Southwest Airlines Responds to Elliott Investment’s Board Demands

Southwest Airlines has firmly countered the demands of activist investor Elliott Investment Management, which has called for a Special Meeting of Shareholders to elect eight new directors. On October 14, 2024, the airline described Elliott’s request as “unnecessary and inappropriate,” citing the extreme nature of the demands.

Elliott’s proposal, also released on October 14, calls for the removal of eight current Southwest directors and the election of its own candidates. In its response, Southwest stated, “Unfortunately, Elliott remains entrenched in demanding control of the board.” The airline criticized Elliott for prioritizing its interests over those of all shareholders, asserting that the firm lacks an understanding of Southwest’s business dynamics.

Southwest Airlines has previously offered to interview Elliott’s board candidates and to appoint three to a restructured 13-member board, which would be reduced to 12 following Executive Chairman Gary Kelly’s retirement in 2025. However, the airline accused Elliott of blocking interviews for its candidates, making it difficult to reach a constructive resolution.

For four months, Southwest claims Elliott has provided no substantial feedback on its strategic plan, only continuing public criticism ahead of and following the airline’s recent Investor Day. “Elliott’s failure to provide actionable feedback, coupled with the disruptive nature of its demands, should give shareholders pause about Elliott’s true intentions,” Southwest stated.

Despite its criticisms, Southwest indicated it would carefully review the request for a special meeting, which is set for December 10, 2024, and expressed intent to discuss arrangements with Elliott in a constructive manner.

Elliott responded by emphasizing the urgency for improved oversight at Southwest, stating that shareholders require a highly qualified board to ensure successful execution of the airline’s turnaround efforts. Among the board candidates proposed by Elliott are notable figures like Michael Cawley, former Deputy CEO of Ryanair, and David Cush, former CEO of Virgin America.

Elliott has actively criticized Southwest’s management since the summer, calling for the replacement of CEO Bob Jordan. “It is time for shareholders’ voices to be heard, so that Southwest can finally deliver on its full potential for customers, employees, and shareholders alike,” Elliott concluded, stressing the need for new leadership on the board.

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