DALLAS (AP) — Elliott Investment Management is launching a proxy battle with Southwest Airlines, planning to nominate 10 candidates to the airline’s 15-member board whose performance has lagged behind rivals.
The hedge fund told CQ late Tuesday that naming a slate of board candidates represents “a critical step toward implementing much-needed change at Southwest.”
The Dallas-based airline had no immediate comment on Elliott’s plans.
Elliott has amassed a roughly 8 percent stake in Southwest, according to a filing Tuesday. The airline’s shares have fallen 12 percent this year, while the S&P 500 has gained 14 percent. It hasn’t been a stellar year for airlines, but Southwest’s shares have suffered more than those of Delta Air Lines and United Airlines.
The company’s second-quarter operating margin lagged far behind Delta, United and American Airlines, and analysts expect Southwest to post a loss in the third quarter.
“The urgency for change is underscored by the continued significant deterioration in Southwest’s performance” since Elliott announced his planned restructuring of Southwest, the company said. Elliott had previously called for the replacement of CEO Robert Jordan and Chairman Gary Kelly, whom the company accuses of allowing Southwest to lag behind changes in the airline industry.
Southwest announced last month that it would make changes to boost revenue, including switching to fixed seating for passengers and offering more legroom at higher prices for about a third of the seats. Jordan promised to provide more details on the measures in September.
Elliott’s list of candidates includes former CEOs of Air Canada, Canadian low-cost airline WestJet and Virgin America, former executives of JetBlue and Ireland’s Ryanair, and a former U.S. Department of Transportation official.
Elliott has previously pushed other companies he saw as underperforming to make management changes. Starbucks announced Tuesday that it would replace its CEO, about two months after Elliott began lobbying for new leadership.
The Wall Street Journal previously reported on Elliott’s plans to nominate candidates for Southwest’s board of directors. According to the report, the hedge fund is preparing to call a special meeting for a shareholder vote.
