Southwest settles proxy fight with hedge fund as Q3 profit shrinks. American loses money
Southwest Airlines will replace several members of its board with candidates pushed by Elliott Investment Management to end a monthslong fight with the hedge fund
DALLAS — DALLAS (AP) — Southwest Airlines reached a settlement with an activist investor by agreeing to overhaul its board, ending — at least for now — a monthslong fight with Elliott Investment Management, which is pressuring the airline to boost profits and the stock price.
Chairman Gary Kelly and six current board members will depart Nov. 1 and be replaced by five Elliott-backed candidates and a former Chevron executive, Southwest said Thursday.
Elliott, the hedge fund led by billionaire financier Paul Singer, achieved most of the demands it has made since June, but it settled for less than majority control of the Southwest board. And it did not succeed in one of its goals, ousting CEO Robert Jordan.
A previously scheduled special shareholder meeting to elect directors in December will be canceled.
Southwest announced the shakeup as it reported that its third-quarter profit fell by nearly two-thirds, to $67 million, on higher costs for labor and other expenses.
American Airlines posted a loss of third-quarter loss of $149 million Thursday, weighed down by paying bonuses to flight attendants who ratified a new labor contract.
The earnings reports were overshadowed by the drama between Southwest and Elliott, which at one point campaigned for 10 seats on the Southwest board. That would have been enough to fire Jordan, the embattled CEO.
The settlement saves Jordan's job but leaves him on the hot seat to improve the airline's financial performance.
Jordan, who had taken an increasingly combative tone against Elliott lately, sounded conciliatory on
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