Elliott Management Calls Special Meeting with Southwest Airlines Leadership

Elliott Management announced plans to convene a special meeting at Southwest Airlines as early as next week, signaling a push for significant leadership changes ahead of the airline’s regular shareholder meeting, typically held in May. The activist investor aims to expedite the election of new directors, proposing a slate of ten candidates with backgrounds in aviation and regulatory experience.

This move follows Southwest’s recent announcement of a comprehensive board shake-up, intended to preempt a proxy fight. With the upcoming investor meeting on the horizon, Southwest is expected to present its strategies for operational improvements. Elliott’s actions include efforts to oust CEO Bob Jordan and Executive Chairman Gary Kelly, the latter of whom has indicated he will step down in 2025.

In a letter to shareholders, Elliott partners John Pike and Bobby Xu expressed their belief that fresh leadership is essential for navigating Southwest’s future. They criticized the current management’s approach, describing it as “haphazard” and driven by self-preservation. “Competent new leaders should chart the course forward for Southwest,” they stated, emphasizing the need for a deliberate strategy to guide the airline.

In response, Southwest Airlines reiterated its support for Jordan, arguing that leadership changes during such a pivotal transformation could be detrimental to shareholders. The airline cautioned against handing control to Elliott, asserting that the activist investor has not presented concrete proposals to enhance Southwest’s operations, which could pose a significant risk to shareholder interests.

Elliott’s call for a special meeting is a tactical move to accelerate the process of electing new directors. Traditionally, it can take months for both parties to rally shareholder support, and a resolution may occur before the special meeting. Elliott accused Southwest’s advisors of attempting to limit the number of eligible voters through what it termed a “false record date,” potentially skewing the outcome.

In July, Southwest announced a major shift in its operational model, including the elimination of open seating, introduction of assigned seats with increased legroom for higher fares, and the launch of red-eye flights. As the airline grapples with rising costs and changing travel patterns, COO Andrew Watterson has warned staff to prepare for “difficult decisions” ahead.

While the company is not planning furloughs, it may reduce operations in certain cities, offering employees the opportunity to transfer to other locations. A routine schedule update is set to be released, outlining flight plans through early June.

Earlier this month, Kelly, who served as CEO before passing the reins to Jordan in early 2022, confirmed he would step down after the spring shareholder meeting. The Aircraft Mechanics Fraternal Association, representing Southwest’s mechanics, indicated that Elliott has made it clear that its vision for the airline includes Jordan’s removal as CEO, suggesting that further executive changes could follow if Elliott gains sufficient board influence.

Pike and Xu emphasized the urgency for change, reaffirming that their request for a special meeting may occur as soon as next week, reflecting Elliott Management’s determination to reshape the leadership at Southwest Airlines.

Sources: AirGuide Business airguide.info, bing.com, cnbc.com