Southwest Airlines has appointed six new independent directors to take effect Nov. 1, including five that were recommended by activist investor Elliott Investment Management, the carrier announced Thursday. In addition, executive chairman and former Southwest CEO Gary Kelly will step down from the board on that date, earlier than planned, along with the previously announced retirements of six other board members.
Kelly will assume the title of chairman emeritus.
The appointments come as part of "cooperation and information sharing agreements" reached with Elliott, which in June announced it had taken a $1.9 billion stake in the carrier. Since then, Elliott has been trying to oust Southwest CEO Bob Jordan and Kelly, and replace much of the carrier's board.
As part of the agreements, Jordan will remain as CEO, and Elliott has recalled its request for a special shareholder meeting.
The changes also are a continuation of the "board refresh" Southwest began in September, which since included the addition of Robert Fornaro, former president and CEO of Spirit Airlines and AirTran Holdings. Rakesh Gangwal, former president and CEO of US Airways and co-founder of Indian carrier IndiGo, was added to the board on July 7.
The five Elliott-nominated individuals to join the Southwest board include former Virgin America CEO and former American Airlines SVP of global sales David Cush; Sarah Feinberg, former chief of staff to U.S. Department of Transportation Secretary Anthony Foxx; former Marriott International group president for the Americas Dave Grissen; former WestJet president and CEO Gregg Saretsky; and Patricia Watson, NCR Atleos EVP and chief information and technology officer. In addition, Pierre Breber, former CFO of Chevron, will join the board next week.
The new board will appoint a new independent chairman, according to Southwest, and will be reduced to 13 members as of the carrier's 2025 annual shareholder meeting. As previously announced, the board also has refreshed its finance committee, which is responsible for assisting in the oversight of the company's operational and strategic plans. Saretsky, Cush and three additional directors to be appointed will serve on the finance committee, with Saretsky serving as chair.
"The board has taken a lot of time to engage with shareholders and get feedback and taken significant steps, based on that feedback," Jordan said Thursday during Southwest's third-quarter earnings call. "There's been a lot of board refresh that has already begun and is ongoing, and we're very pleased to have come to a collaborative resolution with Elliott."
Jordan added that he had interviewed the candidates and talked to each "extensively about their views of Southwest, what they bring to the board, what they bring to Southwest Airlines, and I could tell you that they're all committed to serving Southwest."
Q3 Managed Corp. Performance
Third-quarter managed business revenue grew by a double-digit percentage year over year, Southwest COO Andrew Watterson said during the call. "This was driven largely by [global distribution system] bookings and the success of our investment in Southwest Business," he said.
The carrier continued to see an increase in unique customers, which were up 7 percent year over year, Watterson said, with "76 percent of the new individual travelers won over the quarter coming from existing corporate accounts." Southwest also saw "strong yield performance" for the segment.
Although the carrier has more managed-business customers than ever, they continue to take fewer trips than they did pre-Covid, Watterson said. "We continue to see opportunities to grow our managed business and backfill those seats with new customers."
Southwest Q3 Metrics
Southwest reported third-quarter passenger revenue of $6.25 billion, a 5.7 percent increase year over year. Total revenue was nearly $6.9 billion, up 5.3 percent compared with Q3 2023. Net income was $67 million, down from the $193 million reported a year prior.
Q3 2024 capacity increased 2.4 percent year over year, and the average price of fuel was $2.55 per gallon.
The carrier projects fourth-quarter capacity to be down about 4 percent year over year. Fuel prices for the quarter are expected to be $2.25 to $2.35 per gallon, and $2.60 to $2.70 for full-year 2024. Southwest also expects first-quarter 2025 capacity to decrease 1 percent to 3 percent compared with Q1 2024, with full-year capacity for 2025, 2026 and 2027 to increase 1 percent to 2 percent year over year.
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