Elliott Investment Management plans to nominate a slate of candidates for the board of Southwest Airlines Co., increasing the activist investor’s pressure for sweeping changes on the struggling airline, an individual accustomed to the matter said.
Elliott will nominate as much as 10 directors and call a special meeting to permit investors to vote on the nominees, said the person, who asked to not be identified since the plans are confidential. The activist must amass a ten% stake in Southwest before he can seek the meeting, which he expects to occur before the airline’s annual meeting next spring.
The start of a proxy fight marks a big escalation by Elliott after he built up a big stake in Southwest earlier this yr. The investor has called for sweeping changes, including the firing of CEO Bob Jordan and Chairman Gary Kelly, and criticized the airline for refusing to implement changes which have rippled throughout the industry and caused its stock to plummet in recent times.
Southwest has not heard from Elliott and is unaware of the plans, a spokeswoman said.
Southwest shares rose 1 percent as of 6:38 p.m. after hours in New York. The stock has fallen 12 percent this yr through Tuesday’s close.
The airline announced dramatic changes Southwest last month expanded its business model to incorporate recent seating, including a brand new premium class option and plans for overnight flights, in moves designed to spice up revenue and broaden the corporate’s appeal. Although Southwest said it was considering the changes earlier this yr, the corporate has faced increasing pressure from Elliott to modernize its underperforming operations.
Southwest has struggled this yr with slowing growth, fewer-than-expected aircraft deliveries from Boeing Co. and a series of flight safety incidents that triggered an audit by the Federal Aviation Administration. The strains on the business were underscored in the corporate’s latest forecast, which said revenue and costs in the present quarter were worse than Wall Street estimates.
Elliott criticized Jordan and Kelly, who was CEO before Jordan, for poor execution and a “stubborn unwillingness to further develop the company’s strategy.” They are “not up to the task of modernizing Southwest,” said the activist. He also called for a brand new composition of the board and criticized the dearth of flight experience and independence of the present members.
Southwest last month appointed an experienced airline industry executive to its board to handle other concerns raised by Elliott. The airline also adopted a “Poison pill” Shareholder rights plan to stop the activist from gaining a bigger stake.
The Wall Street Journal had previously reported on Elliott’s plans.
