Elliott starts proxy fight at Southwest

Elliott Management will launch a proxy fight at Southwest Airlinesand intends to nominate up to ten directors to the company’s 15-member board, the activist said on Tuesday evening. This is a long-awaited move after weeks of back and forth between the airline and the investor.

Elliott plans to call a special meeting rather than wait for the company’s annual shareholder meeting. Southwest’s last shareholder meeting was held in May.

The activist has already amassed an economic stake of around 11 percent, although only 7 percent is in common stock. According to Southwest’s charter, Elliott must own at least 10 percent of the company to be able to call an extraordinary general meeting, a threshold he will likely soon exceed.

Elliott’s ten nominees are:

• Michael Cawley, former Ryanair Deputy CEO
• David Cush, former CEO of Virgin America
• Sarah Feinberg, former Secretary of Transportation of the US Federal Agency
• Josh Gotbaum, a former Lazard Banker and appointment to the White House
• Dave Grissen, former Marriott International Group President
• Nancy Killefer, former senior partner at McKinsey and head of the Treasury Department
• Robert Milton, former CEO of Air Canada and former United Airlines Chair
• Gregg Saretsky, former CEO of WestJet
• Eash Sundaram, former JetBlue Executive Vice President
• Patty Watson, NCR Atleos Technical Manager

“The high qualifications of these candidates contrast with those of the current board, which prior to Elliott’s June 10 letter did not include a single independent director with airline experience,” Elliott said in a statement.

Elliott announced his investment in Southwest in June and wrote a letter to the company’s board of directors saying that he believed CEO Bob Jordan and Chairman Gary Kelly were responsible for the company’s rapid decline in performance and that Southwest needed to replace them.

Southwest rejected these demands, with CEO Jordan telling CNBC that Elliott’s involvement with the company was not meaningful. The activist had already indicated in his second letter to Southwest’s board that he would try to call a special meeting.

There are no Elliott employees on the 10-person list. The activist has already indicated that he is not seeking absolute control of the company, but rather wants a comprehensive review of the business in addition to leadership.

The news comes on the same day that another company targeted by Elliott, Starbucksannounced the appointment Chipotle CEO Brian Niccol as the new head of the coffee chain. There were signs that Elliott’s push at Southwest would also be stepped up. Saretsky, one of the activist’s ten nominees, resigned from the board of Sabre Corp., a flight booking software company, citing dealings with a “third party” that had invested in a Sabre client, according to a securities filing. His resignation took effect Monday, before news of Elliott’s slate of candidates became public, the filing said.

Southwest announced last month the biggest changes to its business model in the airline’s more than 50-year history: The company ended its open-seat model and instead introduced premium seats with more legroom.

Southwest had been exploring such changes for years, but oversupply in the U.S. market has driven down prices, forcing the airline and its competitors to adopt new business models to generate more revenue. For example, budget carrier Spirit Airlines recently announced plans to offer a type of business class with larger seats at the front of the cabin that will offer free Wi-Fi, snacks, drinks and checked baggage.

The airline’s executives will explain their strategy in more detail at an investor day next month.