WEST PALM BEACH, Fla. - Elliott Investment Management L.P., managing funds with an 11% stake in Southwest Airlines Co. (NYSE: NYSE:LUV), has called for a Special Meeting of Shareholders to elect eight new independent directors and remove eight current ones. The investment firm, which announced the move today, is pushing for the meeting to take place on December 10, 2024.
Elliott's campaign for change at Southwest follows what it describes as "exhaustive attempts" to persuade the airline to implement governance changes. The firm has nominated a slate of directors it believes can hold the company's leadership accountable and ensure improved performance.
The nominees include industry veterans such as Michael Cawley, former deputy CEO of Ryanair; David Cush, former CEO of Virgin America; and Robert Milton, former CEO of Air Canada. Also on the list are Sarah Feinberg, former head of the Federal Railroad Administration, and Patty Watson, a technology executive at NCR (NYSE:VYX) Atleos.
In a statement, Elliott partners John Pike and Bobby Xu expressed concern that without a reconstituted board, Southwest's recent strategic initiatives might fall flat, repeating a cycle of "empty promises and unfulfilled potential." They urged shareholders, especially those involved in share lending, to ensure they can vote and called on Southwest to confirm the meeting date without delay.
Elliott's push for change comes amid a broader narrative of shareholder activism in the airline industry, where governance and performance are often under scrutiny. The firm's proposals also include the removal of current Southwest directors, including former CEO Gary Kelly and other long-standing board members.
The investment firm has advised shareholders to read the proxy statement, which will be filed with the U.S. Securities and Exchange Commission, for more information on the proposed changes and how to vote.
This move by Elliott, based on a press release statement, highlights the increasing role of activist investors in shaping corporate governance and strategy within major companies.
In other recent news, Southwest Airlines has been a focal point for investor activity. Elliott Investment Management has called for a special shareholder meeting with the airline, advocating for an overhaul in the company's leadership and proposing a plan to replace ten board directors. This move by Elliott underscores the fund's dissatisfaction with Southwest's current management. However, Southwest Airlines has not yet responded to these requests.
Simultaneously, Susquehanna has increased the price target for Southwest Airlines to $30, while maintaining a neutral rating on the stock. The firm has acknowledged the airline's new initiative, "Southwest. Even Better." as a step in the right direction. Analysts from Susquehanna have set quarterly estimates for the fiscal year 2025 and annual estimates for the fiscal year 2026, expecting a 1.5% increase in available seat miles (ASMs) for both years.
Jefferies has upgraded Southwest Airlines shares to Hold with a new price target of $32, citing the potential for Southwest to achieve about half of its $4 billion goal in incremental EBIT by 2027. TD Cowen has also maintained its Hold rating on the company, projecting higher than consensus earnings per share (EPS) for the third quarter. Amidst these developments, Southwest's director, Rakesh Gangwal, has shown confidence in the airline's direction by investing over $100 million in company shares.
InvestingPro Insights
As Elliott Investment Management pushes for significant changes at Southwest Airlines, it's crucial to examine the company's current financial position and market performance. According to InvestingPro data, Southwest's market capitalization stands at $18.35 billion, reflecting its substantial presence in the airline industry.
An InvestingPro Tip highlights that Southwest holds more cash than debt on its balance sheet, which could be seen as a positive factor in its ability to navigate potential changes and investments proposed by Elliott. This financial stability might also provide some reassurance to shareholders considering the proposed board restructuring.
Another relevant InvestingPro Tip notes that 9 analysts have revised their earnings upwards for the upcoming period. This could suggest some optimism about Southwest's near-term prospects, despite the governance challenges highlighted by Elliott.
The company's revenue for the last twelve months as of Q2 2024 was $27.03 billion, with a revenue growth of 7.54% over the same period. This growth, albeit modest, indicates that Southwest has been able to expand its business despite industry headwinds.
It's worth noting that Southwest's P/E ratio (adjusted) for the last twelve months as of Q2 2024 stands at 33.35, which aligns with another InvestingPro Tip stating that the company is trading at a high earnings multiple. This valuation metric could be a point of discussion for both Elliott and existing board members when considering the airline's future strategy and performance expectations.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could be valuable in assessing the potential impact of Elliott's proposed changes on Southwest's future performance and valuation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.