Elliott takes $1.9 billion stake in Southwest Airlines

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Elliott takes $1.9 billion stake in Southwest Airlines

Elliott Investment Management LP announced Monday that it has acquired a $1.9 billion stake in Southwest Airlines, pressing the airline to implement significant leadership changes. However, Southwest Airlines quickly defended its current leadership team.

Elliott takes $1.9 billion stake in Southwest Airlines : Activist Investor’s Demands

In a detailed letter to Southwest’s board, Elliott criticized CEO Bob Jordan and Executive Chair Gary Kelly for overseeing a period of “severe underperformance.” The letter called for new leadership “from outside of the company,” a revamped board with “truly independent directors,” and a “comprehensive business review.”

“Southwest is a legendary airline with a proud history,” Elliott partner John Pike and portfolio manager Bobby Xu wrote. “Today, however, 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.”

Elliott takes $1.9 billion stake in Southwest Airlines : Stock Performance and Potential

Following the announcement, Southwest Airlines’ stock rose approximately 8.4% to $30.09 per share. Elliott believes that with the proposed changes, the stock could reach $49 per share within 12 months.

Criticism of Current Leadership

Elliott’s letter highlighted Southwest’s failure to “modernize,” citing Jordan’s “unacceptable financial and operational performance quarter after quarter.” The letter pointed to a significant incident in December 2022 when nearly 17,000 flights were canceled, stranding about 2 million passengers. This debacle resulted in a $140 million fine for the airline.