Southwest investors have been pushing the board to fire its CEO because the airline is struggling. Now they want to oust the board.
Elliott Investment Management plans to nominate a slate of candidates for Southwest Airlines Co.’s board is pushing an activist investor effort to make sweeping changes at the troubled airline, according to a person familiar with the matter.
Elliott will nominate up to 10 directors and call a special meeting for investors to vote on the nominees, the person said, asking not to be named because the plans are confidential. The activist must amass a 10% stake in Southwest before it can seek the meeting, which it expects to take place before the airline’s annual meeting next spring.
The launch of the proxy fight marks a major escalation for Elliott after building a large stake in Southwest earlier this year. The investor has demanded major changes, including the ouster of CEO Bob Jordan and Chairman Gary Kelly. They have criticized the airline for refusing to implement changes that have swept across the industry, sending its stock plummeting over the past few years.
A Southwest spokesman said the airline had not heard from Elliott and was unaware of their plans.
Southwest shares rose 1% at 6:38 p.m. after the close of regular trading in New York. The stock was down 12% this year through Tuesday’s close.
The airline has announced significant changes to its business model last month, including assigned seating, new premium-class options and plans for late-night flights — moves the company sees as boosting sales and increasing its appeal. While Southwest said earlier this year it was considering changes, it faces mounting pressure from Elliott to overhaul its underperforming operations.
Southwest has struggled this year with slowing growth, fewer aircraft deliveries than expected from Boeing aircraft The company and a series of flight safety incidents is activated Federal Aviation Administration review. The pressure on the business was highlighted in the company’s recent guidance that revenue and expenses for the current quarter were worse than Wall Street estimates.
Elliott has criticized Jordan and Kelly, who was CEO before Jordan, for poor performance and “a stubborn unwillingness to develop the company’s strategy.” They “have not been able to modernize Southwest,” the activist said. They also called for a re-constitution of the board, criticizing the lack of airline experience and independence among the current members.
Last month, Southwest appointed a veteran airline executive to its board to help address other concerns raised by Elliott. The carrier has also applied “poison pill” shareholder protection plan to prevent activists from gaining larger stakes.
The The Wall Street Journal Elliott’s plans were reported earlier.
