In a letter sent Monday to Southwest Airlines’ board of directors, Elliott Investment Management again called for new leadership at the carrier and suggested it could initiate a proxy fight. The investment company in June purchased $1.9 billion in Southwest stock, about 11 percent of outstanding shares.
The company “indicated that it is open to collaborating with the board on a path forward, but absent alignment, Elliott intends to move expeditiously to give shareholders a direct say on the necessary leadership changes,” it wrote in a press statement.
Since its first letter sent June 10, Elliott said it has spoken with “numerous shareholders representing a significant percentage of Southwest’s shareholder base,” and the feedback “underscores a profound lack of confidence” in the carrier’s “leadership, strategy and performance.” In addition, Elliott noted that Southwest shareholder Artisan Partners on June 12 also called for new leadership at the carrier.
Southwest in a statement said it sought good faith efforts to meet with Elliott to better understand their views” but alleged the investment company is “conditioning any serious discussions on an immediate CEO change.”
“We remain open to constructive conversations with Elliott, including evaluating additional strong and independent director candidates, as we continue to solicit candid feedback from all shareholders,” the carrier continued.
Southwest on Monday announced that it had added a 15th board member, Rakesh Gangwal, former president and CEO of US Airways and co-founder of Indian carrier IndiGo. He also previously held executive positions with Air France and United Airlines and was president and CEO of Worldspan Technologies.
Southwest said Gangwal’s appointment “is further evidence that the board and leadership team are committed to a strategy of driving sustainable value for all shareholders while staying true to the Southwest Airlines brand and culture.” Elliott said the carrier “handpicked a new director in a clear attempt to entrench itself and the current management team.”
The carrier on July 3 also adopted a limited-duration shareholder rights plan, which “is designed to deter the acquisition of actual, de facto or negative control of Southwest Airlines by any person or group without appropriately compensating its shareholders for that control.”
Elliott called that move “an antiquated and shareholder-unfriendly ‘poison pill’ ” to prevent the investment company from increasing its stake above 12.5 percent.
