Elliott Investment Management plans to nominate a slate of candidates for Southwest Airlines Co.’s board, escalating the activist investor’s push for sweeping changes at the struggling carrier, according to a person familiar with the matter.
Elliott will nominate as many as 10 directors and call a special meeting for investors to vote on the nominees, said the person, who asked not to be named because the plans are confidential. The activist has to amass a 10% stake in Southwest before it can seek the gathering, which it expects to occur before the airline’s annual meeting next spring.
The launch of a proxy fight marks a major escalation by Elliott after building a large stake in Southwest earlier this year. The investor has demanded major changes, including ousting Chief Executive Officer Bob Jordan and Chairman Gary Kelly. It’s criticized the carrier for refusing to adopt changes that have spread across the industry, causing its stock to plummet over the last few years.
Southwest has not heard from Elliott and is not aware of their plans, a spokeswoman said.
Southwest shares rose 1% at 6:38 p.m., after the end of regular trading in New York. The stock has tumbled 12% this year through Tuesday’s close.
The airline announced dramatic changes to its business model last month, including assigned seating, a new premium-class option and plans for red-eye flights — moves the company sees as boosting sales and enhancing its appeal. While Southwest said earlier this year that it was considering the changes, it faced heightened pressure to revamp under-performing operations from Elliott.
Southwest has struggled this year with slowing growth, fewer-than-expected aircraft deliveries from Boeing Co. and a series of flight-safety incidents that triggered a Federal Aviation Administration review. Strains on the business were underscored in the company’s recent guidance that revenue and costs in the current quarter were worse than Wall Street’s estimates.
Elliott has criticized Jordan and Kelly, who was CEO prior to Jordan, for poor execution and a “stubborn unwillingness to evolve the company’s strategy.” They are “not up to the task of modernizing Southwest,” the activist has said. It’s also called for a reconstituted board, criticizing the lack of airline experience and independence among current members.
Southwest last month named a veteran airline industry executive to its board to help address other concerns raised by Elliott. The carrier also adopted a “poison pill” shareholder rights plan to discourage the activist from gaining a larger share.
The Wall Street Journal reported Elliott’s plans earlier.
