Southwest Air’s Kelly to Exit as CEO, Jordan Named Successor
(Bloomberg) -- Southwest Airlines Co. Chief Executive Officer Gary Kelly will step down in 2022 after more than 17 years in which he transformed the brash discounter into the largest U.S. carrier by domestic passengers and expanded its network abroad.
Robert Jordan, 60, the company’s executive vice president of corporate services, will take over as CEO on Feb. 1 and Kelly will stay on as executive chairman through at least 2026, the airline said Wednesday in a statement. Jordan was picked over President Tom Nealon and Chief Operating Officer Mike Van de Ven, who were viewed as potential successors to Kelly.
The leadership transition caps a tumultuous two-year period for Southwest, which was grappling with the grounding of the Boeing Co. 737 Max when the coronavirus pandemic all but erased demand for air travel in early 2020. High on Jordan’s to-do list will be repaying billions in debt, deciding how much to expand international service and safeguarding a distinctive, freewheeling company culture under threat from years of corporate growth.
“Obviously I want to transition at a time where things aren’t broken,” Kelly, 66, said in an interview. “Things are stable and things are looking up.”
Southwest fell less than 1% to $55.40 at 2:37 p.m. in New York, while a Standard & Poor’s index of major U.S. airlines was little changed. Southwest’s stock price has rebounded to pre-pandemic levels, unlike shares at American Airlines Group Inc., Delta Air Lines Inc. and United Airlines Holdings Inc.
“Gary is going to give Bob space, he’s not going to step on his toes, but to have him in the executive chairman role would suggest there is going to be a little more collaboration,” said Hunter Keay, an analyst at Wolfe Research. “That’s important.”
Jordan will be Southwest’s third CEO since co-founder Herb Kelleher, who left the top job in 2001 and died two years ago. Southwest announced Jordan’s appointment days after celebrating the 50th anniversary of the company’s founding, timing that Kelly said “ceremonially almost kicks off the next 50 years.”
The next chief is a long-time Southwest executive who joined the carrier in 1988. He served as president of AirTran Airways from 2011 to 2014 after it was acquired by Southwest, overseeing the corporate integration. More recently, he led Southwest’s efforts during the worst of the pandemic to slash payroll spending through a mix of early-retirement, voluntary-departure and employee-leave offers.
Jordan’s immediate priorities will be ensuring a smooth transition, carrying out Southwest’s post-pandemic recovery strategy and strengthening its balance sheet. Like other major airlines, the company borrowed heavily to weather the pandemic, even after it got billions of dollars in payroll aid under a government bailout package that enabled the industry to avoid mass layoffs and quieted bankruptcy fears at weaker carriers.
“We’ve had a challenging 16 to 18 months with the pandemic, and we have a long ways to go,” he said in an interview. “I’m grateful we’ll be hitting cash break even and maybe more in June.”
He also has served as chief commercial officer and overseen strategy and planning, technology and purchasing at the Dallas-based airline. The Southwest Airlines Pilots Association signaled support, with union head Casey Murray saying the group was “looking forward to his leadership to see what he brings.”
Kelly took the reins in 2004 and said at the time that the airline sector “was a financial disaster” in the aftermath of the 9/11 terrorist attacks. But he extended Southwest’s industry-best run of annual profits, which began in 1972 and ended last year because of the pandemic.
He also guided the carrier through the 2008 recession and took on crosstown rival American Airlines by leading the effort to repeal the Wright Amendment, a federal law that for years limited Southwest’s flights out of Dallas Love Field.
More recently, Kelly led Southwest through the 20-month grounding of the Max, the mainstay of the company’s future fleet. Earlier this year, after weighing whether to place its first order of Airbus SE planes, Southwest opted to keep an all-Boeing fleet and ordered 100 more Max jets as it rebuilds service for customers flocking back to airlines as Covid-19 vaccines help limit infections.
In an industry known for waves of layoffs, Kelly often said his proudest accomplishment was Southwest’s record of avoiding involuntary furloughs -- although the company almost certainly would have had to abandon that last year if the U.S. government hadn’t stepped in with billions of dollars in payroll aid for airlines.
Kelly often quoted Kelleher, who pioneered Southwest’s maverick spirit and reputation for playing hard as well as working hard. Kelly leads the airline’s yearly Halloween celebration, dressing up at one time or another as Frankenstein, Gene Simmons from the band Kiss and even Snow White. Last year, the annual party was scrapped amid the pandemic.
He said he would follow the path taken by Kelleher after he retired as CEO, focusing on “behind-the-scenes” government affairs work in Washington.
©2021 Bloomberg L.P.