Elliott Investment Management, a major stakeholder in Southwest Airlines, has issued an open letter to fellow shareholders, sharply criticizing the airline’s leadership and calling for a comprehensive overhaul of its management and strategic direction.
In the letter, Elliott, which holds an 11% economic interest in Southwest, outlines what it describes as years of mismanagement under the current leadership of CEO Bob Jordan and Executive Chairman Gary Kelly. According to Elliott, this mismanagement has led to a significant decline in the airline’s performance, with its stock price dropping by more than 50% over the past three years—reaching levels not seen since the COVID-19 pandemic’s travel shutdowns.
Elliott’s letter calls for a sweeping change in Southwest’s leadership, including the replacement of both Jordan and Kelly. The investment firm has proposed a slate of ten independent directors, all with extensive experience in the airline and transportation industries, to reconstitute the company’s Board of Directors. Elliott argues that new leadership is essential to restoring Southwest to its former status as an industry leader.
“We are confident that a reconstituted Board can find the right executive leaders from outside of the Company who will preserve all of the unique cultural attributes that have made Southwest great while fixing the more recent problems that have caused it to underperform its vast potential,” the letter states.
Criticism of Assigned Seating and Reactive Strategies
One of the specific criticisms raised by Elliott is Southwest’s recent decision to introduce assigned seating—a policy shift that the firm describes as a “too little, too late” response to long-standing customer preferences. Elliott argues that this change, along with other recent initiatives, reflects a reactive approach rather than a strategic one. The letter suggests that these moves are intended to placate shareholders temporarily rather than address the airline’s underlying issues.
“Too little, too late is not a strategy,” Elliott asserts, emphasizing the need for a comprehensive review of Southwest’s business practices and customer offerings. The firm accuses Jordan and Kelly of implementing ad-hoc changes that risk the company’s long-term health in a bid to boost short-term stock performance.
«We have seen this movie before, and it rarely ends well, because there is no one more short-term-oriented at the expense of future value than a beleaguered CEO trying to preserve his or her job», the letter states.
Elliott plans to meet with Southwest representatives on September 9, expressing hope that the Board will be open to considering leadership changes. However, the firm warns that if the Board remains resistant, it will push for shareholders to have a direct say in the company’s future leadership.
In the letter, Elliott also criticizes what it calls “entrenchment tactics” by the current leadership, including the adoption of “poison pills” and a rushed Board refreshment process that lacks legitimacy. Elliott argues that these tactics are designed to protect the jobs of Jordan and Kelly rather than improve the company’s performance.
Elliott’s letter frames the current situation as a critical juncture for Southwest Airlines, suggesting that the airline’s future depends on the willingness of its Board and shareholders to embrace significant change. The firm is advocating for a transparent and credible process to address the airline’s challenges, which includes modernizing its operations, technology, and overall strategy.
“As Southwest’s thousands of hard-working employees know, Southwest’s culture is much bigger than these two individuals—and this culture deserves better stewards,” the letter concludes.
Elliott’s push for change at Southwest comes at a time when the airline is grappling with intense competition and operational challenges. The outcome of this potential proxy fight could have significant implications for the future direction of one of America’s most iconic airlines.
