Activist hedge fund firm Elliott Investment Management has intensified its campaign against Southwest Airlines, criticising the airline’s board for adopting a “poison pill” strategy and appointing a new director, according to a report by Skift.
In a letter to Southwest’s board, Elliott partner John Pike and portfolio manager Bobby Xu expressed deep concerns over the board’s recent actions, writing: “In light of these actions, we have become increasingly concerned by the ‘self-help’ half-measures that the board appears to be contemplating and adopting, none of which will do anything to allay the lost credibility of Southwest’s management”.
Elliott argues that Southwest’s board is “profoundly out of touch” with shareholder sentiment and has called for the appointment of a new CEO and additional board members with relevant experience. The hedge fund, which holds a $1.9bn stake in Southwest, has been vocal about the airline’s underperformance in 2024, citing issues such as Boeing delivery delays, high labour costs, and sustained demand for premium travel. Elliott believes that new leadership is essential to restoring Southwest’s profitability.
To prevent Elliott from acquiring a controlling stake, Southwest recently adopted a “poison pill” plan, which will activate if an investor acquires at least a 12.5% stake in the company, allowing other shareholders to buy additional shares at a 50% discount.
On Monday, Southwest announced the appointment of IndiGo co-founder and seasoned airline executive Rakesh Gangwal to its board of directors, a move criticised by Elliott as an attempt to entrench the current management team.
Southwest resounded by saying it is ope to “constructive conversations” with Elliott but accused the hedge fund of refusing to engage in serious discussions without a CEO change. “Despite Southwest Airlines’ good faith efforts to meet with Elliott to better understand their views, Elliott has focused on personal attacks on our leadership team and board, conditioning any serious discussions on an immediate CEO change,” Southwest said in a statement.
Elliott claims to have support from other shareholders who believe leadership changes are necessary to address Southwest’s recent underperformance, however, only Artisan Partners has publicly backed Elliott’s campaign.
The hedge fund also alleges that multiple Southwest employees have expressed concerns about the carrier’s leadership and is concerned that the airline might make short-term changes, such as replacing current CEO Bob Jordan, without a comprehensive selection process.
“Simply put, investors do not want to see a new plan from the same leadership team whose record at the company has been one of failure,” Elliott wrote in the letter. “They want new leaders who will bring outside perspectives and proven expertise to the task of preserving all that was great about Southwest while charting a higher-performing future for the airline.”
