Southwest Airlines, a major player in the airline industry, asserted on Wednesday that it believes it has the "right leadership team in place" to propel the airline into a promising future. This statement comes one day after activist investor Elliott Investment Management unveiled its intentions to a significant reshuffle of the airline's board of directors. Elliott, a well-known active investor, disclosed late Tuesday that it plans to nominate 10 independent directors to Southwest's board, emphasizing the need for "urgent changes" within the organization.
Among the potential candidates are notable figures including Eash Sundaram, a former executive of JetBlue Airways, Michael Cawley, who previously served as the deputy Chief Executive of Ryanair, Robert Milton, the former Chairman of United Airlines, and Dave Grissen, a past Group President of Marriott International. Last month, Elliott had made it clear that it aims to afford Southwest shareholders "a direct say" in the proposed leadership changes.
If the airline management does not engage cooperatively, Elliott is prepared to advocate for these changes more aggressively. Elliott currently manages a group of funds that collectively possess a significant 11% economic interest in Southwest Airlines. In a bold statement made late Tuesday, Elliott noted, "When nominated, these candidates would provide shareholders with an option between the current board—which has failed to deliver satisfactory returns and has not held management accountable for the airline's unsatisfactory performance—and a new board infused with relevant expertise, fresh perspectives, and accountability." Despite these tensions, Southwest Airlines' shares witnessed a modest increase of 0.3% during late-afternoon trading on Wednesday.
However, it's noteworthy that the stock has experienced a considerable decline of roughly 12% throughout this year, raising further concerns among investors. In light of Elliott's campaign, Southwest's response emphasized confidence in its current leadership. The airline stated on Wednesday that its board firmly believes it has the right team in place to adapt and evolve the business strategy moving forward.
In a pointed retort, Southwest criticized Elliott for dismissing its engagement efforts at every opportunity. "After Elliott recently agreed to a meeting with Southwest Airlines in early September to deliberate on a collaborative resolution—including a significant board refresh and other governance improvements—it was disconcerting to see Elliott shift gears and publicly announce its intentions to overhaul a majority of the Southwest Airlines board," said a spokesperson for the airline. In response to the evolving situation, Southwest made it known late last month that it is taking proactive measures to tackle short-term revenue challenges amid a decline in second-quarter earnings compared to the previous year. On Wednesday, the airline mentioned that its board will evaluate Elliott's suggested nominees and reiterated its openness to discussing potential ideas with the investor to enhance shareholder value..