Southwest Airlines reorganizes board under pressure from major shareholders

As of September 10, 2024, Southwest Airlines will reorganize its board of directors. The chairman will retire next year, while CEO Robert Jordan remains in his position after meeting with major shareholder hedge fund Elliott Investment Management. Southwest Airlines said on Tuesday that six directors will leave the board in November and the company plans to appoint four new directors, possibly including candidates proposed by Elliott. Before the market opened on Tuesday, Southwest Airlines' stock price rose slightly.

The Elliott fund is led by billionaire investor Paul Singer. In recent weeks, it has accumulated a 10% stake in Southwest Airlines and advocated for change. It believes that Southwest Airlines' management should be responsible for the more than half drop in stock price in the past three years and hopes to replace Jordan and chairman Gary Kelly. Southwest Airlines said Kelly has agreed to retire after next year's annual meeting.

Elliott believes that Southwest Airlines' leadership has not adapted to changes in customer preferences nor modernized technology, leading to the cancellation of a large number of flights in December 2022 and losses of over $1 billion. Although Southwest Airlines' operating conditions have improved, it is still involved in a series of incidents this year, and the US Federal Aviation Administration has strengthened its supervision of it.

Southwest Airlines was once a profit-making machine. After the COVID-19 pandemic in 2020, its profitability is not as good as that of Delta Air Lines and United Airlines. Now, Southwest Airlines flies to many large airports that are the same as those of its compe***s and faces competition from "ultra-low-cost airlines." Its prices are often undercut. It has also added fees for early boarding. In April, before Elliott disclosed its share purchase, Jordan had hinted that there would be changes in the company's policies. In July, Southwest Airlines announced that it would abandon open seating, start assigning seats and sell premium seats, and investigated charging fees for checked baggage.