Elliott Investment Management and Southwest Airlines Co. have begun discussing a potential settlement that would avoid a proxy fight for control of the airline’s board, according to people familiar with the matter.
Elliott has proposed a framework that would give it representation on Southwest’s board but not control, said some of the people, who asked to not be identified because the discussions aren’t public. The talks, which were progressing toward a resolution as of Saturday, haven’t been finalized and could fall through, the people said.
Representatives for Southwest and Elliott declined to comment.
Elliott has nominated eight directors to the Southwest board and called for a special shareholder meeting on Dec. 10, setting up what would be the firm’s first US proxy fight since 2017.
In response, Southwest said its board had made every effort to reach a constructive resolution with Elliott, including providing a settlement framework for appointing as many as three of the activist’s nominees. It said Elliott’s special-meeting request was unnecessary and inappropriate.
New York-based Elliott disclosed an initial Southwest stake of roughly $2 billion in June. It called for strategy and leadership changes at the carrier after what it saw as years of underperformance, pointing the finger squarely at Chief Executive Officer Bob Jordan and Chairman Gary Kelly.
The airline last month unveiled a $2.5 billion stock buyback plan and detailed major policy changes as part of plans to revitalize operations and fend off Elliott. The airline will begin selling assigned seats late next year and introduce a premium fare option offering extra leg room.
The changes break from tenets that helped set Southwest apart for decades, after the carrier was slow to embrace the industry’s push to capture growing demand for premium flying options. The Dallas-based carrier will retain its policy of two free checked bags.
