Southwest board succumbs to Elliott Management demands

Southwest Airlines (LUV) is undergoing significant leadership changes in response to ongoing pressure from activist investor Elliott Management. The airline has announced a major board reshuffle, with six board members set to retire in November. Additionally, Executive Chairman Gary Kelly will step down from his position in 2025.

Catalysts co-hosts Seana Smith and Brad Smith dive into the details.

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This post was written by Angel Smith

Video Transcript

And a few other tickers that we're following this morning, Southwest Airlines Board getting a major overhaul, six members will retire in November and the executive chairman, Gary Kelly will step down in 2025.

The shake up comes amid pressure from activist investor, Elliott management shares right now are down by about 4.5%.

This was a significant effort from Elliott to really try and reshape the board towards some of its own inclinations.

And um ultimately, there was a letter that was put out to uh address some of the corporate governance changes and uh that was sent to the employees internally, really just speaking about and shareholders, as you say is who that went to really talking about how Elliot investment was met with.

Uh the objective was to meet and then ultimately commence productive dialogue.

Uh That dialogue led to some of the overhaul that we're talking about here today.

And it's a larger question of what the future of Southwest Airlines looks like as a service, especially if Elliott's position is we need to extract even more profits from this business.

Does that mean consumers are paying more for those tickets or getting nickel and dimed at certain corners and turns through their flight experience.

And I think Elliot would also like to see a bit more changes coming to leadership as well because we know that they have been pushing for that of Ceo Bob Jordan that in fact has not happened, Southwest reaffirming its support for Ceo Bob Jordan.

But again, remember that Elliott pushed for even more than this.

They proposed 10 new directors for the 15 member board and they have accused Southwest of refusing to modernize their operations.

Therefore, that hurts shareholders, leaving Southwest really unable to stand some of the operational and competitive challenges that we are seeing from others within the industry.

So Elliott still put for even more changes than what we are seeing from Southwest Southwest coming out saying that they are trying to work with Elliott here to find a solution here going forward.

They wanted to be a quote unquote collaborative resolution with Elliott here and they have proposed again the 10 new directors for the 15 member board.

So again, continuing to be a stock to watch here.

At least today, we're seeing a move downward in the stock.

We know it has been an underperformer, especially when you compare it to the broader S and P.