Southwest Airlines Chairman Kelly to retire amid pressure from Elliott

(Reuters) -Southwest Airlines on Tuesday announced changes to its board including the retirement of its 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 would voluntarily retire after Southwest’s annual meeting next year, and that six directors will also voluntarily step down after the board meeting in November.

Southwest plans to appoint four new independent directors in the near term, which would potentially include up to three candidates proposed by Elliott.

The U.S. carrier unveiled the changes a day after Kelly and two of Southwest’s independent directors held a meeting with Elliott.

The hedge fund, which holds 10% of Southwest’s common stock, has threatened a proxy fight to carry out wholesale changes to company leadership. It has blamed the airline’s underperformance on its 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 are continuing to engage constructively toward a collaborative resolution 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 measures to facilitate a turnaround, including adding seats with more leg room and dropping its marquee open-seating system to move to assigned seats.

It has also been hit hard by Boeing (NYSE:BA)’s jet delivery delays and is reeling from elevated operating expenses, including high labor and aircraft maintenance costs.

Last month, Elliott nominated 10 director candidates to Southwest’s 15-person board, including former Virgin America CEO David Cush and Robert Milton, the former CEO of Air Canada.