Southwest Airlines, a once “best-in-class” airline, has fallen behind its competitors, and activist hedge fund Elliott Management has taken notice. With a $1.9 billion stake in the company, Elliott is pushing for leadership changes at Southwest Airlines to address the issues that have caused its underperformance. The hedge fund is seeking to replace CEO Bob Jordan and Chair Gary Kelly with outside candidates, believing that a new leadership team is necessary to bring Southwest back to its former glory.
Elliott Management’s decision to intervene at Southwest Airlines is based on a thorough 18-month research period that involved speaking with former employees, shareholders, and consumers. The activist found that Southwest has been struggling with delays in receiving new 737 Max planes from Boeing, changes in travel demand post-pandemic, and increased competition from other airlines offering more perks and products. These challenges have led to significant underperformance at Southwest, prompting Elliott to call for immediate leadership changes.
Elliott Management is urging Southwest Airlines to announce a CEO and chair transition with immediate effect to address the issues that have plagued the airline. The current leadership team, led by Bob Jordan and Gary Kelly, has presided over a period of stunning underperformance, which has resulted in Southwest’s market capitalization taking a hit. The activist believes that new leadership is essential for Southwest to better compete with its rivals and regain its foothold in the market.
In recent years, Southwest Airlines has faced challenges such as the grounding of its 737 Max fleet, holiday meltdowns that cost the company over $1 billion, and changes in customer preferences. To stay competitive, the airline is exploring new revenue streams, including potentially ditching its single class of seating and boarding method. However, Elliott Management believes that these efforts may not be enough to turn the tide for Southwest, emphasizing the need for leadership changes to drive real transformation.
While Southwest has struggled to keep up with its competitors, such as Delta Air Lines and United Airlines, Elliott Management’s involvement underscores the need for a change in leadership to revitalize the airline. Delta’s shares have seen a modest increase over the past few years, while United’s have experienced a slight decline. In contrast, Southwest shares have dropped significantly, indicating the urgency of implementing strategic changes to improve the airline’s performance.
Elliott Management’s call for leadership changes at Southwest Airlines highlights the critical need for a new direction to address the airline’s persistent underperformance. By bringing in new leadership to steer the company in a new direction, Southwest has the opportunity to regain its competitive edge and position itself for long-term success in the aviation industry.