Elliot Investment Management panned Southwest Airlines’s attempts to attract investment from new shareholders.
On 26 Sept. 2024, Southwest held an investor day briefing from their headquarters in Dallas Love Field, Texas. Highlights included a partnership with Icelandair which will expand the company’s international routes. The airline also announced plans to offer a full 24-hour service by increasing their red-eye flights throughout 2025, effectively creating 18 free aircraft over the course of the year.
At the same briefing, the company announced that it aims to generate $500 million by 2027 through minimising hiring, optimising scheduling, as well as by increasing supply chain and corporate efficiencies.
CEO of Southwest Airlines Bob Jordan said:
We’re now ushering in a new era at Southwest, moving swiftly and deliberately to transform the company by elevating the customer experience, improving financial performance, and driving sustainable shareholder value.
However, Elliot Investment Management was less than impressed by the briefing, going as far as to state:
“(The Investor Day) Will have a familiar ring for many shareholders: another promise of a better tomorrow from the same people who have created the problems we face today”
Elliot owns 11% of the airline’s common stock and plans to hold a special shareholders meeting. Elliot will encourage current shareholders to call back their shares and demand the election of a new board of directors to enact positive change.
Southwest Airlines’ ongoing turmoil
Like many airlines, Southwest has struggled to regain momentum lost during the Covid-19 epidemic. Passenger numbers are still lower than pre-pandemic levels. Shares have dropped 40% of their value since 2021 and the airline has downgraded its outlook eight times since the beginning of 2023.
Meanwhile, it has announced plans to reduce its services to and from Atlanta, closing seven gates, and asking 200 staff to relocate. It will also close all services at Bellingham International Airport (Bellingham, WA), George Bush Intercontinental Airport (Houston, TX), as well as Cozumel International Airport (Mexico) and Syracuse Hancock International Airport (Syracuse, NY). It will be the first time Southwest has closed any of its services since 2019, when it stopped serving Newark International Airport.
The situation has not been helped by the slow delivery of Boeing 737-MAX 9 aircraft, which was hampered by the entire fleet being grounded after a series of accidents, notably a midair blowout on board an Alaskan Air 737-MAX in January 2024. Southwest is the world’s largest operator of the 737, and the grounding has meant that the company expects to receive 20 new planes this year, down from the forecast 42.
For a full rundown of Southwest’s plans, visit their website.
So what do you think, are Southwest capable of turning it around, or will the radical changes Elliot Investment Management are planning be the only way to save the company?
