Has Received Overwhelmingly Supportive Feedback about Call for Leadership Change
Responds to Company's Adoption of Shareholder-Unfriendly "Poison Pill"
Reiterates Measures Necessary to Improve Performance
Letter is available at StrongerSouthwest.com
WEST PALM BEACH, Fla., July 8, 2024 /PRNewswire/ -- Elliott Investment Management L.P. (and its affiliates, "Elliott"), today sent a letter to the Board of Southwest Airlines Co. (NYSE:LUV) (the "Company" or "Southwest") summarizing the feedback received and key events that have occurred since the publication last month of Elliott's initial letter and presentation calling for leadership change.
According to the letter, the feedback Elliott has received is overwhelmingly consistent with its perspective that the Company's performance is unacceptable and leadership change is required to return Southwest to its once-leading position in the industry.
Elliott noted that the actions of Southwest's Board of Directors and management team since its Stronger Southwest materials were published have only solidified the case for leadership change. According to the letter, these actions included adopting an antiquated and shareholder-unfriendly "poison pill" to prevent Elliott from increasing its stake above 12.5% on July 3, and appointing a new director to the Board today who appears to have been chosen in part due to his support for the Company's status-quo leadership and plan. These actions demonstrate how profoundly out of touch Southwest's Board has become with shareholder sentiment and with the reality of the situation, said the letter.
It is crucial, Elliott wrote, that the Board understand that Southwest's leadership has already lost the trust of its shareholders, and that shareholders simply do not believe this Board and management team are capable of devising and executing a bold new plan to turn around Southwest.
Elliott again outlined the following path to a higher-performing future for Southwest:
- Enhance the Board of Directors
- Upgrade Leadership
- Undertake a Comprehensive Business Review
Elliott indicated that it is open to collaborating with the Board on a path forward, but absent alignment Elliott intends to move expeditiously to give shareholders a direct say on the necessary leadership changes.
The letter can be downloaded at StrongerSouthwest.com.
The full text of the letter follows:
July 8, 2024
The Board of Directors
Southwest Airlines Co.
2702 Love Field Drive
Dallas, Texas 75235
Dear Members of the Board,
We write to you again on behalf of Elliott Associates, L.P. and Elliott International, L.P. (together, with its affiliates, "Elliott" or "we"). The purpose of today's letter is to summarize the feedback we have received and the key events that have occurred since the publication last month of our letter and presentation on the urgent need for leadership change at Southwest Airlines ("Southwest" or the "Company").
Since publishing our views on June 10, we've had the opportunity to engage with shareholders, equity research analysts, industry executives and current and former employees. Many new institutions and individuals have reached out to us, providing us with new sources of insight and information, and this trend is continuing. The feedback has been overwhelmingly consistent with our perspective that the Company's performance is unacceptable and that leadership change is required to return Southwest to its once-leading position in the industry.
The actions of Southwest's Board and management team since we published our views have only solidified the case for leadership change:
- On June 26, Southwest announced significantly reduced unit revenue guidance for the second quarter, continuing its disappointing trend of industry-lagging revenue performance (which appears to have become a habit). This announcement marked the eighth guidance reduction in the last 18 months.
- On July 3, this Board put its own self-interest ahead of the Company's by pursuing the entrenchment strategy of adopting an antiquated and shareholder-unfriendly "poison pill" to prevent Elliott from increasing its stake above 12.5%.
- And today, the Board announced that it had appointed a handpicked new director in a clear attempt to entrench itself and the current management team, thereby expanding the size of the current Board to 15 members. Among the criteria for selecting this new director was clearly that he would be supportive of Southwest's current leadership and status-quo approach, as he noted in the announcement that he was "look[ing] forward to supporting the Company's strategic direction."
These actions – and in particular the adoption of the "poison pill" – demonstrate how profoundly out of touch Southwest's Board has become with shareholder sentiment and with the reality of the situation. Contrary to the Company's statements, Elliott is not seeking control of Southwest. Quite simply, we are seeking to strengthen oversight, upgrade management and improve Company performance. Preventing shareholders who do not support the Company's failed leadership and oversight from purchasing additional stock reflects exceptionally poor governance and underscores the immediate need for accountability at Southwest. This is the worst kind of governance – a shield for failure and a sword for nothing except the fees of advisers who propose these anti-shareholder devices.
In light of these actions, we have become increasingly concerned by ...