Elliott Launches Proxy Battle With Southwest

Activist Investor Elliott Management to Launch Proxy Battle Southwest Airlinesand intends to appoint up to 10 directors to the company’s 15-member board, the activist said Tuesday evening.

Elliott plans to hold a special meeting instead of waiting for the company’s annual shareholder meeting. Southwest’s last shareholder meeting was in May.

Elliott’s ten candidates are:

• Michael Cawley, former deputy CEO of Ryanair
• David Cush, former CEO of Virgin America
• Sarah Feinberg, former federal transportation regulator
• Josh Gotbaum, former Lazard banker and White House appointee
• Dave Grissen, former president of Marriott International Group
• Nancy Killefer, former McKinsey senior partner and Treasury Department administrator
• Robert Milton, former CEO of Air Canada and former chairman of United Airlines
• Gregg Saretsky, former CEO of WestJet
• Eash Sundaram, former executive vice president of JetBlue
• Patty Watson, Technical Director, NCR Atleos

The activist has already amassed an economic interest of about 11%, though only 7% is in common stock. Elliott must own at least 10% of the company to call a special meeting, according to Southwest’s bylaws, a threshold it will likely soon surpass.

“The strong qualifications of these nominees contrast with those of the current Board of Directors, which prior to Elliott’s June 10 letter did not have a single independent director with airline industry experience,” Elliott said in a statement.

Elliott disclosed its investment in Southwest in June, writing to the company’s board of directors to say it believed Chief Executive Officer Bob Jordan and Chairman Gary Kelly were responsible for the company’s rapidly declining fortunes and that Southwest should replace them and initiate a corporate overhaul.

Southwest rejected those requests, with CEO Jordan telling Vscek that Elliott’s engagement with the company had not been significant. The activist had previously hinted that he would seek a special meeting in his second letter to Southwest’s board.

The 10-person list will not include any Elliott employees, the source said. TThe news comes the same day that another company targeted by Elliott, Starbucks, announced it would name Chipotle CEO Brian Niccol as the coffee chain’s new chief executive.

Last month, Southwest announced the biggest changes to its business model in its more than 50 years of flying, ending its open-seat model and introducing premium seats with more legroom.

Southwest has been mulling such changes for years, but an oversupplied U.S. market has driven down fares, forcing the airline and its rivals to adopt new business models to boost revenue. Budget carrier Spirit Airlines, for example, recently said it would start selling a kind of business class with its own larger seats at the front of the cabin that will come with free Wi-Fi, snacks, drinks and checked baggage.

The airline’s executives will discuss their strategy in more detail at an investor day next month.