(Bloomberg) -- Southwest Airlines Co. Chief Executive Officer Bob Jordan says he knew the activists were coming. He just didn’t know which one.
“We knew this was a possibility,” he said in an interview Thursday. “We didn’t know it was Elliott.”
He spoke hours after the airline announced it had avoided a pending proxy fight by adding six new board members under an agreement with activist Elliott Investment Management. Five of the six were Elliott’s candidates.
The activist hedge fund disclosed a $1.9 billion Southwest stake in June, and immediately called for the ouster of Jordan and chairman and former CEO Gary Kelly.
The two executives, Elliott said, were holding Southwest back from making changes that would have boosted revenue and helped the carrier compete. These included offering assigned seating and premium options that consumers have increasingly favored since the pandemic.
Southwest shares fell 5.6% on Thursday. They have tumbled 32% over the past four years, while a Standard & Poor’s index of nine US carriers climbed 19%.
“Elliott did come out of the box right away with pretty aggressive tactics with what they were asking for and put up a website the next morning,” Jordan said. “We were not completely ready for that level of tactics.”
Kelly and six directors had agreed earlier to resign, and their departure date were moved up to Nov. 1 in the final agreement.
“I didn’t give one minute of thought to what happens to Bob,” said Jordan, referring to himself. “All the efforts went into what’s the best thing for Southwest Airlines, what’s best for our shareholders, what’s best for our people — not for the short term but for the long term.”
In July, the Dallas-based airline outlined its own plans to sell assigned seats for the first time in 53 years of flying. It then announced a turnaround plan in September that included creating a premium section with more legroom, adding redeye flights and partnering with other carriers.
Elliott initially asked for 10 board seats, then reduced that to eight, while Southwest had left room for three Elliott-backed directors after naming two former airline executives in recent weeks. During the last week of talks, Elliott agreed to five seats on the 13-member board.
Jordan and Elliott partner John Pike wrapped up the agreement during a phone call late Wednesday night.
“Maybe the lesson learned is these types of things are tough and can be all-consuming,” Jordan said. “It’s a lot of distraction. We don’t want to go through this again.”
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