Elliott Investment Management and Southwest Airlines Co. are reportedly engaging in discussions to potentially reach a settlement that may prevent a proxy battle over control of the airline’s board, according to individuals familiar with the situation.
Elliott has suggested a framework allowing it representation on Southwest’s board without granting it control, according to several individuals who requested anonymity due to the private nature of the talks. As of Saturday, the negotiations were progressing toward a resolution, but a final deal had not been reached and talks could potentially collapse, the sources indicated.
Both Southwest and Elliott representatives declined to provide comments on the matter.
Elliott has nominated eight directors for Southwest’s board and has called for a special shareholder meeting set for December 10, which could become the firm’s first U.S. proxy battle since 2017.
In response, Southwest stated that its board has made every possible effort to reach a constructive agreement with Elliott, including offering a settlement framework to appoint up to three of Elliott’s nominees. Southwest described Elliott’s request for a special meeting as unwarranted and inappropriate.
Elliott, based in New York, initially disclosed a stake in Southwest valued at approximately $2 billion in June. The firm advocated for strategy and leadership changes at the carrier, attributing years of underperformance to Chief Executive Officer Bob Jordan and Chairman Gary Kelly.
Last month, Southwest unveiled a $2.5 billion stock buyback plan and announced significant policy changes as part of its strategy to revitalize operations and counter Elliott’s influence. The airline plans to start selling assigned seats late next year and introduce a premium fare option with extra legroom.
These changes represent a departure from the longstanding policies that distinguished Southwest for decades, as the carrier had been slow to adapt to the industry trend of targeting the increasing demand for premium flying options. However, Southwest will continue its policy of offering two free checked bags.
