Activist Hedge Fund Takes $1.9 Billion Stake, Calls for Immediate CEO and Chair Changes
In a bold move, activist hedge fund Elliott Management has acquired a $1.9 billion stake in Southwest Airlines (LUV), positioning itself as one of the airline’s largest shareholders. This significant investment signals Elliott’s intention to drive substantial leadership changes at the beleaguered airline, which has faced numerous operational and competitive challenges in recent years.
Elliott Management has explicitly called for the immediate replacement of Southwest’s current CEO Bob Jordan and Chair Gary Kelly with external candidates. According to a letter and presentation released by the activist fund, Southwest has experienced a dramatic decline from being a “best-in-class” airline to one of the industry’s underperformers. The fund’s presentation, which draws on extensive research including interviews with former employees and surveys of over 2,000 flyers, underscores the urgency of leadership transition to revive the airline’s fortunes.
Southwest has been grappling with various issues, including delays in the delivery of Boeing’s 737 Max aircraft and evolving travel demand post-pandemic. These challenges have been compounded by operational mishaps, such as the costly holiday meltdown at the end of 2022, which not only dented its finances but also its reputation for stellar customer service.
In response to these pressures, current CEO Bob Jordan, who succeeded Gary Kelly in February 2022, has hinted at potential strategic shifts, such as revising Southwest’s single-class seating arrangement and boarding processes. Despite these efforts, Elliott Management insists that more drastic leadership changes are necessary.
The market reacted positively to the news, with Southwest shares rising approximately 7% in premarket trading following Elliott’s announcement. This surge, however, contrasts sharply with the airline’s overall performance; its shares have plummeted by over 50% in the past three years, lagging behind competitors like Delta Air Lines and United Airlines.
Elliott’s aggressive strategy at Southwest mirrors its previous campaigns for leadership changes at other companies, including Crown Castle and Sensata. The hedge fund’s recent investments in Texas Instruments, SoftBank, and Anglo American further illustrate its active approach to driving corporate transformations.
As Elliott Management seeks to overhaul Southwest’s leadership, the airline industry and its investors will be closely watching to see if these changes can reinvigorate the once-dominant carrier.
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