Activist hedge fund Elliott Investment Management said Thursday that Southwest Airlines' Bob Jordan is to blame for Southwest Airlines' financial woes, hours after the struggling airline raised its profit and revenue outlook. He accused him of being the CEO.
Elliott, led by billionaire Paul Singer, reaffirmed its intention to call a special meeting to remove its current board of directors and asked shareholders to confirm their ability to vote all their shares ahead of the meeting. encouraged.
“Why is Mr. Jordan the right leader to implement these ‘transformational’ changes after years of unacceptable financial results and until recently denying the actions announced today? ” Elliott wrote in a statement..
“The answer is clear: He isn't.”
In response, Southwest Airlines issued a statement supporting Jordan, claiming Elliott was not pursuing a “constructive” relationship with the airline.
Southwest Airlines said, “Elliott's attempts to disrupt Investor's Day and his failure to provide any feedback or suggestions on Southwest Airlines' transformation plans are clearly evidenced by Elliott's attempts to disrupt the airline's future and the interests of its shareholders as a whole. “It has become clear that he continues to focus on public attacks and seizing control of the company.”
Southwest shares soared 7% after the company announced a turnaround plan at an investor conference, following intense pressure from Elliott to shake up its management team. The stock closed 5.4% higher at $29.93.
Southwest Airlines raises third-quarter revenue forecast, announces industry veteran appointment to board, claims new business plan will generate an additional $4 billion in preinterest and tax earnings by 2027 did.
But Elliott warned shareholders that the investor meeting would have a “familiar ring” and be filled with “old” promises.
“Southwest Airlines has similarly committed to billions of dollars in revenue growth in 2021 and 2022,” Elliott said in a statement. “In return, we have generated billions of dollars in revenue. deterioration Under the leadership of CEO Bob Jordan. ”
The hedge fund said its “extensive” meetings and calls with Southwest Airlines executives further reinforced its belief that the airline's current management “does not have the ability to realize Southwest's potential.” said.
But Southwest said the hedge fund had “predetermined its position” before speaking with Jordan or hearing about the company's plans, adding that it had “predetermined its position demanding immediate replacement of a majority of the board and the CEO.” I remain persistent,” he said.
Mr Elliott is calling for fundamental changes to the airline's top leadership, targeting in particular Jordan and Chairman Gary Kelly, who has agreed to step down next year under mounting pressure from hedge funds.
Hedge funds also accused the company of not having enough industry expertise across airlines.
Southwest said it has added or appointed eight new board members over the past three years. The airline claimed it had “invited” Mr. Elliott to participate in the board renewal process, but instead Mr. Elliott barred director candidates from meeting with Southwest's leadership.
The airline said, “If Elliott allows the board to meet with director candidates, Southwest's board of directors remains willing in good faith to consider appointing Elliott's director candidates to the board.'' “There is,” he said.
Southwest has already unveiled changes to its business aimed at fending off Elliott's inroads. Over the summer, the company announced it would introduce reserved seats and seats with extra legroom, a first in its nearly 60-year history.
But Elliott said Southwest Airlines' announcement that implementing these changes would take years is too little, too late.
“Today's announcement that the addition of reserved seating and premium products will take several years to implement, while other companies in the industry have implemented similar changes in a much shorter period of time, gives Mr. Jordan the vision to implement these initiatives. “This is further evidence of a lack of competency,” Elliott said. .
