Southwest Airlines is appointing six new directors to its board of directors and accelerating the retirement of executive chairman Gary Kelly in a settlement with minority shareholder Elliott Investment Management.
The Dallas-based company announced a flurry of personnel changes on Oct. 24 along with its third-quarter results, but the company is hoping to reverse a trend of generally disappointing results.
Earnings continue to lag as Southwest Airlines reported a profit of $67 million, down 65% from its third quarter 2023 profit of $193 million. However, the airline’s revenue increased from $6.53 billion to $6.87 billion, an increase of $5.3 year over year. %.
Chief Executive Officer Bob Jordan, who remains in the role despite pressure from Elliott to resign, said the results “reflect early progress against the plan.” ” he said.
According to Southwest, David Kush, Sarah Feinberg, Dave Grissen, Greg Saretzky, and Patricia Watson were hired on November 1 “in connection with a cooperation and information-sharing agreement” with Elliott. He is scheduled to take office as an independent director starting from the 1st.
Pierre Breber, Chevron’s former chief financial officer, concluded on the latest board additions. Southwest Airlines announced earlier this year the appointments of former Spirit Airlines CEO Robert Fornaro and Indigo co-founder Rakesh Gangwar.
The latest board shakeup is seen as a way to avoid holding a special general meeting of shareholders, which Elliott had formally requested to be held in December.
Elliott, which owns about 11% of Southwest’s stock, has been pushing for major changes in Southwest’s management for months. The company had previously hinted at adding Mr. Kush, who previously served as CEO of Virgin America, and Mr. Saretzky, who previously led WestJet.
“We added a number of airline experts,” Jordan says. “What I like about it is they bring a variety of experience. We have people who started airlines, people who have worked on ULCC, low cost, near-legacy stuff. Southwest Airlines I have no objection to doing these things, but they definitely help expand our thinking.”
Mr. Kelly, Southwest’s former longtime CEO, was scheduled to step down after next year’s shareholder meeting, but he will step down on Nov. 1.
“It has been the honor of my life to work with our employees and serve our customers to make Southwest the leader it is today,” says Kelly. “I believe that Southwest’s best days lie ahead under the vision and leadership of Bob Jordan and the oversight of this reconstituted board.”
Southwest announced that its board of directors will appoint a “new independent chairman.”
As previously disclosed, six members of the company’s board of directors include David Biegler, Veronica Biggins, U.S. Sens. Roy Blunt, William Cunningham, Thomas Gilligan, and Jill Soltau. ) will resign on the same day. As part of the changes, the number of board members will be reduced from 15 to 13 after next year’s annual general meeting.
The appointments include a “revamped” finance committee, which will be responsible for overseeing Southwest Airlines’ operations and strategic planning.
“The board spent a lot of time interacting with shareholders and getting their feedback, and we took significant actions based on that feedback,” Jordan said. “A number of board reforms have already begun and are ongoing, and we are very pleased to have worked with Elliott to reach a solution.
“I can promise you, everyone here is committed to making Southwest successful for generations to come.”
changing strategy
Jordan will lead Southwest Airlines’ complete strategic transformation, which includes significant changes to the airline’s fleet, network and operations. The overhaul, which has been in the works for months, will see Southwest abandon its open-seat policy, overhaul its aircraft cabins and rethink its fleet strategy through the end of the 2010s.
Specifically, Southwest plans to equip its fleet of only Boeing 737s with “premium” seats, which account for about one-third of the plane’s seats. Currently, the airline only offers standard economy seats. Next year, the company plans to begin renovating the cabins of about 50 to 100 aircraft each month until the entire fleet is refurbished.
Southwest Airlines also plans to introduce red-eye flights to increase efficiency, cutting gate times by several minutes.
Collectively, the changes will save the company $500 million a year by 2027, company executives said.
Southwest Airlines said these savings do not include expected “tailwinds” from its fleet management plan, which includes sales of older 737-800s and new 737 Max jets.
“We have 694 aircraft on our order book and we have a modest capacity plan, so we don’t need that many aircraft,” said Chief Financial Officer Tammy Romo. “We will respond appropriately based on what happens regarding the Boeing situation.”
Southwest Airlines is monitoring Boeing Co.’s ongoing machinists’ strike, which was recently extended after the union rejected the plane maker’s latest offer.
“If the strike escalates further, obviously we’re going to have to decide how we’re going to adjust our fleet for next year, how we’re going to adjust our appetite in our schedule,” Jordan said.
