Elliott Investment Management has initiated a proxy battle with Southwest Airlines (LUV, Financial), requesting a special shareholder meeting. The activist investor has nominated eight directors for the board, aiming to replace an equal number of current members. Elliott has proposed the meeting date for early December.
This move marks Elliott's first special meeting request since its proxy contest with Arconic Corp. in 2017, where a settlement was reached before voting. After discussions with Elliott, Southwest announced in September that six board members, including Chairman Gary Kelly, would step down, reducing the board size from 15 to 12 and effectively opening three board seats.
Holding an 11% stake in Southwest, Elliott insists on the removal of CEO Bob Jordan. Originally planning to nominate 10 individuals, Elliott adjusted its nominations to align with the board's reduced size.
Southwest, during an investor day in September, unveiled a stock buyback plan and detailed changes to its open seating policy. Despite a 20% rise over the past year, Southwest's stock has underperformed compared to peers like Delta Air Lines (up nearly 50%) and United Airlines (up over 50%). Over the last three years, Southwest's stock has dropped around 40%, reducing its market cap to $18 billion.
In June, Elliott disclosed a $2 billion stake in Southwest, calling for strategic shifts and leadership changes, particularly targeting Jordan and Kelly. Southwest enacted a poison pill strategy in July to defend against Elliott's aggressive tactics, emphasizing ongoing engagement with the investor.
Southwest laid out a comprehensive plan in September to boost operating profits by $4 billion by 2027, which CEO Jordan mentioned was in progress before Elliott's involvement. Jordan described Elliott's approach as detrimental to the company, labeling it as tactical maneuvering.
Known for its influence and strategic resolutions, Elliott often bypasses intense proxy battles, as seen in past engagements with Starbucks (SBUX) and NRG Energy (NRG). The firm rarely brings matters to shareholder votes, preferring negotiated solutions, this being its inaugural call for a non-routine shareholder meeting since its inception in 1977.
