Regulators launch safety audit into Southwest Airlines
The Federal Aviation Administration said Tuesday it launching a safety audit at Dallas-based Southwest Airlines, which has seen its planes involved in a series of troubling incidents in recent weeks that included flying at very low altitudes while still miles away from an airport.
DALLAS – A hedge fund urging Southwest Airlines to dump its CEO and chairman has now taken a large stake in the Dallas-based airline. They plan on using their new ownership power to make some big changes.
Elliott Investment Management has been pushing for big changes at Southwest Airlines since it first bought a minority stake in the company back in June.
The hedge fund now has control of the required 10% of shares needed to call a special shareholder meeting.
The total ownership was disclosed in a government filing Tuesday.
Elliott has previously said it intends to call a shareholder meeting to elect 10 new members to Southwest’s board, which currently consists of 15 people.
Elliott demands that the Dallas-based carrier reevaluate its board of directors, bring in new leadership and conduct a business review.
Southwest CEO Bob Jordan has pushed back on Elliott’s demands and changes to some longstanding perks like the popular ‘bags fly free’ policy.
Southwest and Elliott are scheduled to meet on Sept. 9.
SMU economist Mike Davis says he’s not surprised by the move, considering Southwest has been struggling financially in recent quarters.
“It signifies to me that the market is working the way it’s supposed to work. There’s this myth out there that these so-called corporate raiders are just evil-doers ready to suck the money out of a corporation. Sometimes that does happen. But most of the time you have a company that needs change, and an outsider comes in there and does what they are allowed to do, which is buy shares of stock in the company to facilitate that change,” he said. “Everything emanates from the top of the company. So the board is the top of the company. And whether Elliott’s directors will be better than the existing directors, whether Elliott can even get their directors on the board — I hate to be so wishy-washy — but this is all one of these ‘we’ll see’ kind of things.”
In a statement, Southwest Airlines said, “We remain prepared to meet with Elliott next week and look forward to sharing details on our continued transformation at our investor day on Sept. 26.”
Recently, Southwest announced a major change to its operation. Open seating will soon be a thing of the past.
Davis says Southwest employees and customers need to pay attention to what’s going on as more changes could be on the horizon that could affect them both.