Activist investor Elliott Investment Management in a Monday
letter called for a board-level committee with a mandate to review Southwest
Airlines' practices and "drive transformational
change," while again stressing it was prepared to initiate a proxy battle
for the carrier.
Elliott in June revealed a $1.9
billion stake in Southwest, representing about an 11
percent economic stake in the carrier, and called for the ouster of
Southwest CEO Bob Jordan, who the firm called ineffective. Elliott subsequently
called for the departure of board chairman and former CEO Gary Kelly, and named
10 would-be nominees to Southwest's board.
In a Monday letter to other Southwest investors signed by
partner John Pike and portfolio manager Bobby Xu, which the firm also released
publicly, Elliott said it considered "the process
that we have seen work most effectively in such situations" to be the
formation of a board-level committee that would review Southwest's business and
drive change, "and that is what we believe is needed at Southwest."
"Working with new Southwest
leadership, and drawing upon the experiences and perspectives of our eminently
qualified set of new proposed directors, all independent, such a committee
would be well positioned to support a company-wide modernization effort and
ensure that Southwest is properly positioned—in both the near term and the long
term—to achieve best-in-class performance," Pike and Xu wrote in the
letter.
Jordan has resisted Elliott's calls to step down, and
earlier this month the carrier in a statement said its board "remains
confident that the airline has the right Leadership Team in place to evolve the
business and to lead Southwest Airlines forward."
Southwest in recent months has announced dramatic changes to
its operations, including an
end to its decades-old open-seating policy and the planned launch of premium
seating with extra legroom, moves Elliott called "too little, too
late."
Southwest officials have said they would reveal more details
of "an ongoing strategic transformation of the business" at its
investor day on Sept. 26.
According
to Reuters, Jordan in a staff memo this month called the battle with
Elliott "a battle for the heart of our company and our future," and
vowed that "if
it's a fight they want, it's a fight they will get."
Elliott in the letter criticized Jordan's memo suggesting he
was actually fighting for "the ability of himself and Mr. Kelly to
continue to control Southwest, on their terms, for as long as they wish,
regardless of the results they deliver," and said it was prepared to
proceed to call a special shareholder meeting if it could not reach an
agreement with the carrier.
Reuters
reported that Elliott now holds voting power of about 9.7 percent of the
carrier, just shy of the 10 percent required to be able to call such a meeting.
Elliott said it is scheduled to meet with Southwest on Sept. 9.
Southwest in a statement said that "Southwest has made multiple overtures to engage with Elliott, and we remain prepared to meet on Sept. 9. Southwest invites feedback and during the past several months, our Board and Leadership have met with many of our Shareholders to hear from them directly. We look forward to sharing details on our continued transformation at our Investor Day on Sept. 26."
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