Southwest Airlines will revamp its board and its chairman will retire next year, but it intends to keep CEO Robert Jordan after a meeting with hedge fund Elliott Investment Management, which has sought a leadership shakeup at the airline including Jordan’s ouster.
Southwest said Tuesday that six directors will leave the board in November and it plans to appoint four new ones, who could include candidates put forward by Elliott.
Elliott, the fund led by billionaire investor Paul Singer, has built a 10% stake in recent weeks and advocated changes that will improve Southwest’s financial performance and stock price. The two sides met on Monday.
"They’ve just had some issues that needed to be addressed. Elliott’s going to try to address them," said President of Dynamic Travel Steve Cosgrove.
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Cosgrove expects changes could happen within a year or sooner.
He said many are likely to be behind the scenes, like recent updates to software at the center of the 2022 holiday meltdown.
Others could be more visible to travelers, including Elliott’s suggestion to review the two free checked bag policy.
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"It’s a huge perk, especially for families," said traveler Kimberly Ahearn.
To maintain customer loyalty, Cosgrove believes changes must be made strategically.
“Herb’s old saying was you take care of the employees, they’ll take care of the passengers, and the passengers will take care of the stockholders. Elliott and his new people need to remember that," he said.
Elliott blames Southwest’s management for the airline’s stock price dropping by more than half over three years. The hedge fund has wanted to replace Jordan, who has been CEO since early 2022, and Chairman Gary Kelly, the airline’s previous chief executive. Southwest said Tuesday that Kelly has agreed to retire after the company’s annual meeting next year.
Elliott argues that Southwest leaders haven’t adapted to changes in customers’ preferences and failed to modernize Southwest’s technology, contributing to massive flight cancellations in December 2022. That breakdown cost the airline more than $1 billion.
Shares of Southwest Airlines Co. rose slightly before the opening bell Tuesday.
