Activist investor Elliott Investment Management (Elliott) has called for Southwest Airlines’ shareholders to ensure they can vote with their shares, accusing the carrier of setting false record dates.

A company uses a record date to determine which shareholders are eligible to vote or receive a dividend. Southwest Airlines has continued paying quarterly dividends since reinstating it on December 6, 2022.

Southwest’s defensive actions

According to the letter published by Elliott on September 24, the activist investor firm’s executives, John Pike and Bobby Xu, said that since taking a large – 11% – shareholding in the carrier, it has been Elliott’s goal to work with the airline to restore accountability and its best-in-class financial performance.

“Unfortunately, Southwest’s management and Board have chosen a go-it-alone path with the goal of obstructing a leadership change that is urgently needed.”

This has included a poison pill, a “hastily recruited” board member, “half-baked” product change announcements, and the sudden resignation of nearly half of the Board, as well as Gary Kelly, the executive chairman of Southwest Airlines, who will be stepping down in May 2025.

Southwest Airlines Boeing 737-700 flying

Photo: Vincenzo Pace | Simple Flying

Elliott added that Southwest Airlines has warned employees about difficult changes ahead that could affect workers.

The investment firm alleged that these decisions were being made in response to demands from Elliott. However, it criticized the carrier’s leadership for making difficult decisions following years of deteriorating performance with the goal of the airline’s executives retaining their jobs.

In July, Southwest Airlines armed a so-called ‘poison pill’ via a shareholders’ rights plan, preventing Elliott from accumulating a larger than 12.5% stake in the company.

If Elliott triggers the poison pill, the airline will issue shares to existing shareholders, excluding those with a 12.5% shareholding, diluting the stake of all shareholders.

Calling for a vote

Nevertheless, Elliott has said that it will call a special meeting at Southwest Airlines in the following weeks.

The investment firm stated that shareholders will have a choice between the board members it has chosen or a board that “lacks relevant expertise and has pre-committed itself to supporting failed CEO Bob Jordan.”

“To be entitled to vote at the special meeting, shareholders must have the right to vote their shares as of the record date for the meeting, which will be set by Southwest’s Board.”

A Southwest Airlines plane

Photo: Southwest Airlines

Elliott accused the airline of setting false record dates by sending them to banks and brokerages, which can be a defensive strategy to disenfranchise shareholders by not allowing them to get their shares into a voting position prior to the record date.

As a result, the false record dates could enable Southwest Airlines to set the actual record date on very short notice, which could even be on the same day as the special meeting, leaving some shareholders unable to vote on Elliott’s proposed changes.

“Because we intend to request that Southwest call a special meeting in the coming weeks, we strongly urge all Southwest shareholders […] to work with their banks and brokers as soon as possible to confirm that they are able to vote all their Southwest shares by no later than October 7 […].”

Elliott added that, given Southwest Airlines’ leadership’s “chaotic” actions, the move to call a special meeting could come as soon as next week.

Tensions rising before Investor Day

Elliott’s latest move just came two days before the airline’s scheduled Investor Day on September 26.

Southwest Airlines Boeing 737-8H4 (N8682B) departing from Phoenix Sky Harbor International Airport.

Photo: Robin Guess | Shutterstock

When Southwest Airlines announced the changes to its product, which included assigned and premium seating, as well as red-eye flights, which were announced a few months before, it said that it would share more details during the Investor Day in September.

“The decision to update the seating and boarding model is part of Southwest’s ongoing modernization efforts. During the past two years, Southwest has enhanced its onboard offerings with improvements such as faster WiFi, in-seat power, and larger overhead bins.”

Elliott swooped in and announced that it has acquired a significant shareholding in Southwest Airlines in June, publishing its plan called ‘Stronger Southwest.’

One of the main points of the plan was the replacement of the leadership of the airline, including Kelly and Bob Jordan, the president and chief executive officer (CEO) of Southwest Airlines.

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