Southwest Airlines Board Shake-Up: Elliott Investment Management’s Major Move
Investment heavyweight Elliott Investment Management is on the verge of proposing a new list of candidates for the board of Southwest Airlines Co. This move intensifies the activist investor’s demand for significant transformation at the airline, which is currently facing difficulties, according to credible sources.
Elliott’s Ambitious Plan
Elliott is reportedly preparing to put forward as many as 10 directors and propose a special meeting allowing investors to cast their votes on the nominees. The source, who chose to remain anonymous, clarified that the plans are yet to be announced to the public. For this gathering to be organized, Elliott needs to secure a 10% stake in Southwest, and it anticipates this will occur prior to the airline’s annual meeting next spring.
Proxy Battle in the Horizon
This move denotes a considerable escalation by Elliott, who accumulated a significant stake in Southwest earlier this year. The investor has been vocal about demanding major changes, including the replacement of CEO Bob Jordan and Chairman Gary Kelly. Elliott has expressed dissatisfaction with the airline’s refusal to adopt industry-wide changes, leading to a considerable downfall in its stock over recent years.
Despite these developments, Southwest claims to be uninformed about Elliott’s intentions, according to an official spokesperson.
Southwest’s Market Performance
Southwest’s stocks saw a 1% increase at 6:38 p.m., following the closure of regular trading in New York. However, the airline’s stock value has dropped by 12% this year, up to Tuesday’s closing.
Southwest’s Recent Changes
The airline initiated substantial changes to its business model last month, including:
- Assigned seating
- A premium-class option
- Plans for red-eye flights
The company perceives these changes as sales-boosting measures that enhance its appeal. It’s worth noting that while Southwest had been contemplating these changes, the pressure from Elliott accelerated their implementation.
Challenges Faced by Southwest
This year has been tough for Southwest, with issues such as slowing growth, fewer aircraft deliveries than expected from Boeing Co., and multiple flight safety incidents leading to a Federal Aviation Administration review. These difficulties were highlighted in Southwest’s recent guidance, which showed that both revenue and costs in the current quarter were worse than Wall Street’s predictions.
Southwest’s Response
In response to Elliott’s critique, Southwest recently added an experienced airline industry executive to its board. The company has also implemented a “poison pill” shareholder rights plan, in an attempt to deter Elliott from gaining a larger stake.
The Wall Street Journal was the first to report on Elliott’s plans.
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