Elliott Demands Leadership Change at Southwest After $1.9B Stake

Southwest

Elliott Investment Management has called for a leadership overhaul at Southwest Airlines (NYSE:LUV) after disclosing a $1.9 billion stake in the U.S. carrier. This announcement sent Southwest’s shares up more than 7% in morning trading on Wall Street.

The activist investment firm criticized Southwest’s “poor execution” and the leadership’s “stubborn unwillingness” to adapt the company’s strategy, leading to disappointing results for shareholders, employees, and customers. Elliott emphasized the need for new leadership in a letter to the airline’s board.

Southwest Airlines did not immediately respond to requests for comment.

The Dallas-based airline, a dedicated Boeing (NYSE:BA) customer, has struggled due to Boeing’s ongoing safety issues. Southwest has warned of an earnings hit, expecting to receive only 20 Boeing aircraft this year, far fewer than anticipated. Plans to operate MAX 7 aircraft this year are also in jeopardy due to delays in FAA certification.

Boeing’s delays have been called “significant challenges” by Southwest, forcing the airline to moderate its growth plans for this year and next.

Elliott, known for advocating changes to boost shareholder returns, criticized Southwest CEO Bob Jordan for “unacceptable” financial and operational performance, noting seven negative guidance revisions over the past 17 months. The firm also called for a board overhaul, citing a lack of external airline experience among directors and the influence of Executive Chairman Gary Kelly on board appointments.

Southwest’s shares have fallen nearly 4% this year, compared to a roughly 12% rise in the S&P 500 index. Raymond James analyst Savanthi Syth noted the activist interest in Southwest is not surprising given its strong franchise with valuable assets. However, Southwest is not alone in facing Boeing delays; rival United Airlines (NASDAQ:UAL) reported a $200 million impact in the first quarter. Despite these challenges, the airline sector expects strong demand for summer travel. Southwest shares trade at about 19.52 times their forward profit estimates, compared with United’s 4.74 and the industry multiple of 7.19.

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