Southwest Airlines Co. added six new board directors in a pact with Elliott Investment Management, as the carrier seeks to address the activist’s push for changes and salvage the job of its chief executive officer.
New board members include former Chevron Corp. CFO Pierre Breber, former Virgin America CEO David Cush, ex-federal railroad administrator Sarah Feinberg, former Marriott International Group President Dave Grissen, ex-WestJet CEO Gregg Saretsky and NCR Atleos Chief Information, Technology Officer Patricia Watson, who all join Nov. 1.
The airline also announced that Executive Chairman Gary Kelly will accelerate his retirement and that the reconstituted 13-member board will appoint a new independent chairman.
The activist firm agreed to a standstill and information sharing agreement with Southwest. Elliott, which owns a stake of more than 10%, also withdrew a prior request for a special shareholder meeting on Dec. 10.
The agreement preserves — for now, at least — the job of CEO Bob Jordan, whom Elliott had been seeking to oust. Elliott had targeted Jordan and Kelly for their poor execution and “stubborn unwillingness to evolve the company’s strategy.” They are “not up to the task of modernizing Southwest,” the activist had said. Jordan, backed by the airline’s board, repeatedly said he had no plans to leave.
“We believe the strategic changes Southwest has announced since we commenced our engagement, together with the new independent directors and governance improvements, will position the Company to enhance business performance, drive operational execution and evaluate additional changes to create long-term shareholder value,” said Elliott Partner John Pike and Portfolio Manager Bobby Xu in a statement.
The board overhaul underscores the high stakes in the carrier’s battle with Elliott. The activist’s call for change, the biggest challenge Southwest has faced from an investor in 53 years of flying, was born out of frustration with what it called the carrier’s resistance to adopt changes embraced by rivals over the last 15 years. Those included offering both a bare-bones economy fare alongside premium options and charging customers for assigned seats and checked luggage. The airline’s profits and share price have suffered as result, it said.
Southwest shares rose 3% in premarket trading. The Dallas-based carrier’s stock had gained 6.4% this year through Wednesday, lagging the S&P 500 Index’s 22% advance.