DALLAS, Sept. 24,
2024 /PRNewswire/ -- – Southwest Airlines Co.
(NYSE: LUV) (the "Company") today issued a response to Elliott
Investment Management L.P.'s ("Elliott") recent Shareholder letter
and provided an update on its engagement with Elliott ahead of the
Company's long-planned Investor Day set for Thursday, September 26:
Elliott Engagement Update
Southwest has made every effort to reach a
constructive resolution with Elliott, including over a dozen
phone calls with Elliott representatives, several in-person
meetings and an offer for Elliott to participate in the Company's
Board refreshment process and understand its views on Southwest's
business and strategy. It's unfortunate that Elliott has not only
completely failed to engage constructively, but today has continued
its pattern of launching public ambushes and is seeking to disrupt
Southwest's upcoming Investor Day.
Before even speaking with CEO Bob Jordan or hearing about the Company's plans,
Elliott predetermined its position and has remained entrenched in
demanding a supermajority of the Board and immediate CEO
change. Since June, members of the Board have met with many
investors to solicit candid feedback on Southwest's strategy and
path forward. It is clear Shareholders desire that Southwest engage
and seek a compromise with Elliott that is in all Shareholders'
best interests and allows the Company to focus on executing its
transformative strategy to move the Southwest forward. The Board
has repeatedly sought to do exactly this, but acquiescing to a
single Shareholder's demand for absolute control of the Company is
not a compromise.
Recent Board Refreshment
Southwest recently announced the next phase
of its Board transformation and invited Elliott's participation in
that process. The Board's refreshment plans include six
retirements in November and Executive Chairman Gary Kelly's retirement at the 2025 Annual
Meeting, the anticipated appointment of four new Directors, and the
naming of new Committee Chairs and a new Lead Independent Director.
Before announcing these significant steps, members of the Board met
with Elliott to propose a resolution framework that included giving
due consideration to appointing up to three Elliott candidates to
the Board. Elliott itself acknowledged that the announced changes
are "unprecedented."
In response, Elliott has inexplicably refused
to allow its candidates to meet with the Board and
required them to sign agreements that explicitly prevent them from
joining the Board without Elliott's approval. Further, all of
Elliott's candidates declined or ignored direct invitations to meet
with representatives of Southwest's Nominating and Corporate
Governance Committee. The Southwest Board remains willing to
consider in good faith Elliott's Director candidates for
appointment to the Board, if Elliott will allow the Board to meet
them.
In the meantime, Southwest will continue its
Board refreshment to ensure the Board maintains fresh perspectives
and strong oversight. The airline has added or appointed
eight highly qualified independent Directors over the past three
years, including the Company's newest Directors Rakesh Gangwal, co-founder
of India's largest airline, InterGlobe Aviation (IndiGo)
and previous executive at US Airways Group and United Airlines, and
Lisa Atherton, president and CEO of
Bell. The Company continues to cultivate a strong pipeline of
potential candidates who would bring relevant experience to the
Southwest Board.
Transformation Plan & Leadership
Southwest is 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.
The Company is hosting its Investor Day in Dallas on Thursday,
September 26 when Shareholders will have the opportunity to
hear more about these initiatives and Southwest's plan to restore
its industry leading performance. Elliott's attempt to disrupt
the Investor Day and failure to offer any feedback or suggestions
on Southwest's transformational plan reveals that Elliott continues
to value public attacks and seizing control of the Company over the
airline's future and all of its Shareholders' interests.
The Southwest Board strongly believes that
CEO Bob Jordan is the right Leader
to successfully execute the Company's robust strategy to transform
the airline and deliver sustainable Shareholder value. Any
Leadership change amid such a significant transformation would be
detrimental to all Shareholders, and handing control of the Board
to Elliott and its Director candidates – when Elliott has not
articulated any ideas for improving Southwest's business plan and
operations – would present a catastrophic risk to Shareholders.
Special Meeting
For months, Elliott has publicly threatened
its intention to call a Special Meeting. In response, Southwest
has been taking the necessary preliminary steps, including
providing notice to the New York Stock Exchange of potential record
dates, so that it is well prepared for all scenarios and can
fulfill its special meeting obligations, especially considering it
takes several weeks to set a record date under SEC rules. Elliott's
suggestion that Southwest has set "false record dates" as a
defensive strategy is untrue and disingenuous; Elliott is well
aware that the use of rolling record dates to facilitate efficient
and timely Shareholder action is common practice when the timing of
an upcoming meeting (particularly a threatened Special Meeting) is
unknown. If Elliott submits a request for a Special Meeting, the
Board will fulfill its duties to carefully review the request in
good faith. Shareholders need not take action at this time.
BofA Securities, Inc. and Morgan Stanley & Co. LLC are
acting as financial advisors to Southwest Airlines and Vinson &
Elkins L.L.P. and Kirkland & Ellis LLP are acting as legal
advisors.
Cautionary Statement Regarding Forward-Looking
Statements
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"). Specific forward-looking statements include,
without limitation, statements related to (i) the Company's plans
with respect to Board refreshment and (ii) the Company's focus
areas, goals, strategies, and initiatives, including with respect
to transforming the business, elevating the Customer Experience,
improving financial performance, driving sustainable Shareholder
value, and restoring industry-leading performance. These
forward-looking statements are based on the Company's current
estimates, intentions, beliefs, expectations, goals, strategies,
and projections for the future and are not guarantees of future
performance. Forward-looking statements involve risks,
uncertainties, assumptions, and other factors that are difficult to
predict and that could cause actual results to vary materially from
those expressed in or indicated by them. Factors include, among
others, (i) the impact of fears or actual outbreaks of diseases,
extreme or severe weather and natural disasters, actions of
competitors, consumer perception, economic conditions, fuel prices,
banking conditions, fears or actual acts of terrorism or war,
sociodemographic trends, and other factors beyond the Company's
control, on consumer behavior and the Company's results of
operations and business decisions, plans, strategies, and results;
(ii) the Company's ability to timely and effectively implement,
transition, operate, and maintain the necessary information
technology systems and infrastructure to support its operations and
initiatives, including with respect to revenue management; (iii)
the cost and effects of the actions of activist Shareholders; (iv)
the Company's ability to obtain and maintain adequate
infrastructure and equipment to support its operations and
initiatives; (v) the Company's dependence on The Boeing Company
("Boeing") and Boeing suppliers with respect to the Company's
aircraft deliveries, fleet and capacity plans, operations,
maintenance, strategies, and goals; (vi) the Company's dependence
on the Federal Aviation Administration with respect to safety
approvals for the Company's new cabin layout and the certification
of the Boeing MAX 7 aircraft; (vii) the Company's dependence on
other third parties, in particular with respect to its technology
plans, its plans and expectations related to revenue management,
operational reliability, fuel supply, maintenance, Global
Distribution Systems, and the impact on the Company's operations
and results of operations of any third party delays or
non-performance; (viii) the Company's ability to timely and
effectively prioritize its initiatives and focus areas and related
expenditures; (ix) the impact of governmental regulations and other
governmental actions on the Company's business plans, results, and
operations; and (x) other factors, as described in the Company's
filings with the U.S. Securities and Exchange Commission (the
"SEC"), including the detailed factors discussed under the heading
"Risk Factors" in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2023,
and in the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30,
2024.
About Southwest Airlines Co.
Southwest Airlines Co. operates one of the world's most
admired and awarded airlines, offering its one-of-a-kind value and
Hospitality at 117 airports across 11 countries. Southwest took
flight in 1971 to democratize the sky through friendly, reliable,
and low-cost air travel and now carries more air travelers flying
nonstop within the United States
than any other airline1. Based in Dallas and famous for an Employee-first
corporate Culture, Southwest maintains an unprecedented record of
no involuntary furloughs or layoffs in its history. By empowering
its more than 74,0002 People to deliver
unparalleled Hospitality, the maverick airline cherishes a
passionate loyalty among more than 137 million Customers carried in
2023. That formula for success has brought industry-leading
prosperity and 47 consecutive years3 of
profitability for Southwest Shareholders (NYSE: LUV). Southwest
leverages a unique legacy and mission to serve communities around
the world including harnessing the power of its People and Purpose
to put communities at the Heart of its success. Learn more by
visiting Southwest.com/citizenship. As the airline with
Heart, Southwest has set a goal to work toward achieving net zero
carbon emissions by 20504. Southwest has also set
near-term targets and a three-pillar strategy to achieve its
environmental goals. Learn more by visiting
Southwest.com/planet.
1 Based on U.S. Dept. of Transportation quarterly
Airline Origin & Destination Survey since Q1 2021
2 Fulltime-equivalent active
Employees
3 1973-2019 annual profitability
4 Southwest's net zero by 2050 goal includes
Scope 1, Scope 2, and Scope 3 Category 3 emissions only and
excludes any emissions associated with non-fuel products and
services, such as inflight service items.
Important Additional Information
The Company intends to file a proxy statement and
a WHITE proxy card with the SEC in connection with the
solicitation of proxies for the Company's next meeting of
Shareholders (whether an Annual or Special Meeting of Shareholders
(the "Shareholder Meeting")). SHAREHOLDERS OF THE COMPANY ARE
STRONGLY ENCOURAGED TO READ SUCH PROXY STATEMENT, ACCOMPANYING
WHITE PROXY CARD AND ALL OTHER DOCUMENTS FILED WITH, OR FURNISHED
TO, THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
SHAREHOLDER MEETING. Shareholders will be able to obtain the
Company's proxy statement, any amendments or supplements to the
proxy statement and other documents filed by the Company with the
SEC at no charge at the SEC's website at www.sec.gov. Copies will
also be available at no charge at the Company's website at
https://www.southwestairlinesinvestorrelations.com/financials/sec-filings.
Participant Information
For participant information, see the Company's soliciting
material filed as "DEFA14A" with the SEC on September 10, 2024 and available here.
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SOURCE Southwest Airlines Co.