Elliott Management, the activist investment firm that has an 11% stake in Southwest Airlines, is pressing forward with an effort to oust the airline's board and management.
Elliott said Southwest's announcement on July 25 that the airline will install extra-legroom seats and adopt assigned seating was "too little, too late."
"It's time for new leadership," Elliott said Thursday. "Southwest can do far better, and we look forward to offering our fellow shareholders an opportunity to elect a board of industry leaders that can return Southwest to best-in-class performance."
Southwest aims to reconfigure cabins so that approximately a third of seats have extra legroom, and it is scrapping the open-seating policy that has been a brand standard for 50-plus years.
Timelines for both initiatives aren't set, though the carrier said it will begin booking assigned seats sometime next year.
Southwest also announced a launch date of next February for its first red-eye service, which has long been in the works.
In explaining the decision to do away with open seating, Southwest CEO Bob Jordan explained that surveys had revealed that 80% of Southwest customers would prefer assigned seats, as well as 86% of flyers who don't fly Southwest.
Elliott said that such preferences did not emerge overnight and are proof that Southwest management has not been doing its job. The plans announced Thursday, the investment company said, came more than a decade late and after a 50% decline in the Southwest share price over the past three years. (Southwest shares were trading on July 26 at approximately 55% of their price from three years ago.)
"Elliott has engaged in direct dialogue with Southwest's board on the scale and urgency of change needed at the company. But this failed leadership team's announced initiatives -- obvious attempts at self-preservation -- are simply not credible," the company said.
Since Elliott announced its $1.9 billion position in Southwest on June 10, the carrier's leadership has taken steps to defend itself against a hostile takeover.
Earlier this month, the Southwest board implemented a shareholder-rights plan that dilutes Elliott's ability to accumulate a larger ownership share in the airline. Under the plan, known in investment parlance as a poison pill, if a single shareholder or shareholding entity accrues 12.5% or more of outstanding Southwest common stock, all other shareholders will be entitled to purchase up to as many shares of stock as they already own at a 50% discount.
Also this month, Southwest added IndiGo Airlines co-founder Rakesh Gangwal to the board, a move that appeared to address Elliott's criticism that the board did not have any members with airline experience other than at Southwest.