Activist investor Elliott buys $1.9B stake in Southwest Airlines, pushes for leadership changes

Activist shareholder Elliott Investment Management has acquired a $1.9 billion stake in Southwest Airlines and is pushing for the removal of the CEO due to the airline's operational and financial challenges. Elliott criticized the leadership of the current CEO and former CEO, stating they are not capable of modernizing the airline. The investment firm is calling for new executives from outside the company to replace the current leadership and for significant changes on the board. Southwest Airlines has faced a decline in stock price, operational issues, and competition from rivals offering better amenities. Despite Southwest's strong brand and balance sheet, the airline has struggled with growth and profitability, partly due to production cutbacks at Boeing affecting jet deliveries. Elliott's stake in Southwest led to a 7% increase in the airline's shares, prompting calls for leadership changes and improved financial performance. Southwest's leadership defended their abilities to drive long-term value for shareholders and serve customers effectively. The airline has faced challenges with Boeing delays, changing travel demand post-pandemic, and the need to enhance revenue streams to compete with other airlines. Elliott Management plans to advocate for leadership changes at Southwest to address its underperformance compared to industry peers. Southwest's leaders are considering strategic changes, such as revising seating policies and boarding methods, to attract more customers and improve financial performance. Elliott's research involved speaking with former employees, shareholders, and flyers to understand consumer preferences and identify areas for improvement at Southwest. The airline industry typically promotes leaders from within, but Elliott is pushing for external candidates to lead Southwest towards better performance and competitiveness. Southwest's shares have declined over the past three years, while rivals like Delta Air Lines have seen stock price increases. Elliott's involvement in Southwest reflects its strategy of advocating for change in leadership at underperforming companies to drive better results.