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Dallas’ Southwest Airlines Announces Management Transformation Amid Investor Pressure » Dallas Innovates

Posted on by darion

From left to right, front row, top: David Biegler (Chairman, Compensation Committee), Veronica Biggins (Chairman, Nominating and Corporate Governance Committee), Senator Roy Blunt, Dr. William Cunningham (Lead Director), Dr. Thomas Gilligan (Chairman, Audit Committee) and Jill Soltau (Photos: Southwest Airlines)

Dallas-based Southwest Airlines announced the next phase of its management transformation, including what the company called a “significant, ongoing modernization.”

The board unveiled its plans earlier this week after Elliott Investment Management LP, an activist minority investor, called earlier this year for changes to the airline’s management and board.

Southwest said Elliott Investment Management has been invited to participate in the refresh and other corporate governance changes. Southwest said it intends to continue constructive engagement with Elliott with a view to a joint resolution in the near future.

Airline executives met with Elliott executives at the investor’s New York offices. Chief Executive Gary Kelly sent a letter to shareholders outlining the changes.

Changes in the management

Kelly announced his intention to voluntarily retire from the board and as executive chairman immediately following the company’s 2025 annual meeting. Southwest said six current directors have informed the board of their plans to voluntarily retire immediately following the company’s regular board meeting in November. These directors are:

  • David Biegler (Chairman of the Remuneration Committee)
  • Veronica Biggins (Chair of the Nominating and Corporate Governance Committee)
  • Senator Roy Blunt
  • Dr. William Cunningham (Chief Director)
  • Dr Thomas Gilligan (Chairman of the Audit Committee)
  • Jill Soltau

The company said its board expects to appoint four new independent directors in the near future.

In addition to considering candidates for Elliott Airline’s director positions, Southwest’s Nominating and Corporate Governance Committee has retained an independent recruiting firm to identify and review candidates who may bring additional skills and experience needed to lead the airline’s growth.

Southwest said it has added or appointed eight “highly qualified” directors over the past three years, including recently appointing Rakesh Gangwal, co-founder of India’s largest airline, InterGlobe Aviation (IndiGo). With the changes, Southwest said it expects the number of directors on its board to be reduced to 13 after its regularly scheduled November board meeting and to 12 after its 2025 annual meeting.

The company said that after these changes, 75% of the airline’s directors will serve on the board for three years or less as of the 2025 annual general meeting, and the average board tenure will be around 2.5 years, down from the current 7.3 years.

Purposeful Transformation of the Southwest

Southwest announced that, in response to shareholder feedback, its board has eliminated its executive committee structure and established a new finance committee primarily to assist management with oversight of financial, operational and business plans and strategies, major transactions, capital structure and capital allocation priorities, and other responsibilities.

In connection with the planned retirement of directors in November and other board committees being reconstituted at that time, the Finance Committee will also be reconstituted to include both new and existing directors with appropriate strategic and financial experience, the company said. The board will then appoint a new lead director and new committee chairs for each of the Audit, Compensation, Nominating and Corporate Governance Committees.

The company said its board is confident there is no better leader than CEO Bob Jordan to successfully execute Southwest Airlines’ robust strategy to grow the airline and drive sustainable shareholder value. Jordan, a 36-year industry veteran, has guided Southwest Airlines through some of its most turbulent times while consistently implementing transformational initiatives and innovations, the company said.

Jordan led the acquisition and integration of AirTran Airways; played a key role in the development of Southwest’s e-commerce platform; launched the new and wildly successful Southwest Airlines Rapid Rewards program; oversaw a major brand refresh of Southwest Airlines; spearheaded the expansion of the domestic network and the introduction of international flights; and, at the height of the pandemic, led voluntary retirement and leave programs that were critical to maintaining the financial strength and stability of Southwest Airlines.

The company said Jordan is making deliberate changes to transform the business, adapt to changing customer preferences, improve customer service, further modernize the airline and increase returns for shareholders.

BofA Securities and Morgan Stanley & Co. LLC are serving as financial advisors to Southwest Airlines; Vinson & Elkins LLP and Kirkland & Ellis LLP are serving as legal advisors.

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