We are pleased that the board is beginning to recognize the degree of change that will be required.”
Photo: Abdul N Quraishi – Abs | Shutterstock
Jordan was pressured by Elliot to resign as the management company has pushed for leadership changes. In June,
Elliot took a nearly $2 billion stake in Southwest
, and attributed the carrier’s CEO to its “stunning underperformance,” CNBC reported.
Kelly, however, believes that Jordan is the appropriate person to guide Southwest through its changes.
“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,” he stated.
Transforming the airline into a new era
Southwest has recently been in the headlines, after announcing major changes, such as the plan to operate red-eye flights for the first time in its history. Another notable change was
its decision to ditch its famed open seating policy after more than five decades
. Kelly, however, believes the changes will be valuable to Southwest’s transformation.
“I am confident the meaningful changes made to our route network; revenue management techniques; and marketing, merchandising and distribution methods – as well as significant new operational initiatives – collectively will transform the airline and usher in the next era of Customer loyalty and strong financial performance.”
Southwest’s investor day is set for September 26th at its Dallas headquarters. The carrier is expected to provide more details on its planned changes and other initiatives at the event.
“We are eager for your continuing input, and we look forward to providing additional updates this month,” Kelly said.