Elliott Management Seeks Board Shakeup at Southwest Airlines, Pushing for Special Shareholder Meeting

Elliott Management, a prominent hedge fund led by billionaire investor Paul Singer, is escalating its campaign for change at Southwest Airlines, calling for a special shareholder meeting to vote on its proposed slate of new directors. Elliott, which recently acquired an 11% stake in Southwest, is seeking a majority control of the board, signaling its intent to overhaul the airline’s leadership and strategic direction.

The hedge fund has been openly critical of Southwest’s management, arguing that the airline has failed to adapt to changing consumer preferences, modernize its technology, and improve its operational performance. Elliott’s dissatisfaction stems from Southwest’s massive operational meltdown in December 2022, which resulted in thousands of flight cancellations and cost the airline over $1 billion.

“Without a comprehensive change to its board, Southwest will continue to be a story of unfulfilled potential and broken promises,” Elliott stated, emphasizing its belief that a leadership shakeup is necessary to drive meaningful change.

Elliott’s proposed slate of eight new directors includes several seasoned airline industry veterans, including former CEOs of Virgin America, Air Canada, and Westjet, as well as a former senior official from the U.S. Department of Transportation.

Southwest, acknowledging the need for improvement, has implemented some changes to address Elliott’s concerns, including reducing the size of its board from 15 members to 12. However, these changes have not been sufficient to appease Elliott, which is pushing for a more sweeping overhaul of the board.

The airline recently unveiled “Southwest 2.0,” a significant revamp of its operations and customer offerings. This includes the introduction of assigned seating, charging for extra legroom, and adding red-eye flights, while maintaining its popular “bags fly free” policy. Southwest also plans to expand its partnerships with international airlines to enhance its credit card and frequent-flyer program.

These changes represent a major departure from Southwest’s traditional low-cost, no-frills model and reflect the airline’s efforts to adapt to a changing market and improve its financial performance.

Key Takeaways:

• Elliott Management, Southwest Airlines’ second-largest shareholder, is calling for a special shareholder meeting to vote on its proposed slate of new directors.
• Elliott is seeking majority control of the board, aiming to drive a change in the airline’s leadership and strategy.
• The hedge fund has been critical of Southwest’s management, citing operational challenges and a failure to adapt to changing market dynamics.
• Southwest has implemented some changes, including reducing its board size and unveiling a new strategy, “Southwest 2.0,” but these efforts have not satisfied Elliott.

The outcome of this proxy fight will have significant implications for the future of Southwest Airlines. A victory for Elliott could lead to a major shakeup of the airline’s leadership, potentially resulting in a new CEO and a shift in strategic direction. However, Southwest’s recent efforts to modernize its operations and address Elliott’s concerns could sway some shareholders, making the outcome of the vote uncertain.