Southwest Tries to Fend Off Elliott With ‘Poison Pill’

Southwest Airlines’ board of directors approved a limited-duration shareholder rights plan in response to Elliott Investment Management’s 11% stake in the company. 

The carrier said the plan — known as a “poison pill” — was designed to deter any person or group from acquiring a controlling stake in the company without properly compensating other shareholders. The plan will expire in one year, with any extension requiring shareholder approval.

The plan also only goes into effect if any person or group acquires at least 12.5% of the company, according to a regulatory filing Southwest posted Wednesday morning. 

Southwest said Elliott has filed regulatory filings with antitrust authorities that could allow it to acquire greater interest in the airline as early as July 11. The hedge fund announced that it had a $1.9 billion stake in Southwest in June, making it one of the carrier’s largest investors. 

“In light of the potential for Elliott to significantly increase its position in Southwest Airlines, the Board determined that adopting the Rights Plan is prudent to fulfill its fiduciary duties to all Shareholders,” Southwest chairman Gary Kelly said in a statement. 

Elliott did not immediately respond to a request for comment. 

Elliott has been pushing for Kelly and CEO Bob Jordan to resign ever since the news of its stake became public. The hedge fund has argued that a leadership change would allow the carrier to turn around its recent underperformance and make significant changes to its business model. 

Kelly said Southwest has “made a good faith effort” to engage with Elliott since its initial investment. 

In 2024, Southwest has so far underperformed. The carrier recently lowered its outlook for the second quarter, which further prompted Elliott to advocate for leadership changes. Southwest has struggled with a range of issues including Boeing delivery delays, higher labor costs and softened demand for their economy products. 

Jordan has previously said that the company is considering adding a premium product to its cabins and doing away with its open boarding process.