Elliott, Southwest Airlines Close To Reaching Settlement To Avert Board Battle: Report

Activist investor Elliott Investment Management and Southwest Airlines are nearing a settlement agreement that could avoid a possible proxy battle over board control, according to a report.

Bloomberg, citing people familiar with the discussions, reported that the parties are currently negotiating terms that would provide Elliott with a number of board seats, though less than the majority, to ensure that control remains with the airline. The report indicated that the settlement could be announced as soon as Thursday.

The report did not mention the exact number of board seats that will be offered to Elliott. The activist investor is eyeing control of the company's board and aims to replace eight directors.

After months of pushing for the replacement of some board members, Elliott tried to get shareholder support by calling for a special shareholder meeting in its fight with the airline. It wants to oust CEO Bob Jordan, urging the airline to review its strategy in order to boost share price and improve its financial performance.

The report did not clarify the implications of a potential settlement for CEO Jordan, nor did it specify whether the settlement was final, highlighting the possibility that negotiations could ultimately fall through.

Southwest has been struggling since the pandemic and has tried its best to remain profitable despite economic woes. It also took steps to help turn things around by dropping its marquee open seating system and adding seats, offering customers more legroom.

In an announcement last month, the airline revealed that it was "executing a transformational plan including tactical and strategic initiatives that will position the airline to elevate the customer experience, improve financial performance and drive sustainable shareholder value."

In September, Southwest Airlines announced a shakeup of its board of directors that included the retirement of Executive Chairman Gary Kelly. Kelly will step down immediately after the company's 2025 annual meeting.

Six directors will retire in November, and the board said it intends to appoint four new independent directors. They could include candidates proposed by Elliott Investment Management.

The six were identified as David Biegler (Compensation Committee Chairman), Veronica Biggins (Nominating and Corporate Governance Committee Chair), Senator Roy Blunt, Dr. William Cunningham (Lead Director), Dr. Thomas Gilligan (Audit Committee Chairman) and Jill Soltau.

As part of the restructuring, the board said it would eliminate the executive committee structure and create a new finance committee. In a release announcing the changes at the time, the airline said it was reiterating support for Jordan as CEO.