Sources report that Elliott is in early discussions with Southwest about significant board representation.

• Southwest Airlines and Elliott Investment Management have been discussing a possible settlement that would grant the activist a substantial presence on the airline's board.
• The activist called for a special meeting at the company, and the discussions took place shortly thereafter.
• The negotiations are contingent on an agreement that would grant Elliott less than complete authority over the board.

According to sources, Elliott Investment Management and the airline have been discussing a settlement that would grant the activist investor a substantial presence on the airline's board.

The negotiations are based on a deal that would give Elliott less than full control of the board, according to sources who requested anonymity due to the confidential nature of the discussions. After Chairman Gary Kelly steps down next year, Southwest's board will decrease to 12 members, meaning Elliott would likely have fewer than six selections.

Some sources said that the talks are in early stages and it's possible that no deal could be reached. Bloomberg News was first to report on the preliminary settlement discussions.

Elliott called for a special meeting at the airline, months after the activist exposed the company's 11% stake. The activist has stated that it plans to remove CEO Bob Jordan and revamp the airline's strategic planning.

Jordan, who has been with Southwest for almost four decades, is now responsible for implementing significant changes to the airline's business model in order to increase revenue and remain competitive with other carriers.

Southwest Airlines announced that it plans to transition from its open-seating model to offering extra legroom seats over the summer. This shift reflects a change in consumer preferences, marking the airline's biggest adjustment to its business model in 50 years.

Last month, at an investor event, Southwest unveiled a three-year plan that Jordan stated would result in an additional $4 billion in earnings before interest and taxes by 2027. Additionally, the airline announced a $2.5 billion buyback and plans to reduce its Atlanta flights to boost profits.

Late last month, Southwest raised its third-quarter revenue forecast, and it will report its third-quarter results on Thursday.

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