Southwest Airlines on Thursday ended a bitter boardroom battle with Elliott Investment Management, reaching an agreement that will add six new members to the airline’s board of directors and oversee a restructuring.
The agreement comes as the airline reported a surprise profit in the third quarter, benefiting from improved pricing and demand, as well as rebookings by passengers stranded by the global cyber outage in July. It was received and carried out.
As part of the agreement, CEO Bob Jordan will remain in his job, but Executive Chairman Gary Kelly will step down next month, accelerating his retirement after a decades-long career.
Elliott Investment Management had called for Bob Jordan to be fired, but the board stuck with the CEO. AP
The company will now have four former airline executives join its board of directors, including two who join through the agreement with Elliott. Six new people will join the company next month.
The board of directors will have 13 members.
Billionaire Paul Singer’s hedge fund had been pushing for months to shake up the board and fire Kelly and Jordan, blaming them for the airline’s poor performance. However, Southwest maintained its position as CEO.
The battle between airlines and activist investors continued last week, with Elliott making good on his threat to take the fight to all shareholders by calling a special meeting in December to allow investors to vote on board nominees. reached its highest value.
Elliott proposed eight director candidates and expressed his desire to take control of the board. Five of Mr. Elliott’s nominees will now participate, the most seats ever won by a hedge fund in a settlement with a U.S. company.
Elliott’s candidates include former Virgin America CEO David Kush, former WestJet CEO Greg Saretzky, and Sarah Fine. Berg, Dave Grissen and Patricia Watson. In addition, former Chevron CFO Pierre Breber will join the board of directors.
Executive chairman Gary Kelly will step down next month, accelerating his retirement after decades with the airline. Reuters
Earlier this year, Southwest Airlines added former Spirit Airlines CEO Bob Fornaro and Rakesh Gangwar, former CEO of US Airways Group and co-founder of Indian airline Indigo, to its board of directors.
Southwest Airlines once boasted 47 consecutive years of record profits before the coronavirus pandemic. But delays in Boeing’s aircraft deliveries, overcapacity in the domestic airline industry and post-pandemic travel patterns have all combined to drag down profits.
The company has taken steps to rebuild its business, including adding seats with extra legroom and eliminating its signature open seating system.
Last month, the company announced several initiatives to offset weak profits, including partnerships, vacation packages for customers and leasebacks on aircraft sales.
The airline announced several initiatives last month to revive sagging profits, Associated Press
Elliott said Southwest Airlines’ strategic changes, board renewal and improved governance will help create “long-term shareholder value.”
Southwest stock fell about 3.5% to $29.52.
The company reported adjusted earnings of 15 cents per share, compared with analysts’ average estimate of breakeven per share, according to data compiled by LSEG.
The company expects fourth-quarter revenue per available seat mile, a measure of pricing power, to increase 3.5% to 5.5% due to an approximately 4% reduction in expected capacity.
Boeing continues to expect about 20 new jets this year.
