Andrew Watterson
SOUTHWEST AIRLINESAbout Andrew Watterson
Andrew M. Watterson, 58, has served as Southwest Airlines’ Chief Operating Officer since October 2022, after prior roles including EVP & Chief Commercial Officer (2020–2022), EVP & Chief Revenue Officer (2017–2020), and leadership across network and revenue functions since 2013 . During 2024, Southwest posted record operating revenues of $27.5B, GAAP net income of $465M, and a company TSR of +20%, while ROIC (after-tax) less Excess Cash was 3.0%—all metrics that inform pay-for-performance alignment and long-term equity outcomes . Operational and commercial initiatives led by management included red-eye connectivity, assigned and premium seating (selling in Q3 2025; operating from Q1 2026), bag fees, loyalty/card enhancements, and distribution/channel expansion, with Watterson describing the load-factor recovery, connectivity strategy, and revenue initiative ramp into Q4 2025 on earnings calls .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Southwest Airlines Co. | Chief Operating Officer | Oct 2022–present | Senior operating leadership for network, operations, revenue execution |
| Southwest Airlines Co. | EVP & Chief Commercial Officer | Jan 2020–Oct 2022 | Led commercial strategy, revenue and network planning |
| Southwest Airlines Co. | EVP & Chief Revenue Officer | Jul 2017–Jan 2020 | Revenue management leadership |
| Southwest Airlines Co. | SVP & Chief Revenue Officer | Jan 2017–Jul 2017 | Oversight of revenue functions |
| Southwest Airlines Co. | SVP Network & Revenue | Jan 2016–Jan 2017 | Network design and revenue optimization |
| Southwest Airlines Co. | VP Network Planning & Performance | Oct 2013–Jan 2016 | Network planning/performance management |
Fixed Compensation
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Salary ($) | 538,754 | 575,000 | 642,292 |
| STI Target (% of base) | Not disclosed | 150% | 150% |
| STI Payout ($) | 442,140 (Non-Equity Incentive Plan) | 1,892,268 (Non-Equity Incentive Plan) | 969,210 (STI under Scorecard) |
Notes:
- FY2024 Non-Equity Incentive Plan for Watterson also included $241,250 paid in Feb 2025 from 2022 performance-based cash awards, separate from STI payout .
- Base salary increased from $575,000 to $660,000 effective Mar 1, 2024 (annualized figures differ due to mid-year changes) .
Performance Compensation
2024 Short-Term Incentive (Company Scorecard)
| Category & Metric | Weight | 0% Threshold | 50% Award | 100% Target | 150% Award | 200% Max | 2024 Result | % of Target |
|---|---|---|---|---|---|---|---|---|
| Financial success – EBITDA (ex specials) ($) | 50.0% | 2.46B | 3.08B | 3.71B | 4.17B | 4.63B | 2.14B | 50.0% |
| On-time arrivals, completion factor, extreme delays, 2-hour tarmac, mishandled bags, involuntary bumping, JD Power satisfaction (operational composite) | 25.0% | 7th place | 5th | 3rd | 2nd | 1st | 2nd | 191.7% |
| Major initiatives – efficiency/productivity | 10.0% | Subjective | Subjective | Subjective | Subjective | Subjective | 75% | 75% |
| Major initiatives – network resiliency/optimization | 10.0% | Subjective | Subjective | Subjective | Subjective | Subjective | 100% | 100% |
| ESG – belonging training completion (% at Dir+ level) | 2.5% | <90% | 94% | 97% | 99% | 100% | 100% | 200.0% |
| ESG – fuel efficiency improvement (%) vs 2023 | 1.5% | 0.0% | 1.0% | 1.7% | 2.0% | 2.3% | 1.7% | 100.0% |
| ESG – single-use plastics reduction progress | 1.0% | Subjective | Subjective | Subjective | Subjective | Subjective | 100% | 100.0% |
| Short-Term Enterprise Performance (Weighted Total) | — | — | — | — | — | — | 97.9% of target | 97.9% |
Scorecard mechanics and definitions, including operational metric sources and adjustments, are detailed in the proxy .
Long-Term Incentives (2024 Equity Grants – Andrew Watterson)
| Component | Grant detail | Vesting | Performance metric |
|---|---|---|---|
| RSUs | 55,203 RSUs; grant-date FV $1,650,018 | Time-based: 1/3 annually, starting Feb 21, 2025 | None (time-vesting) |
| Performance RSUs | Target 55,203; Threshold 5,520; Max 110,406 | Cliff vest Feb 21, 2027 | Average ROIC (after-tax) less Excess Cash, 2024–2026, with peer ROIC rank qualifier |
ROIC (after-tax) less Excess Cash payout curve (companywide awards): 10% ROIC → 100%; 12% → 150%; 15%+ → 200%; with minimums of 50%/100% if relative ROIC beats median/top of peer group .
Career Investment Cash Award (Retention)
| Award | Vesting | Conditions |
|---|---|---|
| $4,000,000 total (granted Jan 2024) | 50% on Mar 5, 2026; 50% on Mar 5, 2028 | Continued employment on vest dates; accelerated on death/disability; forfeited on other termination |
Equity Ownership & Alignment
| Metric | Value |
|---|---|
| Beneficial ownership (common shares) | 87,240 shares |
| Shares outstanding (basis for % calc) | 573,709,096 (Feb 28, 2025) |
| Ownership as % of outstanding | ~0.015% (computed from above) |
| Unvested RSUs (time-based, 12/31/2024) | 89,457 units; $3,007,544 market value (@$33.62) |
| Unvested Performance RSUs (threshold counts) | 8,652 units; $290,880 market value (@$33.62) |
| Stock options (exercisable/unexercisable) | None outstanding; none exercised in 2024 |
| Shares vested in 2024 (supply overhang indicator) | 56,736 shares; $1,959,661 value on vest (Feb 21, 2024) |
| Ownership guidelines | 3× base salary (execs); includes unvested RSUs; 5-year compliance window; all execs meet requirements |
| Hedging/pledging policy | Prohibited from hedging/derivatives, margin accounts, or pledging company stock |
Upcoming RSU Vesting (Andrew Watterson)
| Vest date | RSUs scheduled to vest |
|---|---|
| Feb 21, 2026 | 28,841 |
| Feb 21, 2027 | 18,401 |
Employment Terms
| Topic | Key terms |
|---|---|
| Employment agreement | No ongoing employment contract disclosed for named executive officers other than Mr. Kelly |
| Change-in-control (CIC) | Double-trigger; one-year salary and two years of bonus components in lump sum on qualifying termination post-CIC; continued employment expected for 1 year post-CIC |
| CIC dollar amounts (Andrew Watterson) | $1,708,613 on qualifying termination; $7,112,944 on death/disability; $1,257,019 on qualified retirement (values based on Dec 31, 2024) |
| Severance cap policy | Shareholder approval required if severance >2.99× (salary + target bonus) for §16(b) execs |
| Clawback policy | Recoup erroneously awarded incentive comp upon restatement; adopted Nov 2023; disclosed in 10-K exhibits |
| Non-compete / non-solicit / garden leave | Not disclosed in proxy filings |
Performance & Track Record
- Connectivity and yield/load strategy: Management outlined a first-half focus on yield, second-half focus on load factor via intentional connections, basic economy, and broader distribution; August load factor improved and Q4 revenue tailwinds cited from macro improvement and initiatives .
- Product and revenue initiatives: Assigned and extra-legroom seating selling in Q3 2025 and operating in Q1 2026; bag fees and loyalty/card enhancements tracking ahead of plan; co-brand changes effective 05/28 boosted card signups .
- Network partnerships: Interline partnerships broadened access and connectivity (e.g., Icelandair; EVA Air and Philippine Airlines) with Watterson emphasizing incremental reach through U.S. gateways and Hawaii interisland operations .
- FY2024 outcomes: Record operating revenue ($27.5B), liquidity of $9.7B, and operational ranking improvements underpin the Scorecard payout inputs and operational progress .
Compensation Committee & Benchmarking
- Committee and consultants: Compensation Committee directly engaged Pay Governance LLC (2024) and retained Meridian Compensation Partners, LLC in Jan 2025; assessed consultant independence per SEC/NYSE standards .
- Market data: Benchmarked against Willis Towers Watson general industry samples and airline peers (American, Delta, United, Alaska, JetBlue) to inform pay levels and retention .
- Say-on-pay outcomes: 2024 say-on-pay approval was ~77.7%, below historical ~94% average (2020–2023), prompting continued engagement and review by the reconstituted Committee .
Investment Implications
- Pay-for-performance alignment: STI tied 100% to multi-dimensional Scorecard; LTI includes 50% performance RSUs with ROIC (after-tax) less Excess Cash over 3 years and peer rank qualifier—creating direct sensitivity to profitability, capital efficiency, and strategic execution .
- Retention and overhang: $4M career investment cash award (2026/2028 vests) and sizeable time-based RSU tranches (Feb 2026/2027) reduce near-term attrition risk but create periodic supply overhang and potential insider selling pressure around vest dates; note 56.7K shares vested in 2024 and scheduled RSU tranches ahead .
- Alignment safeguards: Robust ownership guidelines (3× salary for execs), and prohibitions on hedging/pledging mitigate misalignment or leverage risk; clawback policy strengthens accountability in event of restatements .
- CIC economics: Double-trigger CIC agreements and severance cap policy limit windfall payouts while preserving management neutrality in change-in-control scenarios; disclosed Watterson CIC values guide downside-protection analysis .
- Governance watch items: Lower say-on-pay in 2024 vs historical, but Committee reconstitution and new consultant may evolve pay mix or metrics; monitor ongoing initiatives (bags, assigned seating, distribution, partnerships) given their direct impact on ROIC/EBITDA inputs to PSU vesting .
Related policies and disclosures: Insider Trading Policy (hedging/pledging bans) ; Clawback Policy ; Ownership of Management table ; Equity and award grant/vesting tables ; STI Scorecard .