Southwest Airlines reaches an agreement with activist investor Elliott
CEO Bob Jordan to retain job, Executive Chairman Gary Kelly will accelerate retirement
Southwest to add six directors to board
Southwest reports surprise profit for third quarter
Recasts with Southwest's agreement with Elliott
Oct 24 (Reuters) -Southwest Airlines LUV.N on Thursday announced an agreement with activist investor Elliott to end a months-long boardroom battle.
As part of the deal, CEO Bob Jordan will retain his job, but Executive Chairman Gary Kelly will accelerate his retirement. The company will also add six new directors to its board.
The deal came as the U.S. carrierreported a surprise third-quarter profit on Thursday, benefiting from improved pricing and demand, as well as rebookings from passengers stranded due to the global cyber outage in July.
The hedge fund pushed for a revamp of the airline's board and a replacement of top executives. That, along with inflated costs, has pushed it to take steps to restore steady profitability and find high-margin revenue streams, including vacation packages, overnight flights and assigned and premium seating.
During the U.S. summer travel season, an oversupply of airline seats in the domestic sector compelled airlines to sell seats at lower prices to fill their planes, denting their earnings.
Since then U.S. airlines have moderated capacity. Annual domestic seat growth has slowed to 1.5% in October and November from 5.5% in July, according to BofA analysts.
Southwest reported an adjusted profit of $89 million, or 15 cents per share, compared with analysts' average estimate of a loss of $12.65 million, or a break-even on a per share basis, according to data compiled by LSEG.
Shares of the carrier rose 1.5% in premarket trading.
It expects fourth-quarter revenue per available seat mile, a proxy for pricing power, to be up 3.5% to 5.5%, on a projected capacity reduction of about 4%.
"We are laser-focused on delivering the robust set of tactical and strategic initiatives included in our plan and returning to the strong financial performance we expect," Jordan said.
The airline has been hit hard by Boeing's BA.N jet delivery delays and is reeling from elevated operating expenses, including high labor and aircraft maintenance costs.
It continues to expect about 20 new jets from Boeing this year.
Southwest Airlines' operating revenue rose 5.3% to $6.87 billion in the third quarter.
Reporting by Shivansh Tiwary in Bengaluru; Editing by Arun Koyyur and Chizu Nomiyama
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