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Southwest Airlines LUV+2.52% is getting ready for a “battle for the heart of our company and our future,” CEO Bob Jordan has told employees, as the firm faces a new proxy battle.
Jordan’s comments came in a staff memo sent last Wednesday, reported by Reuters on Monday. The Southwest CEO also told staff he has held meetings with some union officials and investors on both the East Coast and the West Coast in recent weeks to fend off a takeover attempt from Elliott Investment Management, a hedge fund.
Elliott disclosed in June that it had acquired an 11% stake in Southwest with the aims of firing Jordan and board of directors chair Gary Kelly, installing a group of friendly directors, and instituting a “comprehensive business review” that would get to the bottom of the airline’s struggling business. The firm last week revealed a slate of 10 people it plans to nominate for seats on Southwest’s 15-member board, including three former airline CEOs and several former federal government officials.
Elliott said it’s confident its candidates will help “chart a brighter future” for Southwest and help restore it as an “industry-leading airline with best-in-class profitability.”
The Dallas-based carrier’s profits fell 46% last quarter, despite record quarterly revenue of $7.35 billion. Jordan said both “both external and internal factors” were behind the loss and said Southwest would boost margins through a series of steps, including getting rid of open seating. After reporting a $231 million loss in the first quarter of the year, Southwest took action by eliminating service to a handful of airports and limiting hiring.
Jordan has said he won’t step down voluntarily, and Southwest has adopted a “poison pill” gambit would that would severely dilute Elliott’s stake if it acquired more shares in a bid to assert more control. The airline said last week that Elliott has dismissed its efforts to engage with it “at every turn,” although the hedge fund has agreed to a meeting in early September.
Southwest Airlines LUV+2.52% stock nudged up slightly in pre-market trading Monday. Shares are down by more than 7% year-to-date.
Correction: An earlier version of this story misstated Southwest’s actions after the first quarter. It limited some hiring; it did not issue layoffs.