Activist shareholder Elliott Investment Management has put forward 10 candidates – including former airline chiefs David Cush and Gregg Saretsky – to replace Southwest Airlines’ board, which it sees as “profoundly out of touch” with investors following a series of blunders earlier this year.
Elliott, which holds an 11% stake in the Dallas-based airline, had in June called on Southwest’s leaders to be replaced, while adding that the business “represents the most compelling airline turnaround opportunity in the last two decades”.
“Elliott has previously called for three steps to put Southwest on the path to restoring its industry-leading position: 1) reconstituting the board; 2) installing new leadership; and 3) conducting a comprehensive business review,” the firm said on 13 August.
“The urgency of change is underscored by the substantial continued deterioration in Southwest’s performance since Elliott initially published its materials on 10 June and the board’s actions in response to further entrench itself and resist change,” it adds.
The candidates were selected “through a months-long global search for the best individuals with the optimal mix of backgrounds and expertise to address Southwest’s current challenges and deliver on the Company’s potential”, Elliott says.
The group includes former airline top executives Michael Cawley (Ryanair), David Cush (Virgin America), Robert Milton (Air Canada) and Saretsky (WestJet).
Former US Department of Transportation official Sarah Feinberg, ex-Mariott International group president Dave Grissen, previous McKinsey senior partner Nancy Killefer, as well as external advisor Josh Gotbaum and technology executives Eash Sundaram and Patty Watson round out the Elliott nominees.
“If elected, Elliott is confident that these candidates will chart a brighter future for Southwest, provide the board with much-needed expertise and relevant industry experience and help restore the company’s position as an industry-leading airline with best-in-class profitability,” Elliott says.
“The strong qualifications of these candidates stand in contrast to those of the current board which… lacked a single independent director with airline experience, and which continues to lack relevant experience in other key areas necessary to drive Southwest’s evolution.”
Southwest responded that since Elliott launched its campaign it has attempted to ”engage constructively and in the best interests of all shareholders.
”Elliott has dismissed those efforts at every turn,” the airline says. ”The Southwest Airlines board and executive leadership team remain open to conversations with Elliott to discuss ideas to drive shareholder value, and the board will evaluate Elliott’s proposed nominees as part of its ongoing board refreshment process.”
In response to the Elliott’s calls for change earlier this summer, Southwest in July added long-time airline executive Rakesh Gangwal to the board, saying he would help guide it back to “enduring profitability”.
Gangwal, co-founder of India’s InterGlobe Aviation, which operates under the IndiGo airline brand, has “decades of valuable experience as an executive and entrepreneur at some of the world’s leading airlines”, Southwest chairman Gary Kelly said at the time.
Also last month, Southwest said it would end its signature “open” seating model and offer premium seating options as it seeks new revenue sources to address concerns around the carrier’s financial performance.
It made the announcements as chief executive Bob Jordan outlined second-quarter earnings that “fell short of what we believe we are capable of delivering”.
Southwest’s net profit fell 46% in the April-June period to $367 million. Operating profit was down 50% at $398 million on revenue up 5% at $7.5 billion.
Updates on 14 August to add Southwest statement.
