Elliott Investment Management has launched a proxy fight with Southwest Airlines and plans to nominate 10 candidates for the airline’s board of directors. The hedge fund believes that urgent changes are needed at Southwest, as the airline’s performance has lagged behind its competitors. Southwest has tried to engage with Elliott to address its concerns, but those attempts have been rebuffed, leading to the proxy fight.
Southwest Airlines’ shares fell slightly following the news of Elliott’s stake in the company. The airline has seen a 12% drop in its shares this year, compared to a 14% gain in the S&P 500. Southwest has been trailing behind Delta Air Lines, United Airlines, and American Airlines in terms of operating margin, with analysts predicting a loss in the third quarter. Elliott believes that the deteriorating performance of Southwest highlights the need for urgent change.
Elliott has called for the replacement of CEO Robert Jordan and Chairman Gary Kelly, accusing them of causing Southwest to fall behind changes in the airline industry. Southwest recently announced plans to improve revenue by implementing assigned seating for passengers and offering extra legroom at higher prices for some seats. Elliott’s slate of board candidates includes former CEOs of various airlines and transportation officials, signaling a push for significant leadership changes at Southwest.
Elliott has a history of pressuring underperforming companies to make management changes, with Starbucks being the most recent example of replacing its CEO after Elliott advocated for new leadership. The hedge fund’s plan to nominate board candidates for Southwest was reported by The Wall Street Journal, which also mentioned the possibility of a special shareholder meeting for a vote on Elliott’s proposals. Southwest has faced challenges in a tough year for airlines, and the proxy fight with Elliott could lead to significant changes in the company’s leadership and strategy moving forward.
Southwest Airlines will need to address Elliott’s concerns and engage with the hedge fund to avoid potentially disruptive changes to its board of directors and leadership. The proxy fight highlights the growing pressure on underperforming companies to make significant changes to improve their performance and shareholder value. With Elliott’s track record of pushing for management changes at other companies, Southwest will need to carefully consider the hedge fund’s proposals and work towards a collaborative resolution to address its lagging performance in the airline industry. The upcoming months will be crucial for Southwest as it navigates the proxy fight and implements changes to improve its financial outlook and competitive position in the market.
