Elliott seeks new leadership and strategy for Southwest Airlines

Activist investor Elliott Management on Monday said it wanted to bring in new leadership at Southwest Airlines, reconstitute the board and overhaul the carrier’s strategy and operations. Elliott sent a letter to Southwest’s board of directors saying CE Bob Jordan had delivered “unacceptable financial and operational performance quarter after quarter”, while costs have increased and revenues have lagged behind other airlines. The fund said the airline’s board had reinforced an “insular culture” and that only one of Southwest’s eight most senior executives had experience at another airline. Elliott has taken a $1.9b position in Southwest. The airline, which has an $18bn market capitalisation, now counts the fund as one of its largest investors with an 11% ownership stake. Southwest’s share price closed at $27.25 on Friday, below its pre-pandemic level in March 2020 before Covid-19 devastated global aviation. The stock jumped 7% on Monday to $29.70. “We believe Southwest’s stock can achieve $49 per share within 12 months,” Elliott said in the letter. Southwest said in a statement that it was first contacted by Elliott on Sunday, and looked forward “to better understanding their views on our company”. “The Southwest board of directors is confident in our CEO and management’s ability to execute against the company’s strategic plan to drive long-term value,” the airline said. Savanthi Syth, analyst at Raymond James, said Southwest’s brand, fleet and balance sheet with net cash of more than $11bn make it “unique among US airlines”, and an unsurprising activist target. While the airline is no longer distinguished by its policy of not charging change fees or cancellation fees, it could improve in other ways, such as adding red-eye flights or assigned seating, she added. “There aren’t structural changes that cannot be overcome with sufficient ‘shots on goal’ to drive margin recovery,” Syth said.<br/>