Seemingly out of nowhere on June 10, 2024, Elliott Investment Management announced it had acquired a $1.9 billion stake in Southwest Airlines. But the investment company wasn't satisfied merely with holding the airline's stock.
Partner John Pike and his team during the next four-plus months led an activist campaign insisting that the carrier's board be overhauled, CEO Bob Jordan be removed and replaced with an executive from outside the airline, and Southwest conduct a comprehensive business review to "evaluate all available opportunities to rapidly restore the Company's performance to best-in-class standards."
As Elliott readied for a proxy battle and continued to pressure Southwest for improved performance and modernization, the carrier during its second-quarter earnings call announced it would end its famous open-seating policy and add premium seats with extra legroom, as well as introduce redeye flights beginning in 2025. Elliott countered that the initiatives should have implemented more than a decade sooner.
By mid-August, Elliott identified 10 would-be nominees to Southwest's board of directors, and, in an Aug. 26 letter signed by Pike and portfolio manager Bobby Xu, the investment company called for a board-level committee to review the carrier's practices and "drive transformational change."
Two weeks later, Southwest announced a board "refreshment," with six members retiring in November and chairman and former CEO Gary Kelly set to leave in 2025, but said Jordan would remain CEO. Elliott was "pleased" that the board was "beginning to recognize the degree of change that will be required at Southwest."
Still, by the end of September, Elliott reiterated its call for Jordan's ouster and said it would call for a special shareholder meeting. Southwest's CEO said the investment company "inexplicably refused" to allow its board candidates to meet with the carrier's board.
On Oct. 14, Elliott called for a special shareholder meeting to vote to replace eight board members with the investment company's slate of candidates. Southwest in a statement called the move "unnecessary and inappropriate."
Ten days later, however, Southwest and Elliott reached a truce. Kelly would depart in November with the six other retiring board members, and Southwest would add six new members, five of whom were recommended by Elliott.
Jordan got to keep his job, for now. He told CNBC that the deal was good for Southwest shareholders and that he wants the board to hold management accountable and "to hold me accountable."
As for Pike? In November, he was promoted to Elliott's management committee, according to Reuters.