Southwest Airlines terminated Bitter boardroom battle with Elliott Investment Management in a deal struck Thursday that will put half a dozen new directors on the carrier’s board to oversee its planned turnaround.
The deal comes as the carrier reported a surprise third-quarter profit, benefiting from better pricing and demand as well as rebookings from stranded passengers. global cyber outage In July.
As part of the deal, CEO Bob Jordan will retain his job but Executive Chairman Gary Kelly will leave next month, accelerating his retirement after decades at the carrier.
The airline’s board will now have four former airline chiefs, two of whom have joined through the deal with Elliott. Six newcomers will join next month.
There will be 13 members in the board.
Billionaire Paul Singer’s hedge fund has been pushing for this for months Refresh the board and remove Kelly and Jordanblaming them for this Poor performance of the airlineBut Southwest held fast to its chief executive.
The battle between carriers and activist investors reached a new high last week when Elliott threatened to take the fight to all shareholders by calling a special meeting in December to allow investors to vote on board nominees.
Elliott had proposed eight director candidates, signaling that he wanted to take control of the board. Elliott will now join five candidates, giving the hedge fund the most seats it has ever held in a deal with a company in the United States.
Elliott’s nominees include David Kush, who served as CEO of Virgin America, and former WestJet CEO Greg Saretsky, as well as Sara Feinberg, Dave Greason and Patricia Watson. Additionally, former Chevron CFO Pierre Breber will join the board.
Southwest earlier this year added Bob Fornaro, former CEO of Spirit Airlines, and Rakesh Gangwal, former CEO of US Airways Group and co-founder of Indian airline IndiGo, as directors.
Southwest once boasted 47 consecutive years of record profits before the COVID-19 pandemic. But delays in Boeing’s plane deliveries, excess capacity in the domestic airline industry and post-pandemic travel patterns have combined to weigh on earnings.
It has taken steps to change the business, including adding seats with more leg room is removing its marquee open seating system,
The airline unveiled a number of initiatives last month overcome declining profitsThat includes partnerships, vacation packages for customers and aircraft sales leasebacks.
Elliott said Southwest’s strategic changes, as well as a revamped board and governance improvements, will help create “long-term shareholder value.”
Southwest shares fell about 3.5% to $29.52.
It reported an adjusted profit of 15 cents per share, compared with analysts’ average estimate of break-even on a per-share basis, according to data compiled by LSEG.
He expects revenue per available seat mile, a proxy for pricing power, in the fourth quarter to be up 3.5% to 5.5% on an estimated capacity reduction of about 4%.
It expects to get about 20 new jets from Boeing this year.
