Elliott Investment Management has initiated a proxy fight with Southwest Airlines, announcing its intention to nominate 10 candidates for the airline's 15-member board. The move comes as Southwest's performance has fallen behind its competitors in the industry.
Southwest Airlines confirmed that it had been attempting to engage with Elliott to address concerns but had been met with resistance. Despite agreeing to a meeting in early September to discuss potential resolutions, Elliott opted to publicly declare its plan to replace a majority of Southwest Airlines' board.
Following the news, Southwest Airlines' shares saw a modest increase of over 1% before the market opened on Wednesday. Elliott has disclosed holding an approximately 8% stake in Southwest, a company whose shares have declined by 12% this year while the S&P 500 has shown a 14% gain.
Analysts have noted Southwest's lagging performance compared to competitors like Delta Air Lines and United Airlines, with the airline projected to incur losses in the third quarter. Elliott has emphasized the pressing need for change, citing ongoing deterioration in Southwest's performance since proposing its overhaul.
The hedge fund has called for the replacement of Southwest's CEO and Chairman, accusing them of contributing to the airline's industry lag. In response, Southwest recently announced plans to enhance revenue by introducing assigned seating and offering additional legroom at premium prices for a portion of its seats.
Elliott's slate of nominees for the Southwest board includes former CEOs from Air Canada, WestJet, and Virgin America, as well as senior executives from JetBlue, Ryanair, and a former U.S. Transportation Department official.
Elliott Investment Management has a history of pressuring underperforming companies to make management changes, with Starbucks being the most recent example of a company replacing its CEO following Elliott's advocacy for new leadership.
Reports indicate that Elliott is gearing up to call a special shareholder meeting for a vote on its proposed Southwest board candidates, as it continues to push for significant changes within the airline company.
