From: http://www.dfw.com/mld/dfw/business/9161698.htm Southwest Airlines CEO resigns By Trebor Banstetter Star-Telegram Staff Writer Southwest Airlines Chief Executive Jim Parker has stepped down for "personal reasons," and will be replaced by the airline's longtime chief financial officer, the airline said in a surprise announcement Thursday morning. Parker "retired effective today" as chief executive and a member of the airline's board, Southwest said. The airline did not elaborate on Parker's reasons. Southwest's board said it named CFO Gary Kelly, 49, to succeed Parker as vice chairman and CEO. Kelly has served as Southwest's executive vice president and CFO since 2001, and joined Southwest as controller in 1986. He became vice president finance and CFO in 1989. Herb Kelleher, chairman, said the board accepted Parker's decision "with both deep regret and profound gratitude to Jim for his many significant contributions to the success of Southwest and the wellbeing of its people over the course of the last 18 years. Our entire Board salutes Jim for his myriad accomplishments and for being an outstanding individual. We will all greatly miss him." Of Kelly, Kelleher said, "Gary Kelly is one of our brightest stars, well respected throughout the industry and well known, over more than a decade, to the media, analyst, and investor communities for his excellence. As part of our Board's succession planning, we had already focused on Gary as Jim Parker's successor, and that process has simply been accelerated by Jim's personal decision to retire. Under Gary's leadership, Southwest has achieved the strongest balance sheet in the American airline industry; the best fuel hedging position in our industry; and tremendous progress in technology." Southwest said it would discuss Parker's departure during a previously scheduled afternoon news conference arranged for Southwest's quarterly earnings release. Kelly recently sparred with the airline's flight attendants union over negotiations on a new contract, and Kelleher eventually stepped in to lead the negotiations. The airline and union subsequently agreed to a new contract. Southwest said earlier Thursday that it posted a 54 percent drop in profits for the second quarter compared to last year, when a government aid package for security costs boosted the carrier's bottom line. Dallas-based Southwest posted profits of $113 million for the quarter, down from $246 million for the second quarter last year. Per share, profits were about 15 cents, meeting the expectations of Wall Street analysts. It's the company's 53rd consecutive quarterly profit. "Considering the difficult airline industry revenue environment, we are pleased with our second quarter revenue and traffic results," Parker said in a statement accompanying the earnings announcement. During the second quarter of 2003, the airline received a $271 million cash payment from the government for reimbursement of security-related costs. Unit revenues were up about 8 percent. But costs were also up, rising about 5 percent. The increase in costs was driven by higher labor expenses, aircraft maintenance and advertising, the company said. Southwest is the first large airline to report its results for the second quarter, which is typically one of the most profitable quarters for the industry because of heavy spring and summer leisure travel. Fort Worth-based American Airlines reports its results next week. ------------------------------------------------------------------------------ Trebor Banstetter, (817) 390-7064 tbanstetter@xxxxxxxxxxxxxxxxx Southwest Airlines: www.southwest.com