Southwest Airlines rises following news of Elliott’s $2 billion investment.
In premarket trading on Monday, shares of Southwest Airlines increased by almost 7% following news from the Wall Street Journal that activist investor Elliott Investment Management had acquired a nearly $2 billion position in the American airline.
As per the story published in the Journal on Sunday, Elliott, being a significant stakeholder in Southwest Airlines, intends to advocate for modifications targeted at improving the airline’s poor performance.
Reuters requested comment from Elliott and Southwest, but neither company responded right away.
Due to delays in the delivery of 737 MAX aircraft from aircraft manufacturer Boeing, one of the biggest airlines in the United States, Southwest, has been struggling with increased costs and slower-than-expected revenue growth.
According to the carrier, delivery delays have resulted in “significant challenges,” which have forced it to curtail its growth ambitions and leave it overstaffed.
The S&P 500 index has increased by over 12% this year, while the shares of the Dallas, Texas-based corporation have decreased by around 4%.
Elliott, one of the most well-known investors in the world, intends to interact with Southwest’s management team, according to the Journal article.
Activist investors are well-known for pressuring businesses to make adjustments in order to increase shareholder returns.
But Southwest is not the only company having trouble with Boeing delays. Due to the problems at Boeing, rival United Airlines also suffered a $200 million loss in the first quarter.
The airline industry anticipates robust performance despite these obstacles due to the high demand for summer travel.
In comparison to United, whose projected profit forecasts trade at 4.74, and above the industry multiple of 7.19, Southwest’s shares trade at around 19.52 times.
