Southwest Airlines is set to undergo significant changes as it revamps its board and prepares for the retirement of its chairman next year. The decision comes following pressure from hedge fund Elliott Investment Management, which has been advocating for improvements at the airline, including the removal of CEO Robert Jordan.
Southwest announced that six directors will be stepping down in November, with plans to appoint four new independent directors, potentially including candidates suggested by Elliott. The airline's stock experienced a 4% decline in morning trading on Tuesday in response to the news.
Elliott, led by billionaire investor Paul Singer, recently acquired a 10% stake in Southwest and has been critical of the airline's management, attributing its lagging stock performance to their leadership. The hedge fund has been pushing for the replacement of both CEO Jordan and Chairman Gary Kelly.
In a letter to shareholders, Kelly acknowledged the challenges faced by Southwest in its post-pandemic recovery, citing increased costs and the need for change. While Kelly will retire after the annual meeting next year, he expressed support for CEO Jordan, describing him as a valuable leader with a deep understanding of the airline's brand.
Despite the announced changes, Elliott indicated that its pressure on Southwest is not over, emphasizing the need for further transformations within the company. The hedge fund has been advocating for adjustments to Southwest's routes, marketing strategies, and seating arrangements to enhance its performance.
Southwest, historically known for its profitability and customer-friendly policies, has faced increased competition and operational challenges in recent years. The airline has made efforts to improve its operations, reducing its cancellation rate and addressing safety concerns following a series of incidents.
Looking ahead, Southwest aims to adapt to evolving customer preferences and modernize its technology to remain competitive in the industry. The airline plans to introduce new seating policies, premium seat options, and red-eye flights, signaling a shift towards a more structured boarding process.
While Southwest continues to offer free checked bags, it has explored the possibility of implementing checked-bag fees in response to changing market dynamics. The airline remains focused on enhancing its services and maintaining its position in the highly competitive airline industry.
