Shares of Southwest Airlines are down 10% this year and some of the airline’s shareholders are pushing for a proxy fight in an effort to replace company management.
The struggling airline recently announced it was abandoning its long-standing open seating policy and introducing extra legroom options for passengers, as reported by The Dallas Express.
The changes may be too little, too late, however, for some stockholders.
Elliott Investment Management, which holds a nearly $2 billion stake in Southwest (42 million shares), equivalent to 7% of Southwest’s stock, has been urging leadership changes since June, according to CNBC. Elliott has sought to replace Southwest CEO Bob Jordan and Chairman Gary Kelly, who the firm claims have “presided over a period of stunning underperformance” at the airline.
In a statement, Southwest responded to Elliott’s campaign:
“Since Elliott launched its campaign against Southwest Airlines, the Board has consistently sought to engage constructively and in the best interests of all Shareholders. Elliott has dismissed those efforts at every turn. After Elliott recently agreed to a meeting with Southwest Airlines in early September to discuss a collaborative resolution, including continuing significant Board refreshment and other governance enhancements, Elliott unilaterally decided instead to publicly announce its intention to replace a majority of Southwest Airlines’ Board.
“The Southwest Airlines Board and Executive Leadership Team remain open to conversations with Elliott to discuss ideas to drive Shareholder value, and the Board will evaluate Elliott’s proposed nominees as part of its ongoing Board refreshment process. No immediate action is required of Shareholders. … The Southwest Airlines Board remains confident that the airline has the right Leadership Team in place to evolve the business and to lead Southwest Airlines forward.”
The Wall Street Journal reports on Elliott’s plans for Southwest. Here’s the start of the story:
Elliott Investment Management said Tuesday that it planned to launch a proxy fight at Southwest Airlines as the activist turns the heat up in its campaign at the Dallas-based carrier.
The Wall Street Journal reported earlier Tuesday on Elliott’s plans.
Elliott said it plans to nominate 10 director candidates to Southwest’s 15-person board, including David Cush, the former chief executive of Virgin America and Robert Milton, the former CEO of Air Canada.
The Journal reported that Elliott is preparing to call a special meeting that would allow shareholders to vote on the candidates. (Southwest’s annual meeting is typically held in mid-May.)
Southwest said Wednesday that its board had sought to constructively engage with Elliott and that the hedge fund had “dismissed those efforts at every turn.” It said it remains open to conversations with Elliott and will evaluate Elliott’s nominees.
Elliott said earlier this summer that it had built a big position in Southwest and aimed to overhaul the company’s leadership. Elliott owns roughly 8% of the shares outstanding, according to a securities filing Tuesday. The firm has a roughly 11% interest when also including derivatives.