Elliott Management and Southwest Airlines Reach Agreement, Ending Activist Investor Fight

Southwest Airlines has reached an agreement with Elliott Management, bringing an end to its ongoing activist fight with the firm. The agreement includes significant changes that Southwest conceded to Elliott, along with a few that it did not.

The first major change is the accelerated retirement of Executive Chairman Gary Kelly, effective Nov. 1, 2024. Kelly, who was previously the CEO of Southwest, will take on the honorary title of Chairman Emeritus upon stepping down.

“It has been the honor of my lifetime to work with our people and serve our customers in making Southwest the leader it is today. I believe Southwest’s best days lie ahead under the vision and leadership of Bob Jordan and the oversight of this reconstituted Board,” Kelly said in a statement.

Southwest will also appoint a new independent Chairman of the Board and reduce its Board to 13 members by the 2025 Annual Shareholder Meeting. Five new directors endorsed by Elliott—David Cush, Sarah Feinberg, Dave Grissen, Gregg Saretsky, and Patricia Watson—will join the Board. Alongside them, Pierre Breber, former CFO of Chevron, has also been appointed.

Eliottt will also get one more unnamed director to be appointed by the reconstituted board later.

Most of the new directors have experience in the travel industry. David Cush is the former CEO of Virgin America, Sarah Feinberg served as the Administrator of the Federal Railroad Administration, Dave Grissen was Group President at Marriott, and Gregg Saretsky was the CEO of WestJet. Saretsky will also chair the Finance Committee.

Elliott had originally asked for 10 members on the 15-seat board, so the reduction of the board to 13 members and the appointment of 5 Elliott-approved directors is the result of a compromise between the two.

Elliott’s other major demand during its activist campaign was the removal of Southwest’s current CEO, Robert Jordan, which did not happen as part of the agreement. Still, the agreement satisfied Elliott enough for it to withdraw its request for a Special Meeting of Shareholders and its plans to nominate more candidates for election to the board.

“We are grateful to Southwest’s shareholders, labor groups, and leadership for their constructive engagement, and we look forward to a strengthened Southwest delivering on its full potential,” Elliott Partner John Pike and Portfolio Manager Bobby Xu said.

Elliott had taken up the fight largely due to Southwest’s financial performance, which has lagged behind its peers since the pandemic. Southwest, meanwhile, has already made some significant changes.

The airline dropped what may be its most signature policy, open seating, in July. It also announced plans for a premium ticket option with extra legroom and new redeye domestic flights within the U.S., which will launch on Valentine’s Day 2025.