Elliott Management, an activist hedge fund, has acquired a $1.9 billion stake in Southwest Airlines and is pushing for leadership changes at the airline. The activist fund intends to replace CEO Bob Jordan and Chair Gary Kelly with outside candidates, citing a decline in Southwest’s performance from being a “best-in-class” airline to one of the biggest underperformers. Elliott, one of the largest shareholders of Southwest, is adamant about implementing the leadership changes it believes are necessary for the airline.
The news of Elliott’s stake in Southwest has caused the airline’s shares to rise by roughly 7% in premarket trading. The fund has conducted extensive research for 18 months, speaking with former employees, shareholders, and surveying flyers to understand consumer preferences. Southwest has faced challenges stemming from delays in the delivery of new Boeing 737 Max planes and shifts in travel demand post-pandemic, prompting the airline to explore new revenue strategies to remain competitive in the industry.
Southwest’s leadership has been criticized for its handling of recent issues, including a holiday meltdown in 2022 that cost the airline over $1 billion. The carrier’s shares have plummeted by over 50% in the past three years, contrasting with the performance of rivals like Delta Air Lines and United Airlines. Elliott’s campaign at Southwest mirrors its approach at other companies, where the fund has advocated for leadership changes to drive performance improvements.
In addition to its stake in Southwest, Elliott has engaged in campaigns at other companies, emphasizing the need for change in leadership. The fund’s recent activities include acquiring stakes in companies like Texas Instruments, SoftBank, and Anglo American. With its track record of pursuing changes at underperforming companies, Elliott’s involvement in Southwest signals potential shifts in the airline’s leadership and operations in the near future.
As Southwest navigates through a challenging period marked by operational issues and financial setbacks, the fund’s involvement could lead to significant changes at the airline. The push for new leadership at Southwest reflects a broader trend of activist investors seeking to drive improvements at underperforming companies across various industries. With Elliott’s substantial stake in Southwest and its history of successful campaigns at other firms, the airline may undergo a transformation under new leadership in the months ahead.
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