(Reuters) -Southwest Airlines (LUV ) announced a deal with activist investor Elliott on Thursday to end a months-long boardroom battle.
As part of the deal, CEO Bob Jordan will retain his position, but executive chairman Gary Kelly will accelerate his retirement. The company will also add six new directors to its board of directors.
The deal came as the U.S. carrier reported 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 has been pushing for an overhaul of the airline’s board and replacement of top executives. That, coupled with inflated costs, pushed it to take steps to restore stable profitability and find high-margin revenue streams, including vacation packages, night flights, and assigned and premium seats.
During the U.S. summer travel season, an oversupply of airline seats in the domestic sector forced airlines to sell seats at lower prices to fill their planes, reducing their profits.
Since then, U.S. airlines have moderated capacity. Annual growth in domestic seat counts slowed to 1.5% in October and November, from 5.5% in July, according to BofA analysts.
Southwest reported adjusted profit of $89 million, or 15 cents per share, compared with analysts’ average estimates of a loss of $12.65 million, or breakeven per share, 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, an indicator of pricing power, to rise 3.5% to 5.5%, on a projected capacity reduction of about 4 %.
“We are focused on implementing 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 delivery delays of Boeing’s planes and faces high operating expenses, including high labor and aircraft maintenance costs.
Boeing is still expecting about 20 new jets this year.
Southwest Airlines’ operating revenue increased 5.3% to $6.87 billion in the third quarter.
(Reporting by Shivansh Tiwary in Bangalore; editing by Arun Koyyur and Chizu Nomiyama)
