Southwest Chair Kelly to step down next year as activist Elliott pushes for changes at airline

Southwest Airlines said Tuesday that executive chairman and former CEO Gary Kelly will retire next year and announced a board shake-up, moves that come as the carrier faces pressure for changes by activist investor Elliott Investment Management.

"Now is the time for change. It's time to shake things up, not just stir them a bit," Kelly said in a letter to shareholders. "The wisdom comes in knowing what to change and what not to change."

Kelly, 69, who has worked at Southwest for nearly four decades and has been chairman since the carrier's co-founder, Herb Kelleher, retired in 2008, announced he would step down after the company's annual shareholder meeting next spring. The announcement came after a meeting with Elliott, which has been calling for leadership changes at the Dallas-based carrier.

Elliott in June revealed a nearly $2 billion stake in Southwest, seeking to oust leadership, including CEO Bob Jordan, 63, who has also spent almost four decades at the carrier and took over from Kelly in 2022. The firm said Southwest has had "stunning underperformance" under their leadership.

On Tuesday, Kelly's statement said Southwest's board and leadership "unanimously support Bob Jordan as CEO."

Six of Southwest's board members will retire in November, and the company will appoint four new independent directors "in the near future, including due consideration of up to three of Elliott's candidates," Kelly said.

Elliott in a statement said the mass departure was "unprecedented."

"We are pleased that the board is beginning to recognize the degree of change that will be required," Elliott's John Pike and Bobby Xu said. But the activist said further change at the airline "remains urgent."

The activist investor crossed the 10% threshold