Southwest Airlines announced on Tuesday that Executive Chairman and former CEO Gary Kelly will retire next year, alongside a broader shakeup of the company’s board.
These moves come as the airline faces pressure for leadership changes from activist investor Elliott Investment Management.
In a letter to shareholders, Kelly, who has been with Southwest for nearly 40 years, emphasized the need for change at the company.
“Now is the time for change. It’s time to shake things up, not just stir them a bit,” said Kelly.
He also affirmed his confidence in CEO Bob Jordan.
Kelly’s retirement follows a meeting with Elliott, which has been advocating for leadership adjustments at the Dallas-based airline, including replacing Jordan. Elliott, which revealed a nearly $2 billion stake in Southwest in June, has expressed dissatisfaction with the company’s recent performance, citing what it describes as “stunning underperformance.”
Despite Elliott’s calls for change, Southwest’s board continues to support Jordan, who has been with the airline for nearly four decades. Six board members will retire in November, and four new independent directors will be appointed, with consideration given to some of Elliott’s candidates.
Southwest has brought in outside experts to help steer the airline through its current challenges, which include higher operating costs, delivery delays from Boeing, and an increasingly competitive domestic market. The airline, long known for its simple business model and consistent profitability, is now adapting to shifting customer preferences and technological needs. This includes significant changes like introducing extra legroom and ending its open seating policy, with redeye flights planned for next year.
The leadership changes come at a time when Southwest is working to modernize its operations and recover from setbacks, including a December 2022 flight cancellation crisis that cost the airline over $1 billion. The company plans to provide further details on its strategy at an investor day in Dallas on September 26.
Southwest’s stock rose slightly on Tuesday following the announcement of Kelly’s retirement, with the company signaling a continued focus on transformation under Jordan’s leadership.
With input from Fortune, CNBC, and Market Watch.
