In a recent government filing, Elliott Investment Management, the activist investor pushing for change at Southwest Airlines, announced that it now holds a controlling interest of over 10% in the company. This milestone means that Elliott has the necessary shares to call a special shareholder meeting, as per Southwest's corporate bylaws.

Elliott had previously disclosed an 11% economic interest in Southwest Airlines in June, and it has been actively seeking to bring about significant changes within the airline. The hedge fund intends to nominate new board candidates and aims to elect 10 new members to Southwest's current 15-member board. This plan is part of its demand for the airline to reassess its board of directors, introduce fresh leadership, and conduct a thorough business review.

Southwest and Elliott are scheduled for a meeting on September 9th. While a special shareholders meeting has not yet been called, it could be an effective avenue for expediting the process and adding pressure to Southwest. Such meetings are rare and would indicate Elliott's progress in its battle against the airline.

"We remain prepared to meet with Elliott next week and look forward to sharing details on our continued transformation at our investor day on September 26th," commented a Southwest spokesperson in an email response.

Michael Levin, a Chicago-based activist investor, highlighted the significance of a special shareholders meeting, explaining that it enables a quicker resolution rather than waiting until the spring to gather shareholders together. Additionally, it places greater urgency on Southwest to address the demands raised by Elliott.

Southwest's board currently has two committees that hold relevant roles in determining board composition. The executive committee, consisting of five members including CEO Bob Jordan and executive chairman Gary Kelly, can fill vacancies on the board and even amend the company's bylaws. The nominating and corporate governance committee, chaired by Veronica Biggins, is responsible for identifying and reviewing potential board candidates.

Elliott has reportedly discussed its plans with other shareholders, including Artisan Partners, which has affirmed its support for Elliott's demands. However, to solidify its position, Elliott will need the backing of major institutional shareholders such as Vanguard Group, T. Rowe Price, Capital World Investors, BlackRock, and State Street Corp., or conversely, Southwest's existing leadership.

The timing of the special shareholders meeting request is crucial. The longer Southwest delays scheduling the meeting, the more time Elliott has to rally additional shareholders to support its cause.

Elliott originally obtained an 11% economic stake in Southwest Airlines through derivatives in June. Despite Southwest's implementation of a "poison pill plan" to prevent Elliott from accumulating more than 12.5% of the company's stock, Elliott has managed to convert enough holdings into common shares to surpass the 10% threshold.

Southwest Airlines' next investor day is slated for September 26th, where it is anticipated that further details regarding the ongoing transformation efforts of the company will be shared.