Southwest Airlines Boardroom Drama Sidelines CEO-In-Waiting And Threatens Its Famous Culture

The opening discussion in this week’s Airlines Confidential is about the leadership drama at Southwest Airlines. Andrew Watterson appears out as CEO-in-waiting, with Bob Jordan likely staying on longer than expected.

• Executive Vice President for Operations Justin Jones got made Chief Commercial Officer, reporting directly to CEO Bob Jordan instead of to Andrew Watterson.

• Chief Customer and Brand Officer Tony Roach takes over HR (the People department), reporting to Bob Jordan.

They’re taking operations and commercial functions out from under Andrew Watterson, and they had been placed there initially for greater accountability and stronger execution – now those are the reasons cited for taking them away. As Scott McCartney notes, “When a company tells you this isn’t a change in core values, something big has changed.” And that’s Jordan asserting direct control, bypassing his expected successor (“I think the message from Bob is, I’m staying, likely until Justin or Tony is ready to run the company. And Andrew isn’t going to be CEO of Southwest”).

Jordan had been adamently opposed to all of the changes that the airline ultimately pushed through. He had opposed the pressure campaign by Elliott Management that ultimately led to basic economy, assigned seats, checked bag fees, expiring travel credits and a devalued Rapid Rewards program.

In fact, Jordan had emailed all customers promising that free checked bags were here to stay only to be overruled by his board. CFO Tammy Romo left. Chief Commercial Officer Ryan Green left. Chief Product Officer and Head of Marketing and Loyalty Jonathan Clarkson left, along with countless others. But Jordan stayed – he was clearly interested in remaining CEO, even if under Elliott he was CEO in name only.

So now that Elliott has taken their ownership stake down below 10%, and no longer controls the board, Jordan appears to have shuffled the deck.

In this discussion, board member Rakesh Gangwal who is former US Airways CEO and co-founder of IndiGo and was brought in as a counterweight to Elliott, is portrayed as the real power center at Southwest even though he’s no longer board Chairman. He’s reportedly become Bob Jordan’s trusted voice, and may be driving cost-cutting and executive departures. McCartney suggests that Gangwal wants to be seen as the genius behind the turnaround, and may be minimizing the people who did the hard work.

And with all the changes at the airline, Southwest culture may be changing in a fundamental way — from the layoffs and cost-cutting – which could threaten the airline’s historic competitive advantage, even while the company publicly insists core values remain unchanged.

Both Scott McCartney and Henry Harteveldt conclude that Andrew Watterson should be poached. And that’s right. He’s clearly a competent major airline executive who will be looking to become CEO of his own shop.