Southwest Airlines and Elliott Investment Management are set to meet on September 9 to discuss the ongoing issues between the two parties. Elliott has made it clear that they will move forward with their plan to initiate a proxy vote for a new slate of 10 board members, unless the current board is willing to engage in a conversation about the removal of chairman Gary Kelly and CEO Bob Jordan. The firm holds an 11% interest in Southwest, valued at approximately $1.9 billion.
Elliott Investment Management has raised concerns about the declining margins of Southwest Airlines in recent years, relative to its competitors such as United, Delta, and American. They have criticized the current leadership for being slow to adapt to evolving consumer preferences and have accused the board of failing to hold Kelly and Jordan accountable for critical decisions. Elliott also believes that the current board is too aligned with Kelly and Jordan, hence the need for new leadership.
Proposed Solutions
In an open letter to Southwest shareholders, Elliott has proposed a new slate of directors, including former airline executives from companies like Virgin Atlantic, Air Canada, and Ryanair. On the other hand, Southwest Airlines has taken a defensive stance against Elliott’s proposals, including adopting a shareholder-rights provision to prevent Elliott from accumulating a larger ownership share. The airline has also added a new seat on the board with experience from an airline other than Southwest.
Southwest Airlines has stated that they are open to discussing ideas that would drive sustained shareholder value and are willing to work towards a collaborative resolution. The airline has made efforts to engage with Elliott in the past and remains prepared to meet on September 9. Southwest has also announced plans to share more details about its transformation plan at an investor event on September 26. However, they have not confirmed whether a process to add new directors is currently underway.
The ongoing battle between Southwest Airlines and Elliott Investment Management highlights the challenges faced by the airline in terms of leadership and strategic direction. Shareholders will be closely watching the outcome of the upcoming meeting on September 9 and the potential proxy vote for a new slate of board members. As Southwest continues to navigate through these turbulent times, the decisions made in the coming weeks will have a significant impact on the future of the airline and its shareholders.