By Svea Herbst-Bayliss

NEW YORK (Reuters) – Elliott Investment Management now holds 10% of Southwest Airlines (NYSE:LUV) common stock, crossing the threshold that allows the hedge fund to call a special meeting at the carrier, according to a person familiar with the matter.

The news comes days before the two sides are scheduled to meet on Sept. 9 to discuss ways to solve problems that have contributed to Southwest’s stock losing roughly half its value over the last three years.

The hedge fund, one of the world’s most powerful activist investors with $70 billion in assets under management, has demanded that CEO Robert Jordan and Executive Chairman Gary Kelly be ousted. It also laid out plans to nominate 10 directors to the airline’s 15-person board.

Elliott had taken an 11% economic stake through derivatives but converted enough of those holdings into common shares to cross the 10% threshold. Its overall economic stake remains unchanged.

A Southwest representative was not immediately available for comment.

Jordan, Southwest’s chief executive since 2022, has stated he will not resign and has indicated to staff that he and other executives are prepared to resist Elliott.

Elliott has communicated to other shareholders its readiness to take further action, including calling for a special meeting, unless the company is open to discussing changes in leadership.

Special meetings, used to solicit shareholder votes on urgent matters before the next annual gathering, are rare. If Elliott were to call one, it would mark a significant escalation in its confrontation with the airline since its investment became public in June.

While the airline has sought to repair its image and share price, it has also enacted defensive measures by implementing a shareholder rights plan, making it harder for an investor to accumulate over 12.5% of the stock.

Southwest has announced plans to add seats with more legroom, moved to assigned seating, and appointed a new board member in July.

Southwest’s stock price had lost 50% of its market value in the three years up to June 7, closing that day at $27.75, just before Elliott’s investment became public on June 10. It closed trading at $28.92 on Friday, with the company’s value dropping to $17 billion from $41 billion in 2017, according to Elliott’s research.

Elliott has criticized the improvement measures as too late and insufficient.

Elliott has previously advocated for the removal of top executives, including NRG CEO Mauricio Gutierrez, who initially resisted but resigned late last year. NRG’s stock has risen approximately 160% since Elliott’s stake was disclosed in May 2023.