By ALEXANDRA SKORES, Dallas Morning News
Activist investor edges closer to forcing meeting, board changes
Activist investor Elliott Investment Management disclosed it has a 7% beneficial ownership in Dallas-based Southwest Airlines, a step closer to allowing shareholders the chance to elect new board members in a special meeting. After months of pressure on Southwest over slumping financial performance and a series of operational missteps, Elliott upped that pressure on the air carrier by detailing to the company, investors and regulators that it was approaching a key stake that would allow it to call a new meeting of shareholders and potentially oust company leadership.
In a regulatory filing Monday, Elliott reported that it has accumulated 23.3 million common shares along with 18.6 million physical derivative agreement swaps, giving it voting power over 41.9 million shares and roughly 7% of the company’s value. Investors must file with the Securities and Exchange Commission after surpassing a 5% ownership stake.
Elliott also disclosed it “intends to provide shareholders with an opportunity to elect new highly qualified board members, whether by requesting that the issuer call a special meeting of shareholders or at an annual meeting of shareholders.” The hedge fund said it has found a “a number of” qualified former airline executives and industry leaders eager to serve on the board. Under Southwest’s bylaws, special meetings of shareholders may be called by the chair of the board, president or the CEO and can be called on written request “stating the purpose or purposes” by the majority of the whole board of directors, one or more shareholders that, at the time the request is delivered collectively, own 10% of greater of all shares entitled to a vote at the proposed special meeting.
According to the filing, Elliott has less than 10% but has been accumulating common shares quickly over the last 60 days. Keith Gottfried, managing member of Gottfried Shareholder Advisory, said Elliott is making it clear that it is moving quickly on its asks.
“The message is there,” Gottfried said. “Particularly in the past week, they’ve been acquiring shares at a fairly rapid clip and they’re probably doing that to lend credibility to their indication that they are prepared to call a special meeting.”
In June, Elliott disclosed its total 11% economic interest in the company, made up of common stock and derivatives. That has not changed since its initial letter to Southwest’s board. That 11% economic stake includes another chunk of stock that does not count as voting shares.
“Contrary to the company’s statements, Elliott is not seeking control of Southwest,” Elliott wrote in a July 8 letter to the board. “Quite simply, we are seeking to strengthen oversight, upgrade management and improve company performance.”
Southwest has an investor day scheduled for late September. More information is expected on its new seating policies, which were announced at its latest quarterly earnings call. The assigned seats are a step closer to changing the airline’s roots and an opportunity for Southwest to perform better financially.
“(Elliott is) trying to send a message that if those discussions don’t result in the leadership changes and the business review that they’ve called for, that they’re moving quickly to position themselves, to request the special meeting to replace directors with their candidates.”
Carrier on board with search site
Airline changes course to make its fares available on Kayak amid investor worries
By ALEXANDRA SKORES, Dallas Morning News
Southwest Airlines is now available on travel deal search engine Kayak, just a few months after it joined Google Flights. Southwest, which has traditionally held to keeping its airfares available on its website and mobile app, is doing away with the old practice and trying out search engines like Kayak. Beginning Aug. 5, Southwest’s airfares were integrated into Kayak’s travel website.
“This is a great development for travelers,” said Steve Hafner, CEO of Kayak, in a release. “We first started showing Southwest in 2022 to KAYAK for business customers. We’re thrilled to expand that relationship to the millions of leisure travelers who use KAYAK.”
It will allow customers to compare Southwest fares and flight times with competing carriers, which was more difficult before the Dallas-based company began partnering with third-party websites to sell tickets.
“We’re excited to continue finding ways to expose more consumers to the appeal of our unique combination of value, friendly and flexible policies and breadth of flight service that’s built around the hundreds of unique routes Southwest offers among 117 airports across 11 countries,” a Southwest spokesperson said in an email.
In May, Southwest joined other major airlines on Google’s flight search engine, which lets travelers look at one airline there and another back during a trip. It began with a “pilot” for its partnership with Google. It’s one of many changes Southwest is making as it faces pressure from investors to improve lagging financial results, inching it toward an airline model that resembles its competitors. In its latest quarterly earning call, Southwest announced it would end open seating and add premium seating options. More information is expected at its investor day in September.