Whether Jordan will ultimately want to keep that job is another matter. Elliott has accused him of presiding “over a period of stunning underperformance” and being “incapable of delivering on Southwest’s potential,” and now the company is giving two of its people on the board the power to “help” Jordan.

Elliott nominees David Cush, who served as CEO of Virgin America, and Gregg Saretsky, former CEO of WestJet…. and three additional directors will also serve on a committee that will assist in the oversight of Southwest's operational and strategic plans.

Southwest Airlines settles boardroom feud with activist investor Elliott [Reuters via Yahoo!]

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Now, his threats to take to the skies in a proxy dogfight with Southwest Airlines has cost seven Southwest Airlines directors—including the man who served as its CEO for nearly two decades—their board seats.

Executive Chairman Gary Kelly… who has worked at Southwest for nearly 40 years, said he would voluntarily retire after next year’s annual meeting…. Six other Southwest directors intend to retire in November as the airline looks to refresh its board. Southwest said it would appoint four new directors in the near future and would consider filling as many as three of those spots with candidates from the slate Elliott put forward last month….

Elliott partner John Pike and portfolio manager Bobby Xu said Tuesday that the resignations were an “unprecedented” step and that they were pleased that the airline’s board is “beginning to recognize the degree of change that will be required at Southwest.”

Well, that many severance checks at targets mean a whole lot of fat bonus checks at Elliott.

US-headquartered hedge fund Elliott Investment Management’s UK affiliate… paid its directors £50m in 2023, up 382% from £10.4m in 2022, according to its latest accounts.

Southwest Airlines Overhauls Board Amid Activist Pressure [WSJ]
Elliott Advisors boosts director pay by 382% [FN]

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These differences, along with those regarding what to do about the Southwest’s stock price plummeting from the sky beyond simply firing everyone, would not seem to leave much fruitful room for compromise. That said, Singer is going to allow his kinder, gentler side to give it a try for another few days. And then, well, get ready for the holographic fighters to take to the skies.

Elliott Investment Management now holds 10% of Southwest Airlines' common stock, crossing the threshold that allows the hedge fund to call a special meeting at the carrier…. The news comes days before the two sides are scheduled to meet on Sept. 9 to discuss ways to solve problems that have contributed to Southwest's stock losing roughly half its value over the last three years…./Elliott has signaled to other shareholders that it is ready to take next steps, including calling a special meeting, unless the company is willing to discuss changes to its leadership.

Elliott now owns enough of Southwest Airlines to call special meeting [Reuters via Yahoo!]

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Elliott Investment Management is launching a proxy fight with Southwest Airlines and plans to nominate 10 candidates for the 15-member board of an the airline where performance has lagged behind competitors.

That’s right: Because Southwest refused to can its CEO as Starbucks did and as Elliott wanted, Singer intends to take over the U.S.’s third-largest airline. Turns out ditching its signature seating approach didn’t do the trick for Singer (he flies private, anyway), and may have made things a good deal worse, given how poorly it’s going down among the WN faithful. And Singer’s not showing Southwest any of his famous patience.

Elliott plans to call a special meeting, rather than waiting for the company’s annual shareholder meeting. Southwest’s last shareholder meeting was held in May.

Suffice it to say, Southwest isn’t particularly happy about this turn of turbulence.

“After Elliott recently agreed to a meeting with Southwest Airlines in early September to discuss a collaborative resolution, including continuing significant Board refreshment and other governance enhancements, Elliott unilaterally decided instead to publicly announce its intention to replace a majority of Southwest Airlines’ Board,” Southwest said in a prepared statement.

Elliott seeks 10 of the 15 board seats at Southwest in bid to strengthen the airline’s performance [AP]
Elliott readies Southwest proxy fight, will nominate 10 directors [CNBC]

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In any event, the airline’s chatbot became the first line of contact for a number of passengers seeking customer service and, predictably, the chatbot hallucinated like Timothy Leary at a Pfish show.

A customer asking about bereavement fees learned that he could purchase tickets at full price and seek a refund within 90 days. When the airline refused to honor this request, he produced a screencap of the airline’s own customer service bot providing this advice only to be told that the bot was wrong and there was nothing the airline planned to do about it. A bold stance since Canada’s national motto is “Sorry.”

The customer took the airline to small claims court where the corporation decided to double down with a wild legal strategy. Per Ars Technica:

According to Air Canada, Moffatt never should have trusted the chatbot and the airline should not be liable for the chatbot’s misleading information because Air Canada essentially argued that “the chatbot is a separate legal entity that is responsible for its own actions,” a court order said.

Yeah… no. The court awarded the customer most of the refund and some associated fees.

But what were they even talking aboot?

Based upon the record, the airline hadn’t even taken basic steps to claim that the bot belonged to some legal subsidiary. You can’t invent legal entities retroactively unless you’re trying to help corporations get away with crimes against humanity. And even then, all you can do is spin existing liability onto the new entity. As the court put it:

This is a remarkable submission. While a chatbot has an interactive component, it is still just a part of Air Canada’s website. It should be obvious to Air Canada that it is responsible for all the information on its website. It makes no difference whether the information comes from a static page or a chatbot.

There are actually good arguments for giving AI legal personhood. Professor David Vladeck argued a few years back that the current legal regime inefficiently allocates damages for AI run amok. There are so many points of contact where AI can go off the rails that it doesn’t make sense to blame the inventor of the algorithm if the problem is the data fed into it or the dingbats using it for the wrong purpose, for example. Making AI a separate legal entity and then creating a mandatory insurance requirement that all stakeholders have to proportionally fund is a better solution for the long-run.

But not only is that not currently the law — in Canada or anywhere else — it’s unclear how this wouldn’t be Air Canada’s fault anyway. Sure, the insurance would have to pay for the screw-up, but the carrier isn’t going to bang on OpenAI’s door when it would come time to increase premiums. This was Air Canada’s breakdown, not the algorithm’s.

Air Canada has, for now, seemingly suspended its AI endeavors.

Air Canada must honor refund policy invented by airline’s chatbot [Ars Technica]

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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But maybe we’re wrong. Maybe Uncle Carl is OK squeezing into an Even More Space seat. Maybe he brings a couple of mini bottles of dry vermouth to mix up his own vodka martinis alongside his favorite EatUp box. Maybe he really misses Terminal 5 (more on that later). Maybe he has a soft spot for a certain airline born and bred in his own native borough.

Or maybe he’s never bought a ticket on JetBlue. But he has certainly bought 33 million of its shares.

Affiliates of the billionaire late Monday disclosed a position in JetBlue valued at $204 million, based on the day’s closing prices, making Icahn the third-largest shareholder in the carrier. According to a filing, the investor has already held talks with company leaders “regarding the possibility of board representation.”

And as American Electric Power could tell brand-new JetBlue CEO Joanna Geraghty—whose first day coincided with nature’s first predatory snowbird’s public disclosure—sometimes it’s better to accept that “possibility” here should read as “eventuality.” Especially given the, uh, difficult situation Geraghty’s stepping into, what with JetBlue shares being worth one-third less than a year ago, and having both its big recent deals blocked by the courts. And in a very real sense, today’s JetBlue wouldn’t have been possible without Icahn, given that it occupies some rather familiar-to-Icahn space at JFK.

The stake harks back to one of Icahn’s most famous plays as a corporate raider from the 1980s. The hedge fund manager took over Trans World Airlines, loading it with debt and sending it toward bankruptcy in the early 1990s after several turbulent years.

Activist Carl Icahn Takes JetBlue Stake, Eyeing Board Seat [Bloomberg via Yahoo!]
AEP Enters Agreement With Icahn Capital [WSJ]

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BREAKING: The Department of Justice has blocked JetBlue and Spirit airlines from merging, finding that it "would further consolidate an oligopoly" and cause harm to consumers. pic.twitter.com/QTsvUvLaeH

— More Perfect Union (@MorePerfectUS) January 16, 2024

One small loss for oligarchy, one big win for consumers. Monopolies cost the average American $300 a month back in 2019 — I’d bet the number has only gone up since then. There is no better way to celebrate JetBlue and Spirit staying seperate entities than buying a ticket and going somewhere nice! Well, you’d probably be better off with a staycation. COVID rates are really high right now and I doubt an airport visit would help the numbers.

Chris Williams became a social media manager and assistant editor for Above the Law in June 2021. Prior to joining the staff, he moonlighted as a minor Memelord™ in the Facebook group Law School Memes for Edgy T14s. He endured Missouri long enough to graduate from Washington University in St. Louis School of Law. He is a former boatbuilder who cannot swim, a published author on critical race theory, philosophy, and humor, and has a love for cycling that occasionally annoys his peers. You can reach him by email at cwilliams@abovethelaw.com and by tweet at @WritesForRent.

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Frontier Airlines will ultimately control the merged air carrier entity with a 51.5% stake. Spirit Airlines investors, meanwhile, will receive $2.13 in cash and 1.9126 shares of Frontier for every share they own, representing a 19% premium over the Spirit Airlines stock price as of the end of last week.

Overall, the deal is valued at $6.6 billion. The boards of both companies approved the merger last weekend.

Traditionally, airline industry mergers have been heavily scrutinized by government antitrust regulators. Most recently, the Justice Department filed a lawsuit in September seeking to block a partnership between JetBlue and American Airlines in the U.S. Northeast. While there is no official word yet on whether Biden administration lawyers will object to the Spirit-Frontier merger, the markets didn’t seem to be overly concerned, with share prices for both companies rising somewhat on news of the deal.

Perhaps a bigger question than whether the Spirit-Frontier merger has anything to offer investors in the short term is whether it has anything to offer travelers in the long term. Between the two of them, Spirit and Frontier nearly doubled their market share from 2013 to 2019. Still, as of 2019, that market share, as measured by revenue passenger miles flown, was only 5.4%. In comparison, the four largest U.S. airlines (American Airlines, Delta Air Lines, United, and Southwest) controlled a combined 73.9% of the market share in 2019.

Both Spirit and Frontier reported losses over the past two years, at least when excluding special items like the federal dollars that went to all U.S. airlines as part of the COVID-19 relief packages. Depressed demand for flights during the pandemic hammered airlines across the board.

One way Spirit and Frontier seem to be aligned is not giving much of a crap about customer service. According to data from the American Customer Satisfaction Index, Frontier and Spirit have the airline industry’s lowest customer satisfaction ratings. Department of Transportation statistics have also consistently ranked Frontier and Spirit at or near the bottom of the industry for rates of passenger complaints.

Personally, I have flown Spirit many times and don’t really have any major complaints. Sure, the seats are cheap and thin, and there is very little room. But who cares? Flights are short, and if you’re really that worried about being uncomfortable, you can use some of the money you saved on your Spirit tickets to get drunk beforehand at the airport bar.

Frontier, on the other hand: I shudder to even say its name. Back in 2015, I was departing from an airport I had departed from numerous times before, at a time of day when I knew the line for security would be nonexistent, so I wasn’t overly rushed in getting to the airport. Of course, something was wrong with the Frontier website the night before, so I couldn’t check in there. No problem: I’d do it at one of those computerized self-service kiosks at the airport. Except all of Frontier’s kiosks were broken. OK … I went to the counter, where there was one other customer ahead of me. By the time that person was done, it was 43 minutes until my flight departed, and the Frontier agent refused to print my boarding pass, citing their policy not to do so less than 45 minutes before any flight departure.

Despite the visible absence of a line at security, despite my best rhetorical efforts, there was no moving this Frontier agent. Not only that, he refused to talk to me about the problem and instead gave me some customer service number to call. I was told on the call they’d put me on a much later flight to Trenton, New Jersey, at no additional charge — I originally set out to get to Philadelphia, which is, of course, not Trenton, New Jersey. At any rate, I figured close enough, I could get to Philly somehow when I got to Trenton. I asked for a confirmation number for this flight change, but whoever was on the other end of the line for Frontier said no need, it was all in the computer system. But then, when I showed up for the flight to Trenton several hours later (ridiculously early this time), no one had heard of me having a ticket for it, I had to call this stupid number again, the person I talked to this time pretended like I was crazy and was just lying about having talked to someone at their customer service center earlier, and then Frontier tried to charge me a big additional fee for switching flights, despite promising not to do so.

I eventually got to Trenton. But I vowed never again to set foot on a Frontier plane, no matter how cheap a Frontier flight may have appeared to be.

I paid $169 for that godawful Frontier flight in 2015. Just a few weeks ago, I dropped $287.20 on a Delta flight. Never before have I spent an extra $118.20 so wisely.

We’ll see what the Spirit-Frontier merger brings for investors, and for the flying public. Perhaps a rebrand is in order.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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The Third Point Offshore Fund gained 6.5% last month and is up 11% for the quarter while the Third Point Partners Fund gained 6.6% in March and is up 11.3% in the first quarter.

Lee Ainslie even more so, thanks to the revival of so many a pandemic punching bag.

Despite losing about 9 per cent in its flagship hedge fund in a choppy January, Lee Ainslie’s Dallas-based Maverick, which manages $11bn in assets, gained roughly 25 per cent in February and a further 20 per cent last month…. The bets on previously unloved “value stocks” in sectors such as retail, airlines and banks has left Maverick up about 36 per cent in its flagship fund this year to late March, making it one of the world’s top-performing hedge funds

And hey: There’s something in there for Santa Monica born-and-bred Loeb to love, as well.

Real-estate investment trusts overall rose 9% during the three months, beating the S&P 500’s 6% gain, according to data-analytics firm Green Street. Fueling the REIT rally was an 18% rise in the shares of lodging owners and a 32% gain by mall owners.

Loeb's Third Point up 11% in first quarter - investor update [Reuters via Nasdaq]
Maverick’s big bets on unloved stocks pay off in value rally [FT]
Real-Estate Losers in 2020, Like Hotel and Mall Owners, Starred in the First Quarter [WSJ]

Tesla doubters have experienced a jolt of economic reality.

According to S3 Partners, short-sellers of Tesla’s gravity-allergic stock have lost $35 billion in 2020.

Falling Short
Tesla shares have been in ludicrous mode all year and are now up over 600%. In November, Tesla climbed 46% and short-sellers lost $8.5 billion in a single month.

Bruised and battered, many short-sellers have simply given up. The percentage of shares sold short has fallen around 63% so far this year. Still, about 6% of Tesla’s shares are held by short-sellers, well above the 1-2% average for large companies.

A few numbers to put the losses in perspective:

• Short-seller losses for high-fliers Amazon and Apple have been roughly $5 billion each this year.
• The U.S. airline industry posted combined losses of $24.2 through the first nine months of 2020, the worst in its history.
• Through the first 11 years of Tesla’s corporate history, it lost $6.7 billion.

Elon’s Warning: In an email to employees obtained by Electrek, he warned that if investors grow concerned with Tesla’s 1% profit margin, the stock will “immediately get crushed like a soufflé under a sledgehammer.”

Well, if people are willing to pay money for Hertz shares, Hertz is more than happy to provide them: $500 million worth of them. There’s just one thing it has to tell you about those shares, not that you’re likely to listen.

“Although we cannot predict how our common stock will be treated under a plan, we expect that common stock holders would not receive a recovery through any plan unless the holders of more senior claims and interests, such as secured and unsecured indebtedness (which is currently trading at a significant discount), are paid in full, which would require a significant and rapid and currently unanticipated improvement in business conditions to pre-COVID-19 or close to pre-COVID-19 levels.”

Hertz says it expects stockholders to lose all their money in filing for selling more stock [CNBC]
Leon Cooperman: Robinhood traders speculation in stocks like airlines will ‘end in tears’ [CNBC]
Looking to buy a car? Hertz is selling thousands of used cars in its fleet in bankruptcy at bargain prices [USA Today]
‘There’s absolutely no reason to own U.S. equities right now,’ strategist says, citing ‘an unholy speculative mix’ [MarketWatch]

“We crossed a lot of red lines that had not been crossed before,” Powell said Friday during an online event hosted by Princeton University’s Griswold Center for Economic Policy Studies. “I’m very confident that this is the situation where you do that and then you figure it out….”

Who knew he and his erstwhile patron and antagonist had so much in common?

The Fed chair responded to questions about one of its most complex and riskiest programs intended to support the economy -- the Main Street facility -- which has been slow to launch. Powell said the central bank is “days away” from getting it up and running.

Speaking of risky bailout programs….

Of the Fed’s $1.3 billion in ETF holdings as of May 19, around 17% were in funds that invest primarily in junk debt…. The Fed owned $100 million in iShares iBoxx High Yield Corporate Bond ETF, which as of Thursday included small holdings of bonds issued by rental car company Hertz Global Holdings Inc., which filed for bankruptcy protection on May 22. It also included small holdings of retailers J.C. Penney Co. and Neiman Marcus Group Inc. and oil-shale driller Whiting Petroleum Corp., all of which filed for bankruptcy in recent weeks.

Unfortunately, the terms of the Secondary Market Corporate Credit Facility currently do not allow the Fed to get in on this apparently can’t-miss opportunity.

The U.S. Global Jets ETF held around $33 million in assets in early March, according to FactSet, but now holds about $950 million. The fund has had net inflows for 62 consecutive trading days, according to FactSet, despite its price falling sharply during that period…. “It is certainly the type of investment you make knowing that the consensus is against you, at least it was at the time we were buying in,” said Keith DeGreen, CEO of Scottsdale, Ariz.-based DeGreen Capital Management LLC.

Powell Says Fed Crossed Red Lines When Virus Demanded Action [Bloomberg]
Federal Reserve Discloses Holdings of $1.3 Billion in Exchange-Traded Funds [WSJ]
This ETF Booms as Investors Bet on Airlines [WSJ]