Southwest Airlines, a major player in the aviation sector, is facing pressure from its activist investor Elliott Investment Management to initiate significant transformations within its board of directors. Elliott, holding an approximate 11% economic stake in the airline, has officially requested a special shareholder meeting to vote on the appointment of eight new independent directors.
This meeting is proposed to take place on December 10. Following this announcement, Southwest's shares experienced a decline of 1.9% during trading hours. In a statement, Elliott Partner John Pike and Portfolio Manager Bobby Xu articulated their position: "Absent a thorough reconstitution of its board, the story of Southwest will remain one of empty promises and unfulfilled potential." Their aim is to remove the existing eight directors, which include Executive Chairman Gary Kelly, William Cunningham, Thomas Gilligan, and Jill Soltau, who have come under scrutiny for their leadership. Notably, Southwest had previously disclosed plans for board renewals, announcing that Cunningham, Gilligan, and Soltau are set to retire in November 2023.
Additionally, the airline revealed that Executive Chairman Gary Kelly intends to step down in 2025, and that it would appoint four new independent directors, which may also include some candidates proposed by Elliott. Despite these developments, the airline did not respond to a request for comment from MT Newswires regarding the ongoing situation.
Last month, Southwest disclosed its strategy to implement a $500 million cost-saving initiative which encompasses reduced hiring alongside other efficiency measures. This moves comes alongside an optimistic adjustment to its third-quarter revenue guidance per available seat mile. Elliott's demand for board restructuring follows its public advocacy for changes at Southwest.
Pike and Xu emphasized in their statement, "Following Elliott's public push for changes, Southwest has responded with a series of long-overdue strategic and corporate-governance initiatives, promising that better performance will follow. However, Southwest's shareholders have heard these sorts of promises before.
What they need today, at the outset of this attempted turnaround, is an experienced, highly qualified board to oversee the changes and ensure successful execution." The list of Elliott's eight proposed nominees is impressive, featuring candidates such as former Ryanair Deputy Chief Executive Michael Cawley, former Virgin America CEO David Cush, ex-Department of Transportation official Sarah Feinberg, and former Marriott International Group President Dave Grissen.
These individuals, with their diverse and extensive backgrounds, could potentially inject new insights and leadership into the Southwest board as the airline navigates its path towards revitalization..