Yahoo Finance Southwest Defends Strategy Amid Activist Pressure
Southwest Airlines is doubling down on its strategy after Elliott Investment Management, an activist fund, took a $2 billion stake in the company.
“We are confident that Southwest Airlines has the right strategy, the right plan and the right team in place to drive long-term value for our Shareholders,” Southwest said in a statement.
Elliott’s stake in Southwest makes it one of the airline’s largest investors. The firm is pushing for major leadership changes, including replacements to CEO Bob Jordan and Chairman Gary Kelly. Southwest said the board and its executive team are currently reviewing Elliott’s proposal.
Southwest also said it was taking steps to restore its profitability. Those steps include new technology investments, cutting underperforming routes, implementing a new revenue management system, and improving its onboard experience.
The carrier underperformed in the first quarter, with executives citing delivery delays for the Boeing 737 Max 7, and sustained demand for premium and international products.
Elliott also expressed concerns over what it considers a complacent board of directors; Southwest said it’s brought on seven independent board members in the past three years.
This also isn’t Elliott’s first time making an activist push in the travel industry. Previously, the firm has invested in Dean Hotels and and Travelport. Beyond travel, Elliott has also taken activist stakes in companies like SoftBank, Texas Instruments and Johnson Controls. Elliott’s activist pushes have also led to the ouster of CEOs at telecommunications giant Crown Castle and energy company NRG.
It’s unclear if Elliott’s activist push in Southwest will end in Jordan or Kelly stepping down. Wall Street welcomed the news of Elliott’s activist stake in Southwest as the carrier’s shares rose by around 7% Monday morning.
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