Elliott Investment Management, a prominent activist investor, is intensifying its campaign to overhaul the board of Southwest Airlines. The hedge fund, which holds an 11% stake in the airline, has called for a special shareholder meeting on December 10, 2024, to vote on replacing eight of the current board members with its own nominees. This move marks Elliott's first U.S. proxy fight since 2017 and underscores its dissatisfaction with Southwest's current leadership and strategic direction.

Elliott's proposed board slate includes experienced executives from the aviation and hospitality industries, such as former Virgin America CEO David Cush and former Air Canada CEO Robert Milton. The hedge fund argues that these changes are necessary to address Southwest's underperformance and to enhance its financial performance and stock price, which has fallen 42% over the past five years despite an 8% gain in 2024.

Southwest Airlines has been under pressure to modernize its operations and improve profitability. The airline has announced several initiatives, including introducing assigned seating and extra-legroom seats, forming partnerships with international airlines like Icelandair, and relaunching its vacation-package brand. However, Elliott contends that these measures are insufficient and that a complete board reconstitution is essential to unlock the airline's full potential.

The call for a special meeting has set the stage for a proxy battle, with Elliott seeking to gain control of the board and implement its strategic vision. Southwest has responded by reducing its board size from 15 to 12 members and expressing willingness to appoint directors with Elliott's input. However, the airline has also criticized Elliott's demands as extreme and disruptive.

As the December meeting approaches, the outcome of this proxy fight will be crucial in determining the future direction of Southwest Airlines. The airline's shareholders will have the opportunity to vote on whether to support Elliott's proposed changes, which could lead to significant shifts in leadership and strategy.