Southwest Braced for Boardroom Battle as Activist Investor Nominates 10 New Members

Southwest Airlines’ activist investor is ramping up the pressure on the carrier’s leadership team. Late on Tuesday, Elliott Investment Management published a list of ten candidates that it wants to see on Southwest’s board. It said this followed a “months-long global search.”

Among them are four former airline CEO and/or deputy CEOs. Other nominees come from what Elliott describes as “complementary” sectors. 

The big names include David Cush, former CEO of Virgin America, Dave Grissen, former Group President of Marriott International and Michael Cawley, the former deputy CEO of Ryanair. There are currently 15 members on Southwest’s board of directors.

In June, Elliott took a $1.9 billion stake in Southwest, making it one of the carrier’s largest investors. Since then, it has engaged in a fiery war of words with the airline’s leadership team. 

Just last month, Elliott partner John Pike and portfolio manager Bobby Xu wrote a public letter to the airline’s board. “We have become increasingly concerned by the ‘self-help’ half-measures that the Board appears to be contemplating and adopting, none of which will do anything to allay the lost credibility of Southwest’s management,” said the pair.

The 10 Elliott Nominees are:

In an open letter, Elliott claims the nominees offer Southwest shareholders a different approach: “When nominated, these Candidates would give shareholders a choice between the Company’s existing Board, which has delivered poor returns for shareholders and has not held management accountable for Southwest’s unacceptable performance, or a new Board that brings relevant expertise, fresh thinking and accountability,” Elliott said.

In earlier developments, Elliott pushed to replace both Bob Jordan, who has been chief executive since 2022, and executive chair Gary Kelly, who was Jordan’s predecessor as CEO. Jordan has publicly resisted calls to step down.

In July, Southwest added longtime airline executive and IndiGo co-founder Rakesh Gangwal to its board. The move was the airline’s latest defense from the hedge fund which has previously criticized Southwest’s leadership for not having enough external aviation experience. 

Gangwal was previously the CEO and chairman of U.S. Airways and held executive roles at United Airlines and Air France. He helped found IndiGo, a low-cost carrier that has become the biggest airline in India.

How Has Southwest Responded?

On Wednesday morning, Southwest issued a sharply worded statement in response to Elliott's nominations. "Since Elliott launched its campaign against Southwest Airlines, the Board has consistently sought to engage constructively and in the best interests of all Shareholders. Elliott has dismissed those efforts at every turn.

"After Elliott recently agreed to a meeting with Southwest Airlines in early September to discuss a collaborative resolution, including continuing significant Board refreshment and other governance enhancements, Elliott unilaterally decided instead to publicly announce its intention to replace a majority of Southwest Airlines’ Board," read the statement.

Southwest highlighted that as part of "continued refreshment efforts," it appointed eight new independent directors over the last three years.

Stormy Skies for Southwest

Elliott previously said it believes that a leadership change at Southwest would help the airline implement more changes to its business model to be profitable. Many analysts believe Southwest has underperformed in 2024, due to a range of issues including Boeing delivery delays, high labor costs, and sustained demand for premium travel.

In its most recent quarter, the carrier reported a net income of $367 million, a 46% decrease compared to the same time last year. Speaking during the company’s Q2 earnings call Jordan said: “We are taking urgent and deliberate steps to mitigate near-term revenue challenges and implement longer-term transformational initiatives that are designed to drive meaningful top and bottom-line growth.”

Among the initiatives is a radical shake-up of its decades-old business model. The company is transforming its boarding policy and adding premium seating to stay relevant to changing consumer preferences. It will also start flying red-eye overnight flights. Jordan described the project as “a transformational change that cuts across almost all aspects of the company.” 

However, even these moves haven’t been enough to satisfy Elliott, which is pushing for a bigger shake-up. Full details of Southwest’s changes are expected to be announced during an investor day event in late September.

Bob Jordan is due to speak at the Skift Aviation Forum in Dallas, Texas in November. For more information and to get your ticket click here.

This story has been updated to include a response from Southwest Airlines.