Southwest Airlines CEO Kelly stepping down in 2022, will be replaced by company veteran

Gary Kelly, chief executive officer of Southwest Airlines Co., speaks during an event inside the new Southwest Airlines Co. international terminal at the William P. Hobby Airport in Houston, Texas.

Carter Smith | Bloomberg | Getty Images

Southwest Airlines CEO Gary Kelly will step down next year, capping more than 17 years at the helm, where he grew the carrier and guided it through crises from the Great Recession to the Covid-19 pandemic.

The Dallas-based airline named more than three-decade company veteran Bob Jordan, executive vice president of corporate services, as Kelly’s successor, tasking him with leading the company’s recovery. He will start Feb. 1, 2022.

“I think now is really the perfect time,” Kelly, 66, said in an interview. “We’ve stabilized.”

Kelly will hold the role of executive chairman until “at least” 2026, the company said.

Kelly has been in the top job at the airline during the financial crisis, a merger, an aggressive expansion and the grounding of the Boeing 737 Max. The pandemic devastated travel demand and last year pushed Southwest to its first annual loss since 1972.

Southwest is now trying to regain its footing and capitalize on a jump in travel demand. That surge is coming from U.S. domestic leisure customers. Southwest’s focus as it carries more U.S. passengers than any other airline.

Southwest last month reported an uptick in revenue over the past several months and posted a profit for the first quarter of the year — the first of the major U.S. airlines to do so — thanks to more than $1 billion in federal aid.

Jordan, 60, has led its 2011 acquisition of rival AirTran, Southwest’s frequent flyer program, e-commerce platform most recently, a employee buyouts and other voluntary programs to cut labor costs during the pandemic, Southwest said.

“We’re exiting the pandemic in really good shape, especially compared to our competitors,” Jordan told CNBC.

He said he expects Southwest to get to cash breakeven, “maybe a little better,” in June.

Southwest lacks the sprawling global networks of its competitors that they slashed due to the pandemic and a host of travel restrictions to stop the spread of the virus.

Jordan started at Southwest in 1988 and has held roles including controller, director of revenue accounting and chief commercial officer.

“While out of the ‘spotlight’ over the last few years as EVP of Corporate Services, Mr. Jordan’s accomplishments are long and extensive,” Daniel McKenzie, Seaport Research Partners airline analyst, wrote in a note Wednesday. He has a buy rating and a $73 price target on Southwest’s stock. 

The company’s shares closed at $55.19, down 1%, a bigger drop than competitors. “Net/net, the change in leadership does not lead to a change in our thesis that LUV remains a great longer-term story,” wrote McKenzie.

Southwest President Tom Nealon and Chief Operations Officer Mike Van de Ven were considered ready for the top job, but the carrier choose Jordan, Kelly said.

“The hardest part of this, bluntly, has been choosing,” said Kelly. He said the other two executives are staying on in their current roles. “We’re not breaking up the band here.”

Successor’s priorities

Jordan said in an interview that his priorities include repairing Southwest’s balance sheet

Southwest ended the last quarter with $15.3 billion in liquidity and $10.8 billion in debt. U.S. carriers added $58 billion in debt last year to weather the effects of the crisis.

Jordan said another priority over the next year will be hiring employees to help support the increase in travel demand. The carrier is calling back employees who took leaves of absence, at the company’s urging, and reaching out to new candidates.

In the coming months, the airline will examine booking trends after the peak summer travel season. Southwest added 18 new destinations during the pandemic, from cities in Hawaii to Florida as it went after leisure customers seeking outdoor destinations. That fast-paced expansion will likely cool, Jordan said.

“There’s still a lot of work to do to come out of the pandemic,” Jordan said. “You got to play a little bit of offense and a little bit of defense.”

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