01—Abstract
Summary
Summary of the 8-K filed September 26, 2024. Cited figures are marked; the original filing is the authoritative source.
On September 26, 2024, Southwest Airlines Co. appointed Robert L.
Fornaro to its Board of Directors, effective immediately. Fornaro previously served as President and CEO of Spirit Airlines from January 2016 until January 2019 (the 8-K states his Spirit board service began in May 2014 and ended January 2019), as President and CEO of AirTran Holdings Inc. from November 2007 until May 2011, and as a consultant to Southwest from 2011 to 2014 and again from 2020 to 2024. The Board has determined he is not independent under NYSE standards because of his prior advisory agreement and consultant letter with the Company.
Those arrangements, which paid a monthly fee of $23,000a under the Advisory Agreement, were terminated on September 26, 2024. His son-in-law, Eric Hall, is a Company Director-level employee who was paid a combined $296,107.81 in 2023 and $255,775.87 in 2024 year-to-date. The Board increased its size to sixteen members upon Fornaro's appointment.
It also reflected six previously announced director resignations effective after the regularly scheduled fourth-quarter Board meeting (currently scheduled for November 21, 2024), which will reduce the Board to ten members. The Board further resolved to reduce its size to nine members effective immediately after the 2025 Annual Meeting. The press release states that the appointment follows a broader Board refreshment plan that includes Executive Chairman Gary Kelly's retirement at the 2025 Annual Meeting and the anticipated appointment of three new independent directors.
The filing also includes Item 8.01 disclosures stating that the Company intends to file a proxy statement and a WHITE proxy card for its next shareholder meeting, and it lists the Company's directors and CFO Tammy Romo as participants in the solicitation of proxies. The press release references the cost and effects of actions by activist shareholders as a risk factor.
02—Key points
Key Highlights
- Robert L. Fornaro appointed to the Board effective immediately; he has not been named to any Board committee.
- Fornaro previously led Spirit Airlines as President and CEO (January 2016 to January 2019) and AirTran Holdings Inc. as President and CEO (November 2007 to May 2011).
- The Board has determined Fornaro is not independent under NYSE standards due to his prior Advisory Agreement ($23,000 monthly fee) and Consultant Letter, both terminated September 26, 2024.
- Board size increased to sixteen upon Fornaro's appointment, then reduced to ten after six announced resignations effective after the November 21, 2024 meeting, and to nine after the 2025 Annual Meeting.
- Non-employee directors receive a $90,000 annual retainer (pro-rated for Fornaro for July 2024 to June 2025), plus travel benefits and eligibility for equity grants.
- Company intends to file a proxy statement and WHITE proxy card for its next shareholder meeting; directors and CFO Tammy Romo are named as participants in the solicitation.
- Press release states the Board refreshment plan includes six November retirements, Gary Kelly's retirement at the 2025 Annual Meeting, and the anticipated appointment of three new independent directors.
03—Questions
Frequently Asked Questions
Who is Robert Fornaro and why was he appointed to the Board?
Fornaro is an airline executive who previously served as President and CEO of Spirit Airlines and AirTran Holdings Inc., and as a consultant to Southwest. The press release quotes Executive Chairman Gary Kelly saying his experience leading multiple airlines will support the Board refreshment plan.
Is Fornaro considered independent?
No. The Board determined he is not independent under NYSE standards because of the Advisory Agreement and Consultant Letter he held with the Company, both of which were terminated on September 26, 2024, before his Board appointment.
What compensation will Fornaro receive as a director?
Non-employee directors receive a $90,000 annual retainer, pro-rated for Fornaro for the July 2024 to June 2025 service period, along with meeting fees above regularly scheduled meetings, travel benefits, eligibility for equity grants under the 2007 Equity Incentive Plan, and eligibility for retirement payments under the Severance Plan for Directors.
Does the Company have any related-party relationship with Fornaro?
Yes. Fornaro's son-in-law, Eric Hall, is a Director-level employee who was paid a combined $296,107.81 in 2023 and $255,775.87 in 2024 year-to-date in base salary, bonus, and equity compensation, plus standard benefits. Fornaro disclaims any interest in Hall's compensation.
How will the Board size change?
The Board increased to sixteen members upon Fornaro's appointment. After six announced director resignations take effect following the November 21, 2024 regularly scheduled meeting, the Board will decrease to ten members, and it will further decrease to nine members effective immediately following the 2025 Annual Meeting.
04—Continue