Elliott Management plans to name a slate of candidates to Southwest Airlines’ board, according to a person familiar with the matter, furthering the activist investor’s push for sweeping changes at the troubled airline.
Elliott will nominate up to 10 directors and hold a special meeting to allow investors to vote on the nominees, said the person, who asked not to be identified because the plans are confidential. The activist must first accumulate a 10% stake in Southwest before seeking the gathering, which is expected to take place before the airline’s annual meeting next spring.
The launch of the proxy fight marks a significant escalation for Elliott after taking a large stake in Southwest Airlines earlier this year. The investor is demanding major changes, including the removal of Chief Executive Bob Jordan and Chairman Gary Kelly. The company has faced criticism that the airline has refused to adopt changes that have spread across the industry, causing its share price to plummet over the past few years.
A spokesman for Southwest said it had not heard from Elliott and was not aware of their plans.
Southwest Airlines shares rose 1% at 6:38 p.m. after regular trading in New York. As of Tuesday’s close, the stock had fallen 12% this year.
The airline last month announced major changes to its business model, including assigned seats, new first-class options and a red-eye flight program – a move it believes will boost sales and enhance its appeal. While Southwest said earlier this year it was considering making the changes, it faces increased pressure from Elliott to restructure its underperforming business.
Southwest has struggled this year due to slower growth, lower-than-expected deliveries of Boeing Co. planes and a series of flight safety incidents that prompted a review by the Federal Aviation Administration. The company’s most recent guidance underscored the pressure on the business, with revenue and costs for the quarter falling short of Wall Street expectations.
Elliott criticized Jordan and Kelly, who preceded Jordan as CEO, for poor execution and a “stubborn unwillingness to evolve the company’s strategy.” The activist said they were “not up to the task of modernizing Southwest Airlines.” It also called for a reshuffle of the board, criticizing current members for their lack of airline experience and independence.
Southwest last month named a veteran airline executive to its board to help address other concerns raised by Elliott. The airline has also adopted a “poison pill” shareholder rights plan to prevent activists from taking larger stakes.
this wall street journal Elliott’s plans were reported earlier.
