Southwest Rebukes Elliott's Special Meeting Request

DALLAS — Southwest Airlines (WN) has confirmed that activist investor Elliott Investment Management L.P. has requested a Special Meeting of Shareholders to consider its Board shakeup proposals.

These proposals include removing eight members of WN's Board of Directors without cause and electing eight Director candidates Elliott selected. The move grants Elliott's nominees complete control of the Board. Southwest Airlines confirmed this today. 

Southwest's Board responded by issuing the subsequent statement:

“Elliott’s Special Meeting request is unnecessary and inappropriate considering the extreme nature of Elliott’s demands. The timing of Elliott’s request to apparently pursue Board control appears designed to maximize disruption of Southwest’s execution of its important business transformation underway as we approach one of the busiest travel periods of the year. Elliott’s actions highlight its lack of understanding of Southwest’s business and its insatiable need to put its own interests ahead of those of all Shareholders. Before and since Elliott launched its campaign in June, the Board has had extensive dialogue with a significant number of Southwest Shareholders. The Board’s actions have been rooted in feedback from these conversations, including the comprehensive Board and governance changes recently announced.

Southwest also heard Shareholders’ resounding preference that the Company engage with Elliott and seek to avoid a protracted dispute. The Board has made every effort to reach a constructive resolution, including providing a reasonable settlement framework under which the Board would interview Elliott’s candidates and appoint up to three to a reconstituted 13-member Board that would be reduced to 12 following Executive Chairman Gary Kelly’s retirement at the 2025 Annual Meeting of Shareholders. For Elliott’s part, its latest framework for settlement reflects its continuing interest in seeking effective control of both the Board and management, including by installing Robert Milton, former CEO of Air Canada and a member of Elliott’s Board slate, as Executive Chair of Southwest.

Unfortunately, Elliott remains entrenched in demanding control of the Board, while continuing to block its Director candidates from being interviewed by the Board’s Nominating and Corporate Governance Committee, making it impossible to find a constructive resolution. For nearly four months, Elliott has failed to offer any substantive feedback on Southwest’s strategic plan. The Company was encouraged that Elliott might be turning the page ahead of Investor Day, when it requested a preview of Southwest’s Investor Day materials as a condition to engaging in settlement discussions. After providing Elliott a detailed, in-person preview of the Company’s plan more than a week before Investor Day, Elliott failed to provide input and continued its public attacks ahead of and following Investor Day. Elliott’s failure to provide actionable feedback, coupled with the disruptive nature of its demands, should give Shareholders pause about Elliott’s true intentions.

The Board will carefully review the Special Meeting request in accordance with its fiduciary duties, Texas law and the Company’s bylaws, including Elliott’s stated request to hold the meeting on December 10, 2024. The Board intends to discuss the process for setting a Special Meeting with Elliott in a constructive manner. The Board is committed to acting in the best interests of Southwest and its Shareholders and will provide further updates in due course. No immediate action is required of Shareholders.”

Elliot Goes on the Offensive with Podcast

Elliott summoned a special shareholders meeting on December 10 to elect "eight best-in-class nominees" to serve on Southwest's Board. To support its position, the activist investor launched a podcast series today to allow shareholders to learn more about its director nominees. The 'Stronger Southwest' podcast features 1:1 conversations with these individuals. 

The initial segment showcases Nominee Gregg Saretsky, who has accumulated substantial industry experience and leadership skills throughout his nearly 40-year aviation career. Mr. Saretsky recounts his formative years in the industry, during which "the aviation fuel got in [his] blood," as well as the lessons he has acquired from his tenure as CEO of WestJet (WS), among other positions.

He also discusses the high-value potential that he believes can be achieved at Southwest, including insights such as:

• "If a company loses its way, it loses its culture. You really have to be mindful of both those things simultaneously."
  
  
• "Great union relationships are founded on really making the investment of ensuring that issues are brought in a timely fashion and dealt with."
  
  
• "Having spent ten years of my life at the Southwest of Canada, and having been a part of some exciting changes that led to great outcomes, [it's exciting to have] the opportunity to be part of the grandfather of the low cost carriers, to help them get back to a point of real prominence and profitability in the industry."
  
  
• "Southwest just has such a great story and such a great history and so many good things to be proud of and to leverage, that being a part of that, as an airline person, would be the best thing possible."

Listeners can access the Stronger Southwest Podcast on StrongerSouthwest.com/podcast, with episodes available now on Apple, Spotify, YouTube, and everywhere podcasts are heard.

Elliott manages funds that collectively hold an investment representing an approximately 11% economic interest in WN. In the meantime, the airline continues "to move expeditiously to transform its business, improve financial performance and make meaningful Board and corporate governance changes."