Southwest CEO Faces Challenge from Activist Investors

Southwest Airlines CEO Bob Jordan is actively seeking investor backing as he prepares for a proxy battle initiated by activist hedge fund Elliott Investment. Elliott, led by billionaire Paul Singer, aims to remove Jordan and two-thirds of the airline's board, citing dissatisfaction with the company's performance and management. Jordan, who took the helm in 2022 after a lengthy career at Southwest, has embarked on an investor tour to rally support against Elliott's aggressive campaign. Elliott, which disclosed its significant stake in Southwest in June, has criticized the airline's longstanding operational strategies and low stock price, attributing these issues to Jordan and Chairman Gary Kelly. The airline's operating costs have surged by 23% since the pandemic, while unit revenues have only increased by 6%. In stark contrast, competitors Delta and United have reported healthier operating margins, raising concerns about Southwest's financial health, which saw its operating margin plummet to 0.2% in the first half of the year. While Southwest has indicated a willingness to consider board changes, it has ruled out a CEO replacement. Sources within the airline suggest that Elliott is unwilling to engage in constructive dialogue unless Jordan and Kelly are removed. In response, Jordan has expressed skepticism about Elliott's ability to successfully overhaul the board, emphasizing that the activists' tactics are predictable and not indicative of actual control over the situation. As the situation unfolds, Elliott plans to convene a special shareholder meeting to vote on board members, intensifying the pressure on Jordan to secure investor support ahead of the critical vote.