Elliott Management announced on Tuesday its intention to convene a special meeting at Southwest Airlines, potentially as early as next week, following the airline’s proposal of substantial board changes aimed at averting a proxy contest.
This announcement comes just days before Southwest Airlines’ investor meeting, where the company is set to disclose new operational improvements. Elliott Management is aiming to remove CEO Bob Jordan and Executive Chairman Gary Kelly, the latter of whom has already declared his intention to step down in 2025. The activist investor has put forth a slate of ten directors comprising airline executives and former regulators or government officials.
Elliott partner John Pike and portfolio manager Bobby Xu expressed in a letter to shareholders, “We believe that competent new leaders, working through a deliberate and thoughtful process, should chart the course forward for Southwest.” They further criticized the current leadership’s strategy, describing it as “haphazard” and driven by self-preservation.
Typically, Southwest’s shareholder meeting is scheduled for May. By calling for a special meeting, Elliott aims to expedite the election of new directors. The process of soliciting shareholder support takes several months, and a settlement remains a possibility during this period.
Elliott has accused Southwest’s advisors of attempting to restrict shareholder voting eligibility through a tactic referred to as a “false record date.”
In July, Southwest Airlines announced significant changes to its over-50-year-old business model, including the introduction of assigned seating, seats with more legroom for higher fares, and the commencement of red-eye flights. COO Andrew Watterson recently advised staff to prepare for more “difficult decisions” necessary for restoring profitability amidst rising costs and evolving travel patterns.
According to a source familiar with the matter, the company does not plan to furlough workers but may reduce its operations in certain cities, offering employees the opportunity to transfer to other locations.
Southwest Airlines is set to release an updated flight schedule on Wednesday, covering flights through early June. Earlier this month, Gary Kelly, who served as CEO before Bob Jordan, announced that he would step down after the shareholder meeting next spring.
The Aircraft Mechanics Fraternal Association, representing Southwest’s mechanics and having met with Elliott, indicated last week that the activist investor envisions a turnaround for Southwest without Robert Jordan as CEO. Elliott aims to influence the board sufficiently to enact further executive changes.
John Pike and Bobby Xu emphasized the urgency of the situation, stating, “The need for change is urgent, and our request for a special meeting may come as soon as next week.”
Southwest Airlines has not yet responded to a request for comment.
