Elliott Management Calls for Special Shareholder Meeting to Overhaul Southwest Airlines' Board

15.10.2024 - 22:25 / travelpulse.com / Gary Kelly / Bob Jordan / Laurie Baratti / John Pike / Bobby Xu

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