Calling for significant changes at Southwest, an activist investor has added a $1.9 billion stake in the airline.
Ever since the outbreak, Southwest’s stock price has been volatile. According to Elliott Management, the modifications it is proposing may drive shares up 77%. Getty Images/Scott Olson
Elliott Management has demanded improvements at Southwest to address what it claims is subpar operation.
Southwest’s stock price fell more over 50% in just three years, reaching depths not seen since March 2020.
Southwest Airlines markets itself as the “LUV” carrier thanks to its two complimentary checked baggage and entertaining flight attendants. This approach changed the landscape of budget aviation and helped the airline maintain a 47-year profitable streak from 1973 to 2019.
But as part of a strategy it’s dubbed “Stronger Southwest,” Elliott Investment Management said on Monday that the airline’s decades-old tactics weren’t relevant in the present. It is thus urging a management and board of directors makeover.
An activist investment firm announced a new $1.9 billion stake, making it among the company’s largest shareholders.
Elliott blamed the issues of today on the “rigid commitment” of Southwest leadership to the paradigm that was conceived decades ago. The article mentioned a significant disaster in December 2022 that impacted millions of travellers and was caused by outdated crew scheduling systems. This led to a cascade of cancellations throughout the nation.
Elliott is also in favour of adding fresh, outside talent to the board of directors.
Elliot stated that in the last three years, the price of Southwest’s stock has dropped by more than 50%, lagging some rivals and declining below 2020 levels.
Elliott went on to say that the company’s concepts might raise the stock 77% to $49 per share.
Following Elliott’s disclosure of its interest, shares increased by over 7% on Monday.
According to Southwest, its executive team is confident.
Business Insider was informed by Southwest that it defended its management team and board and looked forward to “better understanding their views on our company”.
Savanthi Syth of Raymond James, an airline analyst, suggested that red-eye flights and the possibility of allocated seating might help Southwest improve its financial performance by improving customer service and optimising its routes.
She continued by saying that Southwest had “correctly” begun to reduce its aggressive growth goals and had the chance to update its antiquated equipment.
One of the most feared activist hedge funds in the world is Elliott Management, which is in charge of $66 billion in assets. The company has declared its holdings in Match Group, the online dating platform that powers Tinder, and Texas Instruments, anglo American’s mining company, in addition to Southwest.
