*

Proposal would give Elliot representation on Southwest ( LUV )

board,

not control

*

Elliott called for special shareholder meeting for Dec. 10

(Add details and background in paragraph 2-8)

Oct 19 (Reuters) - Elliott Investment Management and

Southwest Airlines ( LUV ) have begun discussing a potential

settlement that would avoid a proxy fight for control of the

airline's board, Bloomberg News reported on Saturday, citing

people familiar with the matter.

Elliott has proposed a framework that would give it

representation on Southwest's ( LUV ) board but not control, the people

said, adding that the talks, which were progressing toward a

resolution as of Saturday, have not been finalized and could

fall through.

Southwest ( LUV ) and Elliott did not immediately respond to a

Reuters' request for comment.

On Monday, the hedge fund

officially

called for the special meeting to be held on Dec. 10 and

submitted proposals to replace eight directors and take control

of the board.

The company said it tried to reach a resolution to avoid

a fight and noted that the timing of the proposed special

meeting was designed to "maximize disruption" before one of the

busiest travel periods of the year.

The activist investor which owns 10% of Southwest's ( LUV )

common stock, has pushed for months to replace some members of

the board, oust CEO Bob Jordan, and review its strategy to

improve financial performance and boost the share price.

The airline unveiled several

initiatives last month

to shore up sagging profits, including partnerships,

vacation packages for customers and aircraft sale-leasebacks.

As one of the biggest and busiest activist investors,

Elliott has previously pushed for changes at coffee chain

Starbucks ( SBUX ), Salesforce ( CRM ) and Twitter.