Elliott Investment Management, the activist hedge fund with a significant stake in Southwest Airlines, has issued a stern warning to the airline – change leadership or face a potential proxy fight – ahead of a first meeting between the two parties on 9 September, according to a report by Reuters.
And despite the scheduled meeting, Elliott, which now controls nearly 9.7% of the airline’s investor voting power, has indicated it might still pursue more aggressive measures after highlighting the urgency in addressing what it describes as the carrier’s “immense” challenges.
The hedge fund has been vocal about the need for new external leadership to guide the airline towards a better future, suggesting that if Southwest’s current leaders fail to make necessary changes, its will push for a vote to replace the board of directors.
In preparation for the upcoming meeting, Southwest Airlines has stated its willingness to engage with Elliott, emphasising its commitment to driving sustained shareholder value. The airline has spent recent months gathering feedback and meeting directly with many of its shareholders. Southwest will also hold an investor day on 26 September.
In a letter to investors, Elliott outlined its dissatisfaction with Southwest’s current leadership, including CEO Robert Jordan and Executive Chairman Gary Kelly. The hedge fund is pushing for a comprehensive review of the airline’s business and is advocating for the creation of a new board-level committee to oversee “transformational change.”
Elliott’s growing influence over Southwest is nearing a critical threshold. If the hedge fund reaches 10% ownership, it would be able to call a special shareholder meeting to vote on new board members. Elliott has already proposed a slate of 10 candidates for Southwest’s 15-member board, including notable figures like former Virgin America CEO David Cush and former Air Canada CEO Robert Milton.
Elliott’s demands have found some support among other investors, with Artisan Partners publicly calling for a leadership change and encouraging the board to work with Elliott. Additionally, concerns among Southwest’s pilots about the need for bold leadership have further amplified the pressure on the airline’s management.
Southwest has been attempting to execute a turnaround plan, including initiatives like adding more legroom and moving to assigned seating. The airline also named a new board member in July. Despite these efforts, its stock has struggled, although it has recently seen a slight recovery, closing at $28.20.
