Activist Investor Blames Executives for Current Struggles

On September 24, Southwest activist investor Elliott Investment Management revealed its intention to call a special shareholder meeting in the coming weeks. Holding over 10% of the airline’s stock puts Elliott in a strong position to advocate for the potential ousting of CEO Bob Jordan and other top executives.

"We do 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," Elliot stated in a letter to other shareholders. "The urgency of management and board change at Southwest could not be clearer."

The carrier has continuously shut down the idea of a leadership change. It believes that the current CEO, Bob Jordan, is the “right leader” to navigate Southwest through its current financial difficulties.

The hedge fund sees the situation in a different light, blaming Southwest executive leadership for the carrier’s continued underperformance. It recently launched a campaign to replace 10 out of 15 board directors. Elliot intends to provide more details on its proposed strategy in the airline’s Investor Day on September 26.

Southwest has confirmed that it is reviewing the hedge fund’s call for a special shareholder meeting. However, the airline sees Elliot’s actions as a direct and intentional disruption of its investor day.

The carrier has been facing financial struggles since the pandemic, due to both Boeing delivery delays and industry overcapacity. Southwest has announced plans to boost its revenue, including the introduction of assigned and extra-legroom seats, overnight flights, and network shifts. With these adjustments far underway, the airline is not looking to make any radical executive swaps.

“Any leadership change amid such a significant transformation would be detrimental to all shareholders,” commented Southwest. "...Acquiescing to a single shareholder's demand for absolute control of the company is not a compromise.”

Southwest has attempted to appease the hedge fund by replacing six directors, who plan to step down in November, and Executive Chairman Gary Kelly after his retirement in 2025. The company would also allow Elliot to nominate up to three new candidates.

FMI: www.southwest.com