A Southwest Airlines plane arrives to land at Laguardia Airport in New York City, New York, USA, on January 11, 2023.
Mike Segar | Reuters
Activist hedge fund Elliott Management has amassed a $1.9 billion stake in Southwest Airlines and plans to push for leadership changes at the airline that has fallen behind its big rivals.
Elliott is looking to replace Southwest CEO Bob Jordan and Chairman Gary Kelly with outside candidates, the activist said in a letter and filing Monday. Elliott believes Southwest has gone from being a “best-in-class airline” to a laggard, according to the presentation detailing his arguments for the change.
The size of Elliott's stake makes the activist one of Southwest's largest shareholders, according to FactSet. Elliott said he intends to “pursue all available avenues to bring about the leadership changes” the activist believes Southwest needs.
He wants the airline to announce a CEO and president transition effective “immediately,” Elliott said in his filing. Jordan and Kelly have “presided over a period of astonishing underperformance at” Southwest, Elliott said.
Southwest shares rose 6% in early trading Monday. The company had a market capitalization of $16.6 billion as of Friday's close.
Elliott said he spoke with numerous former Southwest employees during an 18-month investigative period, according to a filing. The activist also said he spoke to shareholders and surveyed more than 2,000 travelers to understand why consumers chose Southwest over other airlines, according to that same presentation.
Southwest has had problems with delays in boeing of new 737 Max aircraft, the newest models of the aircraft flown exclusively by the airline, as well as changes in travel demand patterns after the pandemic.
Airline leaders are now looking for new ways to increase revenue to better compete with rivals that offer travelers more benefits and products.
Jordan, who replaced Kelly as CEO in February 2022 after decades at the airline, told CNBC in April that the airline is considering ditching its long-standing single class of airline seats and boarding method.
The airline also faced a reckoning over a holiday crisis in late 2022 that cost it more than $1 billion and forced the airline long known for good customer service to win over the flying public and make corrections. fast in your internal personnel scheduling software.
Southwest shares are down more than 50% from three years ago, when travel demand, led by domestic travel, was beginning to recover. Unlike, Delta Airlines The stock was up about 10% during that period and united airlines They are down approximately 7%.
Elliott's campaigns at other companies have also focused on a change in leadership. Elliott's second campaign in Crown Castle in 2022 and conciliation agreement with auto parts supplier Sensible At the beginning of this year there are only two cases.
In just the last few months, the activist has acquired a $2.5 billion stake in a semiconductor company. Texas Instrumentsa $2 billion stake in a Japanese conglomerate SoftBank and a billion-dollar stake in a mining company Anglo-American.
This is breaking news. Please check for updates.
