Elliott Investment Management is beginning a proxy battle with Southwest Airlines by nominating 10 candidates for the airline’s 15-member board. The hedge fund stated that it sees naming a slate of directors as a crucial move towards making necessary changes at Southwest. The airline, headquartered in Dallas, has not yet responded to Elliott’s intentions.
As per a regulatory filing, Elliott has acquired an approximate 8% stake in Southwest. While the S&P 500 has shown a gain of 14% this year, Southwest’s shares have declined by 12%. Southwest has been underperforming compared to its competitors Delta Air Lines and United Airlines. In the second quarter, Southwest lagged significantly behind in operating margin, and analysts predict further losses for the airline in the third quarter.
Elliott has expressed concerns about Southwest’s deteriorating performance and previously called for the replacement of CEO Robert Jordan and Chairman Gary Kelly, holding them responsible for the airline’s failure to keep pace with industry changes. Southwest recently announced plans to boost revenue, such as introducing assigned seating and offering extra legroom at higher prices for a portion of its seats. Further details on these changes are expected from Jordan in September.
The individuals Elliott intends to nominate for Southwest’s board include former CEOs of Air Canada, WestJet, and Virgin America, as well as ex-senior executives from JetBlue, Ryanair, and a former U.S. Transportation Department official. Elliott has a history of pressuring struggling companies to revamp their management. Starbucks, for instance, announced a new CEO after Elliott advocated for leadership changes.
Reports indicate that Elliott is gearing up for a special shareholder meeting to vote on the recommended Southwest board candidates.
