Southwest Airlines Appoints 5 Elliott Representatives To Board Of Directors

Elliott Investment Management (Elliott) and Southwest Airlines have reached a deal to end the proxy war between the two sides, which could have culminated in a shareholder’s vote in December, with the appointment of six new independent directors on the airline’s board.

Completing a deal

On October 24, Southwest Airlines announced that it had appointed six new independent directors to its board. These appointments will be effective November 1:

In addition to these appointments, Gary Kelly, the current chairman of the board and former CEO of Southwest Airlines, will accelerate his retirement to November 1, with the newly constructed board appointing a new chairman.

As of Southwest Airlines’ annual shareholder meeting in 2025, the board will be reduced to 13 members, the airline said.

“As previously announced, the Board has refreshed its Finance Committee, which is responsible for assisting in the Board’s oversight of the Company’s operational and strategic plans.”

Saretsky, Cush, and three additional directors who will be appointed soon will serve on the Finance Committee, with the former being the chair of it.

Bob Jordan, the president and CEO of Southwest Airlines, will seemingly keep his job. Elliott has already taken down the ‘Stronger Southwest’ site, which was the go-to hub for all of its related announcements. However, a new chairman of the board could also result in a new CEO coming in to take the reins of the carrier.

John Pike, partner of Elliott, and Bobby Xu, the portfolio manager of Elliott, said that the investment firm was pleased to have reached an agreement with Southwest Airlines to add six new directors to the carrier’s board.

“They are all highly qualified and will bring diverse skills and backgrounds to the task of overseeing Southwest under the leadership of a new Board Chairman.”

Pike and Xu added that the strategic changes that the airline has announced since Elliott began its proxy war, and the addition of new board members, will improve Southwest Airlines’ operational and financial performance.

Kelly noted that he was confident that the new board would continue holding the leadership accountable for executing the transformational plan and delivering the promised financial performance.

“It has been the honor of my lifetime to work with our People and serve our Customers in making Southwest the leader it is today. I believe Southwest’s best days lie ahead under the vision and leadership of Bob Jordan and the oversight of this reconstituted Board.”

Changing Southwest Airlines’ leadership

Jordan and Kelly had been Elliott’s primary targets, with the activist investor having called for their removal multiple times.

A previous report by Bloomberg, citing people familiar with the matter, said that Elliott and Southwest Airlines were near a settlement that would avert a proxy fight for control of its board of directors.

When Elliott had fulfilled its promise and called a shareholder’s meeting on October 14, it proposed to elect eight of its nominated directors to Southwest Airlines’ board. The meeting was scheduled to take place on December 10.

Initially, when Elliott began its proxy battle against the current leadership of the carrier, the activist investor presented ten nominees, including former airline C-level executives.

Exciting times at Southwest Airlines

Meanwhile, Bob Jordan, the president and chief executive officer (CEO) of Southwest Airlines, said that these were exciting times at the airline as it executes its ‘Southwest. Even Better.’ plan when the airline announced its Q3 results on October 24.

Jordan and Gary Kelly, the current chairman of the board and former CEO of Southwest Airlines, have been Elliott’s main targets, with the activist investor having called for their removal on multiple occasions.

“We are laser-focused on delivering the robust set of tactical and strategic initiatives included in our plan and returning to the strong financial performance we expect. We are fully committed to executing our plan and to reporting regularly on our progress.”

Jordan concluded that based on its current progress, outlook, and confidence in the plan, Southwest Airlines intended to repurchase $250 million of its common stock through an accelerated share repurchase program. It was under the $2.5 billion share repurchase authorization that the airline announced in September.

Improving yields

Southwest Airlines ended Q3 with $6.87 billion in revenue, and despite operating costs increasing to $6.83 billion, the airline posted an operating profit of $38 million. Its net income was $67 million, a 65.3% decrease year-on-year (YoY).

“The Company’s record third quarter performance for both operating and passenger revenues was driven primarily by yield improvements from capacity moderation across the industry and progress in managing tactical initiatives to drive results.”

Looking forward, Southwest Airlines said that its unit revenues should increase in the range of 3.5% to 5.5% YoY, with capacity being down around 4% YoY.

“This guidance range contemplates a headwind of just under one-half point from

Hurricane Milton

and the resulting Customer cancelations.”

So far, travel demand has remained healthy in Q4, with bookings-to-date for the holiday season being strong, Southwest Airlines concluded.