Next year, Southwest Chair Kelly will resign, with activist Elliott advocating for changes at the airline.

• Southwest's chairman Gary Kelly said he will retire in 2025.
• The change comes under pressure from Elliott Investment Management.
• The CEO of Southwest, Bob Jordan, has been supported by the board for nearly 40 years.

The board of directors announced on Tuesday that Gary Kelly, the executive chairman and former CEO, will retire next year and that there will be a board shakeup. This news comes as the airline faces pressure for changes from activist investor Elliott Investment Management.

""Change is necessary now, not just a small adjustment. It's important to know what to alter and what to keep the same," Kelly wrote in a letter to shareholders."

Kelly, who has been chairman of Southwest Airlines since 2008 and has worked at the company for nearly four decades, announced his retirement after a meeting with Elliott, which has been pushing for leadership changes at the Dallas-based airline.

In June, Elliott disclosed a nearly $2 billion stake in Southwest, aiming to remove leadership, including CEO Bob Jordan, who has spent nearly four decades at the airline. The company stated that Southwest's performance has been "stunningly poor" under their leadership.

On Tuesday, Kelly announced that Southwest's board and leadership had unanimously endorsed Bob Jordan as CEO.

In November, six Southwest board members will retire, and the company will appoint four new independent directors, including up to three of Elliott's candidates, according to Kelly.

Southwest has enlisted the services of outside experts, including Bob Fornaro, the former CEO of Spirit Airlines and AirTran, which Southwest acquired.

Despite facing an oversupplied domestic U.S. market, higher costs, and aircraft delivery delays from Boeing, its sole supplier, the carrier has persevered.

For decades, Southwest maintained a profitable business model that transformed the U.S. airline industry, and it did so without significant changes.

In July, the airline announced significant changes to its seating policy and plans to introduce overnight flights next year.

An investor day is scheduled by Southwest for Sept. 26 in Dallas to provide more information about these and other initiatives.

Elliott did not immediately comment Tuesday morning.

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