Southwest Airlines and Elliott Investment Management Negotiating Settlement

Investing.com — Southwest Airlines (NYSE:LUV) and Elliott Investment Management are closing in on a settlement that would avoid the carrier's first proxy fight since 2017, according to Bloomberg News.

Citing sources familiar with the matter, Bloomberg reported that the airline and Elliott are negotiating a framework that would result in the activist investor taking less than a majority of seats on Southwest's board.

A settlement could be announced as early as Thursday, although nothing has been finalized yet and the deal could still change or fall through, according to Bloomberg. The implications of a settlement for Southwest Chief Executive Officer Bob Jordan remain unclear.

Both Southwest and Elliott representatives have declined to comment on the situation.

In response to what it has described as "disappointing" financial returns, Elliott has previously nominated eight directors to Southwest's board and called for a special shareholders meeting in December, though Southwest has yet to set a date for that meeting.

Jordan faces increased pressure to restore the airline's long-term profitability. Once boasting 47 consecutive years of profit, Southwest has struggled to recover from the COVID-19 pandemic, even as the broader airline industry has seen solid demand from travelers. The company continues to support Jordan, asserting he is the right leader to oversee a significant transformation of the business.

In a presentation in September, Southwest indicated that its initiatives aimed at driving income growth are "well underway," and projected these efforts would contribute roughly $4 billion to cumulative earnings before interest and taxes by 2027.

However, Dallas-based Southwest's passenger volumes remain below pre-pandemic levels, and aircraft delivery delays from Boeing (NYSE:BA) have adversely affected performance. Additionally, the company has downgraded its outlook at least eight times in the past 20 months.