Elliott Management, which has been calling for leadership and board changes at Southwest Airlines since taking a $1.9 billion stake in the carrier in June, sent a second letter to Southwest shareholders on Tuesday, informing them of the investment company's intent to call a special meeting in the coming weeks, and to encourage shareholders to ensure they have full voting rights. The first letter was sent in late August.
"Given the reckless and chaotic actions that Southwest's leaders keep taking in an attempt to preserve their jobs—and the resulting risk to the Company and its constituents—the need for change is urgent, and our request for a special meeting may come as soon as next week," wrote Elliott partner John Pike and portfolio manager Bobby Xu in the letter.
Southwest earlier this month announced sweeping changes to its board of directors, with six retiring in November, and chairman and former CEO Gary Kelly to step down after Southwest's 2025 annual meeting. The carrier said it would consider up to three candidates of the 10 that Elliott put forth previously, but that CEO Bob Jordan would remain—a move that Elliott does not endorse.
The carrier in July also announced it was to introduce assigned seating and a premium cabin with extra legroom as it looks for ways to increase revenue.
Further, earlier this week, Southwest warned employees of the "tough decisions" to be announced in the "coming days" to restore profits and fend off the takeover challenge from Elliott, Bloomberg reported. Southwest is holding its investor day on Sept. 26.
Elliott added in the letter that it does "not support the Company's current course, which is being charted in a haphazard manner by a group of executives in full self-preservation mode." It also encouraged shareholders to call back all their shares prior to Oct. 7, which is the current record date set by Southwest's board, so they could vote those shares in any upcoming special meeting, according to Elliott.
"In the coming weeks, we will be formally requesting a special meeting to provide you with a choice between the new directors that we have put forward—who we believe possess the qualifications and skills to guide Southwest to a brighter future—or a Board that lacks relevant expertise and has pre-committed itself to supporting failed CEO Bob Jordan," Pike and Xu wrote.
Southwest in a statement responded that it had "made every effort to reach a constructive resolution with Elliott." The carrier added that since June, board members have met with investors for "candid feedback," and "it is clear Shareholders desire that Southwest engage and seek a compromise with Elliott that is in all Shareholders' best interests and allows the Company to focus on executing its transformative strategy to move Southwest forward. … But acquiescing to a single Shareholder's demand for absolute control of the Company is not a compromise."
Southwest further stated that Elliott has "inexplicably refused" to allow its board candidates to meet with the Southwest board and "required them to sign agreements that explicitly prevent them from joining the Board without Elliott's approval." The carrier remains willing to consider "in good faith" Elliott's candidates, if it will allow the Southwest board to meet with them.
Southwest also said it "strongly believes that CEO Bob Jordan is the right Leader to successfully execute the Company's robust strategy to transform the airline and deliver sustainable Shareholder value." Regarding Elliott's request for shareholders to call back their votes suggesting that Southwest has set "false record dates as a defensive strategy is untrue and disingenuous. … If Elliott submits a request for a Special Meeting, the Board will fulfill its duties to carefully review the request in good faith."