[ACCESSWIRE]
LONDON, UK / ACCESSWIRE / August 8, 2016 / Active Wall St. blog coverage looks at the headline from Southwest Airlines Co. (NYSE: LUV). Despite opposition in the first week of August 2016 from the company's four largest employee union groups seeking Chief Executive Officer, Gary Kelly, and Chief Operating Officer, Mike Van de Ven, to step down, Southwest Airlines' Board of Directors on August 5, 2016 backed their top brass to stay in their respective posts. The labour union blamed the firm's top two bosses for the flight disruptions. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
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Established in 1967, the US major airline, Southwest Airlines, is world's largest low-cost carrier and operates more than 3800 flights every day. As of June 2016, the Texas-based airline has customers flying to 98 destinations in 41 states, Puerto Rico, Mexico, Central America, and the Caribbean.
Coming up the ranks
Gary Kelly (61) has come up the ranks of Southwest Airlines, having joined the company in 1986 as Controller before becoming the Executive Vice President of the company in 2001. He was promoted to his current designation as CEO in 2004. Kelly was also named Chairman of the Board of Directors on May 21, 2008, replacing co-founder Herb Kelleher. Being named one of the best CEOs in America for 2008, 2009 and 2010 by Institutional Investor magazine, the airliner's decision to back him seems only logical. Meanwhile, 54-year-old Mike Van de Ven, became COO in 2008 after serving the firm in its operations and financial departments.
The Pilot Association initiated the 'no-confidence' movement, which was later joined by flight attendants, mechanics, and baggage handlers, and other airport ground workers labour groups. The four labour unions regroup 36,000 of the 52,000 employees that the US airline employs. The labour unions have not responded to the board of directors' request for comment.
Board clears air
In a clear message to the labour unions, the Board of Directors wrote in the letter, "Given the recent 'no confidence' vote by each of you in the Management of Southwest Airlines, we believe it is imperative you understand the unanimous position of the Company's Board Members. Let us be clear. It is solely the board's responsibility to determine who will serve as the Chief Executive Officer of Southwest Airlines. Let us be equally clear we have no intention of removing Gary Kelly or Mike Van de Ven from their positions."
Citing how the airline has catered to labour needs, the letter added: "This all took place against the backdrop of years of economic turmoil, including one of the greatest recessions in our country's history. During the same period, several other airlines went bankrupt or closed down, while Southwest remained profitable and laid off no employees." In fact, the board termed union's outburst as "without merit" and "reckless".
The employee unrest has not deterred Southwest Airlines in moving ahead with its plans. The airline is planning to purchase a domestic reservation system worth $500 million which will be deployed in phases over the next three years. Furthermore, Southwest Airlines spent $700 million to repurchase shares in the second quarter to complete a $1.5 billion repurchase program. The board has authorised another buyback program worth $2 billion in May 2016.
Market Reacts Positively
Shares of Southwest airlines closed last Friday's trading session at $37.85, up 3.93%, with a total of 9.16 million shares changing hands. The company's stock price has advanced 6.50% in the previous six months.
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