An activist investor with a new $1.9 billion stake in Southwest is calling for big changes at the airline
Southwest Airlines touts itself as the “LUV” carrier with its two free checked bags and comedic flight crews — a strategy that revolutionized low-cost air travel and earned the carrier a 47-year profitability streak from 1973 to 2019.
However, Elliott Investment Management said Monday that the airline’s decades-old strategies aren’t working in modern times and is calling for a management and board of directors overhaul as part of a plan it’s calling “Stronger Southwest.”
“Poor execution and leadership’s stubborn unwillingness to evolve the Company’s strategy have led to deeply disappointing results for shareholders, employees and customers alike,” the activist investment firm said in a letter announcing a new $1.9 billion stake, that makes it among the company’s largest shareholders.
Elliott blamed Southwest leadership’s “rigid commitment” to the model it dreamt up decades ago for today’s shortcomings. It specifically cited a major meltdown in December 2022 that affected millions of passengers, which stemmed from antiquated crew-scheduling systems and resulted in snowballing cancellations across the country.
“No senior executives were terminated for their role in the meltdown,” it said. Elliott would also like to see new, outside talent on the board of directors.
Southwest’s stock price has fallen more than 50% in three years, Elliot said, underperforming competitors and falling below 2020 levels.
“The mandate from the Board has been clear: Keep doing things the way they have always been done,” the letter read. Elliott says its ideas could help the stock gain 77% to $49 per share.
