Elliott Investment Management plans to nominate a slate of candidates to the board of Southwest Airlines Co., escalating the activist investor’s push for sweeping changes at the troubled airline, according to a person familiar with the matter.
Elliott will nominate as many as 10 directors and call a special meeting where investors can vote on the nominees, said the person, who asked not to be named because the plans are confidential. The activist must amass a 10% stake in Southwest before he can organize the meeting, which is expected to take place 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 the ouster of CEO Bob Jordan and chairman Gary Kelly. The airline has been criticized for refusing to implement changes that have spread across the industry, causing its shares to plummet in recent years.
Southwest has not heard from Elliott and is not aware of their plans, a spokeswoman said.
Shares of Southwest rose 1% at 6:38 p.m. after the end of regular trading in New York. The stock is down 12% this year through Tuesday’s close.
The airline has announced this 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 says will boost sales and broaden its appeal. Although Southwest said earlier this year it was considering the changes, it was under increased pressure to revive Elliott’s underperforming business.
Southwest has suffered slowing growth this year, fewer than expected aircraft deliveries from Boeing Co. and a series of flight safety incidents that activated a Federal Aviation Administration assessment. The pressure on the company was underscored in the company’s recent forecast that current quarter revenues and costs were worse than Wall Street estimates.
Elliott has criticized Jordan and Kelly, who were CEOs before Jordan poor execution and a “stubborn unwillingness to evolve the company’s strategy.” They are “not up to the task of modernizing the Southwest,” the activist said. There are also calls for a new board, criticizing the lack of aviation experience and independence among current members.
Southwest appointed a veteran airline industry executive to its board of directors last month to address other concerns raised by Elliott. The carrier also has one “poison pill” shareholder rights plan to prevent the activist from acquiring a larger share.
The Wall Street Journal Elliott’s plans previously reported.
