Activist investor Elliott Investment Management has intensified its campaign against Southwest Airlines , announcing plans to call a special shareholder meeting as early as next week in a push for significant leadership change at the airline, including the removal of Chief Executive Officer Bob Jordan, according to a report by Reuters.
Despite the pressure, Southwest Airlines reiterated its support for CEO Bob Jordan, calling him the “right leader” to execute its strategy to enhance financial performance and maximize shareholder value.
Elliott, which holds over a 10% stake in Southwest, blames Jordan and other top executives for the airline’s underperformance and aims to replace two-thirds of the 15-member board. The hedge fund’s move comes just days before Southwest’s investor day on Thursday, where Jordan is expected to unveil a turnaround strategy.
In response, Southwest reiterated its support for Jordan, calling him the “right leader” to execute its strategy to enhance financial performance and maximize shareholder value, and stated that its board would review the request for a special shareholder meeting, but accused Elliott of attempting to derail the upcoming investor event.
The Dallas-based airline has faced a tough recovery since the pandemic, hindered by Boeing’s aircraft delivery delays and an oversupply in the domestic market. As a result, Southwest’s operating margin plummeted to just 0.2% in the first half of 2024, down from over 13% in 2019. In contrast, competitors Delta Air Lines and United Airlines reported operating margins of 9.5% and 7.4%, respectively, during the same period.
Southwest’s stock has also suffered, losing approximately 43% of its value over the past three years, compared to a 9% gain in Delta’s shares.
To reverse its fortunes, Southwest plans to introduce new initiatives like assigned seating, extra-legroom options to attract premium travellers, and overnight flights, along with broader network changes. Further details are expected to be shared during Thursday’s investor day.
In an effort to avoid a proxy battle, the airline announced earlier this month that six directors would step down in November, and Executive Chairman Gary Kelly would retire next year. Southwest also plans to appoint four new independent directors and consider up to three candidates proposed by Elliott.
However, Elliott responded in a letter to shareholders on Tuesday, accusing the airline of obstructing necessary changes.
