The second largest shareholder of Southwest Airlines on Monday called for special meeting of shareholders to vote on its slate of eight new directors, which would represent a majority of the struggling airline’s board.
Elliott Management, which has been highly critical of Southwest in recent months, is pushing for leadership changes and an overhaul of the company’s strategy. Southwest has responded by making some changes, but not enough to appease the fund, which is led by billionaire investor Paul Singer.
“Absent a thorough reconstitution of its board, the story of Southwest will remain one of empty promises and unfulfilled potential,” Elliott said in a release naming its proposed directors.
The slate includes the former CEOs of Virgin America, Air Canada and Westjet as well as a former senior official at the Department of Transportation.
The hedge fund recently acquired a stake of 11% in the struggling airline and is calling for the meeting to be held on Dec. 10. Elliott had previously requested 10 directors, but Southwest trimmed its board from 15 members to 12 in September. That change takes effect immediately following the company’s 2025 annual meeting.
Elliott has argued that Southwest leaders haven’t adapted to changes in customers’ preferences and failed to modernize the airline’s technology, contributing to massive flight cancellations in December 2022 that cost the airline more than $1 billion.
Southwest has improved its operations and its cancellation rate since the start of 2023 is slightly lower than industry average and better than rivals United, American and Delta, according to FlightAware. However, Southwest planes have been involved in a series of troubling incidents this year, including a flight that came within 400 feet of crashing into the Pacific Ocean, leading the Federal Aviation Administration to increase its oversight of the airline.
Late last month, Southwest Airlines executives unveiled their vision for Southwest 2.0, giving passengers assigned seats for the first time, charging them extra for more legroom and offering red-eye flights. Bags still fly free, the Dallas-based company said.
The airline will also repackage its sale of vacation packages. It will seek partnerships with international airlines, starting with Icelandair next year, that executives say will make Southwest credit cards and frequent-flyer program more attractive.
The changes will amount to the biggest ever at Southwest, which is the original low-cost airline but is now well into middle age and suffering from sagging financial results.
For its first 50 years, Southwest was a profit machine never logging a full-year loss until the pandemic crushed air travel in 2020.
Since then, Southwest has been more profitable than American Airlines but far less so than Delta and United.
