In a scenario reminiscent of the HBO series “Succession,” Southwest Airlines (NYSE:LUV) is embroiled in a high-profile proxy battle as Elliott Investment Management seeks to overhaul the airline’s leadership. Following a significant $1.9 billion investment in June 2024, representing roughly 11% of Southwest’s shares, Elliott has expressed strong dissatisfaction with the current management, led by CEO Bob Jordan and Chairman Gary Kelly. The firm has criticized its leadership for “poor execution” and an “unwillingness to evolve” the company’s strategy.
A Turnaround Effort Under Scrutiny
Southwest Airlines has faced a series of disappointing earnings reports over the past year. In response, the airline announced the elimination of its long-standing seating policy in July as part of a broader strategy to boost profitability. However, Elliott Investment Management has deemed these efforts insufficient, continuing its campaign to replace much of the airline’s board. On August 13, Elliott unveiled a list of 10 proposed board members, including former airline CEOs like Robert Milton of Air Canada (ACDVF) and David Cush of Virgin America. The firm argues that these candidates would bring “relevant expertise, fresh thinking, and accountability” to Southwest.
Southwest Airlines has countered by affirming its support for the current leadership. In its statement, the company reaffirmed its commitment to shareholder value and dismissed Elliott’s demands. The airline highlighted that since Elliott initiated its campaign against Southwest Airlines, the Board has continually sought to engage constructively and prioritize the interests of all shareholders. Despite this, Elliott has repeatedly ignored these attempts.
Navigating the Proxy Battle
Southwest is set to hold a meeting in early September to attempt a “collaborative resolution” with Elliott. Despite Elliott’s substantial shareholding, it does not currently hold the majority necessary to unseat the existing board members or vote in new ones. The investment firm, which owns approximately 8% of Southwest’s stock and 11% when including derivatives, needs to secure additional support to initiate a vote. This situation echoes the fictional boardroom maneuvering depicted in “Succession,” where Kendall Roy attempts to rally shareholders to his cause.
Southwest Airlines remains confident in its current leadership, stating, “The Southwest Airlines Board remains confident that the airline has the right leadership team in place to evolve the business and to lead Southwest Airlines forward.”
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