Activist investor Elliott Investment Management blasted Southwest Airlines Co’s “reckless and chaotic” recovery strategy and said it would continue to seek a board overhaul, escalating tensions in a showdown over the carrier’s future.

Elliott said in a letter on Tuesday that it plans to call a special shareholder meeting in the coming weeks to give investors a chance to vote on a slate of 10 potential directors it previously proposed.

“Given the reckless and chaotic actions that Southwest’s leaders keep taking in an attempt to preserve their jobs — and the resulting risk to the company and its constituents — the need for change is urgent,” Elliott said in the letter to shareholders.

The move is a repudiation of steps Southwest has already announced, including plans to revamp its seating policy, sell premium products and offer redeye flights. The airline, seeking to boost underperforming shares and stem financial challenges, also said this month that chairman Gary Kelly and about half of the board would step down.

Southwest said Elliott has “completely failed to engage constructively” with the airline to reach a compromise despite repeated attempts. The investor has “continued launching public ambushes” at the airline, Southwest said in a statement on Tuesday night.

Elliott, which has become Southwest’s second-largest shareholder while acquiring an 11% interest in the company, has sought more sweeping changes to the board and its operations, saying leadership has failed to update the carrier. The firm has also demanded the ouster of chief executive officer Bob Jordan, whom Southwest has stood by.

Southwest warned employees in the past week that it would be announcing “some difficult decisions” in coming days under its plan to bolster profits and help fend off Elliott’s demands for change. In a video to workers, chief operating officer Andrew Watterson apologised to employees who might be affected, even though there are no plans to end service to more cities.

Southwest disclosed on Wednesday that it will cut nearly a third of its flights through Atlanta starting in April as it drops unprofitable routes. While the carrier isn’t planning involuntary layoffs, the pullback is expected to lead to the loss of more than 300 pilot and flight attendant jobs. Flights will be added in Nashville, along with redeye service from Hawaii to the US mainland.

The company will further detail plans to revamp operations, including assigned seating and a premium section, at an investor meeting on Thursday. 

“Any leadership change amid such a significant transformation would be detrimental to all shareholders, and handing control of the board to Elliott and its director candidates — when Elliott has not articulated any ideas for improving Southwest’s business plan and operations — would present a catastrophic risk to shareholders,” Southwest said in the statement.

The airline has said it will name four new directors at its November meeting, when six current members will resign. Kelly will retire next year.

The activist urged shareholders to take necessary steps now to ensure that they will be able to vote their full holdings at the upcoming special meeting.

“We do not support the company’s current course, which is being charted in a haphazard manner by a group of executives in full self-preservation mode,” the activist hedge fund said in the letter. Current leaders “have proven incapable of competently running the airline.” 

  - Bloomberg