Elliott Investment Management acquires $1.9bn stake in Southwest Airlines, calls for reform
Elliott Investment Management has made a $1.9 billion investment into Southwest Airlines, the company has disclosed via an open letter, while simultaneously calling for a comprehensive shakeup of company leadership…
June 11, 2024
Elliott Investment Management has made a $1.9 billion investment into Southwest Airlines, the company has disclosed via an open letter, while simultaneously calling for a comprehensive shakeup of company leadership in a damning indictment of the airline’s current operations. However, Southwest maintains that whilst it values Elliot’s perspectives, it is confident that it has “the right strategy, the right plan and the right team in place to drive long-term value for [its] shareholders”.
“The letter substantiates Elliott’s view that Southwest’s poor execution and leadership’s stubborn unwillingness to evolve company strategy have led to deeply disappointing results for shareholders, employees and customers alike,” wrote Elliott, asserting that while the airline “represents the most compelling airline turnaround opportunity in the last two decades” a significant strategy change is needed.
Alongside criticising Southwest’s “outdated software, a dated monetization strategy and antiquated operational processes,” Elliot also believes that Southwest’s executive chairman Gary Kelly and its CEO Robert Jordan have “presided over a period of severe underperformance”. Furthermore, it recommends that the Board “should be reconstituted with new, truly independent directors” and external leadership, with a new management and Board-level committee to “evaluate all opportunities to rapidly restore the Company’s performance to best-in-class standards”.
Southwest’s share price, which has declined by more than 50% in the past three years, jumped from $27.75 to $29.65 upon publication of the letter. Elliot argues that, should its ‘Stronger Southwest’ plan be implemented, the airline’s stock can achieve $49 per share within 12 months.
“Our Board and Executive Leadership Team are thoughtfully reviewing Elliott’s letter and presentation and look forward to further conversations with Elliott to better understand its view on the Company,” confirmed a spokesperson for Southwest, who reiterated the airline was willing to meet to discuss its strategy with Elliott.
“The Southwest Airlines Board of Directors diligently oversees our strategy and Leadership Team and, based on the Company’s ability to overcome strong headwinds in the past, is confident in our CEO and Leadership Team’s ability to fulfil our strategy to drive long-term value for all Shareholders,” added Southwest.
