Elliott Investment
Management has ramped up its battle with Southwest
Airlines by formally calling for a special
shareholder meeting on December 10, during which shareholders could vote for
a new set of directors to steer the company’s strategy.
The hedge fund,
which oversees about $70 billion in assets and controls approximately 11
percent of the airline's stock, is advocating for the replacement of eight
board members with its own candidates, which it described as a
"world-class slate of independent industry experts."
According to Reuters,
Elliott’s move is a highly unusual one, but is unsurprising given that Elliott
has been pressuring the airline for months to replace the majority of its board
members, oust Bob Jordan as CEO, and address its flagging financial performance
by improving management accountability.
“Absent a thorough
reconstitution of its Board, the story of Southwest will remain one of empty
promises and unfulfilled potential. The nominees we have put forward today are
uniquely qualified to hold the Company’s executive leadership accountable and
ensure that the Company delivers improved results,” Elliott partner John Pike
and portfolio manager Bobby Xu said in a statement.
Southwest’s board,
which currently consists of 15 members, is already set to shrink to 13 in
November and down to 12 by next year’s annual meeting. The carrier’s last
annual meeting took place in May 2024. Executive chairman Gary Kelly is also already
set to step down in May of next year.
In the past five
years, Southwest’s stock price has dropped by 42 percent, although it bounced
back by eight percent this year. The airline has struggled to regain
profitability since the COVID-19 pandemic blighted global air travel, but has
recently taken steps to turn things around.
At its Investor
Day meeting in Dallas on September 26, Southwest revealed its plans to
shore up its profits through initiatives like adding premium seating with extra
legroom, introducing assigned seating and overhauling its boarding process. It
has also launched new airline
partnerships, vacation packages—including the ability to book
cruises—and aircraft sale-leasebacks.
But, for Elliott,
the recent changes fall short of its vision for true transformation. In a news
release issued today, the hedge fund wrote, “We are taking this step today
because the need for improved oversight at Southwest has never been more
urgent. Following Elliott’s public push for changes, Southwest has responded
with a series of long-overdue strategic and corporate-governance initiatives,
promising that better performance will follow.”
It continued, “However,
Southwest’s shareholders have heard these sorts of promises before, and what
they need today, at the outset of this attempted turnaround, is an experienced,
highly qualified Board to oversee the changes and ensure successful execution.”
TravelPulse has reached
out to Southwest Airlines for comment.
Elliott has proposed
to elect the following eight director candidates to Southwest’s Board:
- Michael Cawley, former deputy CEO, COO and CFO of
Ryanair
- David Cush, former CEO of Virgin America
- Sarah Feinberg, former senior official at the
Department of Transportation and former head of the Federal Railroad
Administration
- Hon. Josh
Gotbaum, a longtime
advisor to companies and labor groups, and the former chapter 11 trustee of
Hawaiian Airlines
- Dave Grissen, former Group President of Marriott
International
- Robert Milton, former CEO of Air Canada and ACE
Aviation Holdings and the former Chairman of United Airlines
- Gregg Saretsky, former CEO of WestJet
- Patty Watson, current EVP and Chief Information
& Technology Officer at NCR Atleos and a longtime technology executive
For the latest travel news, updates and deals, subscribe to the daily TravelPulse newsletter.
Topics From This Article to Explore
