Southwest Airlines threw in the towel in its fight against activist investor Elliott
Southwest Airlines (LUV) reached a settlement with activist investor Elliott Investment Management, ceding six board seats to the firm seeking control over the struggling airline.
In June, Elliott announced it had acquired an 11% stake in Southwest, launching a campaign to turn around the airline’s foundering performance. Its plans included nominating a slate of directors, removing chief executive Bob Jordan, and instigating a “comprehensive business review” to help turn things around.
On Thursday, Southwest announced that it had acquiesced to at least one of those demands, nominating David Cush, Sarah Feinberg, Dave Grissen, Gregg Saretsky, and Patricia Watson as independent board members — all travel and hospitality veterans. Pierre Breber, former CFO of Chevron (CVX), will also join the board.
As part of the agreement, executive chairman Gary Kelly will also retire effective Nov. 1. This means six of Elliott’s soon-to-be 13 board seats will be held by Elliott-approved appointees.
Elliott leadership said the changes, which will go into effect on Nov. 1, will help Southwest deliver its “full potential.”
“We believe the strategic changes Southwest has announced since we commenced our engagement, together with the new independent directors and governance improvements, will position the Company to enhance business performance, drive operational execution and evaluate additional changes to create long-term shareholder value,” said Elliott partner John Pike and portfolio manager Bobby Xu in a statement.
While both Kelly and Rakesh Gangwal, director of Southwest, struck an optimistic note about the statement, they also made clear that their vision for the future of the company includes Jordan staying on as CEO.
“Our critical priority as a newly constituted Board is to coalesce as a functional body for the benefit of Southwest Airlines and work closely with Bob Jordan to preserve the Company’s unique business model and Culture, while driving growth and returning the carrier to superior financial performance,” Gangwal said in a statement.
Kelly similarly said that he believes “Southwest’s best days lie ahead under the vision and leadership of Bob Jordan and the oversight of this reconstituted Board.”
Under the cooperation agreement between the two firms, Elliott has agreed to a number of provisions, including an information sharing agreement that allows Southwest to share confidential information regarding upcoming company announcements and other matters with the activist.
Elliott also withdrew its request to call a special meeting of shareholders and no longer plans to nominate its own candidates to stand for election to the Southwest board.
Shares of Southwest fell 1.40% in pre-market trading Thursday. The company also announced better-than-expected third-quarter earnings early Thursday, bringing in record operating revenues of $6.9 billion.
Southwest also raised expected revenue per available seat mile, or RASM, the total operating revenue per plane seat, regardless of if it’s empty or full, flown one mile. The airline expects 5.5% RASM, up from 3.5% previously.
In recent months, the carrier has announced a number of changes to its business, including assigned seating (breaking with 50 years of open seating), a slew of new premium options, and red-eye flights.
Last month, the company laid out a plan that aims to generate an additional $4 billion in revenue before interest and taxes in 2027. It also said it will initiate a $2.5 billion share buyback program.
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