(Reuters) – Southwest Airlines announced board changes on Tuesday, including the retirement of Chairman Gary Kelly, but reiterated its support for CEO Bob Jordan amid calls for a shakeup from activist investor Elliott Investment Management.
The Dallas-based airline said Kelly will voluntarily step down after Southwest's annual meeting next year, and that six directors will also voluntarily step down after the board's meeting in November.
Southwest plans to appoint four new independent directors in the near term, potentially including up to three candidates proposed by Elliott.
The U.S. airline announced the changes a day after Kelly and two independent Southwest directors held a meeting with Elliott.
The hedge fund, which owns 10% of Southwest's common stock, has threatened a proxy fight to bring about wholesale changes to the company's management. It has blamed the airline's poor performance on “management's rigid commitment to a decades-old approach.”
In a letter to shareholders, Kelly said the company shared a specific framework with Elliott on Monday to address its concerns about corporate governance and performance.
“We continue to work constructively towards a collaborative solution in the near term,” Kelly said.
Elliott did not immediately respond to a Reuters request for comment.
Southwest has struggled to remain profitable since the COVID-19 pandemic and has taken steps to facilitate a turnaround, including adding seats with more legroom and abandoning its open-seating system in favor of assigned seating.
It has also been hit hard by delays in Boeing (NYSE:) aircraft deliveries and is reeling from high operating expenses, including high labor and aircraft maintenance costs.
Last month, Elliott nominated 10 director candidates for Southwest's 15-person board, including former Virgin America CEO David Cush and Robert Milton, former Air Canada CEO.
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