Southwest Airlines has reached an agreement with Elliott Investment Management, avoiding a potentially disruptive proxy battle with the activist hedge fund, one of its largest shareholders, according to a report by the New York Times.
The airline will now appoint six new directors to its board, five of whom were nominated by Elliott, as well as an additional independent board member. In exchange, Elliott has agreed to withdraw its request for a special shareholder meeting where it had aimed to install eight directors.
As part of the deal, Gary Kelly, who previously served as Southwest’s longtime CEO and has been chairman since 2022, will retire on 1 November, several months earlier than planned. Kelly will be replaced by an independent chair.
The truce comes after Elliott, which holds a 10% stake in Southwest, presented a proposal calling for significant changes to boost the airline’s lagging stock price, which has dropped 44% over the past five years. Among Elliott’s recommendations were a switch from Southwest’s unique open-seat boarding to assigned seating and the addition of more premium offerings. Southwest has already begun implementing several of these suggested changes.
The agreement gives Elliott substantial influence on Southwest’s restructured 13-member board, with newly appointed directors including David Cush, former CEO of Virgin America; Gregg Saretsky, former CEO of WestJet; and Sarah Feinberg, ex-administrator of the Federal Railroad Administration.
Despite gaining these board seats, Elliott did not secure majority control nor did it succeed in its push to replace Bob Jordan, Southwest’s CEO of two years.
