Shareholder Elliott Investment Rips Southwest Airlines for ‘Poor Execution’, Demands New Leadership

Elliott Investment Management L.P., managing funds with a substantial investment of approximately $1.9 billion in Southwest Airlines, has formally expressed its dissatisfaction with the airline’s direction in a detailed letter to the Board of Directors.

The letter criticized Southwest for its steadfast adherence to outdated strategies and processes, which Elliott argues have stifled the airline’s competitive edge in the modern aviation market.

According to Elliott, this resistance to change has led to “deeply disappointing results for shareholders, employees and customers alike.” The firm points to Southwest’s operational fiasco in December 2022, which left over two million travelers stranded, as a glaring indicator of the need for an overhaul in strategy and leadership.

Highlighting a more than 50% decline in Southwest’s share price over the past three years, Elliott emphasized that the airline’s market valuation has dipped below its March 2020 levels—the peak of the COVID-19 pandemic crisis. This downturn, the letter states, has not only eroded shareholder value but has also significantly impacted employee compensation, with frontline staff losing “tens of thousands of dollars on average” due to reduced profit sharing and depreciated stock values.

In the correspondence, Elliott describes Southwest’s situation as “the most compelling airline turnaround opportunity in the last two decades” and advocates for a fresh corporate leadership to arrest the decline and steer the company towards recovery. As part of its proposed “Stronger Southwest” plan, Elliott has laid out a three-pronged strategy focused on enhancing the board, upgrading leadership, and conducting a comprehensive business review.

Elliott’s projections are bold, claiming that with these changes, Southwest’s stock could potentially reach $49 per share within 12 months, a significant uptick that would translate to a 77% return for shareholders. The investment firm remains hopeful for a collaborative effort with Southwest to “restore accountability and best-in-class financial performance,” thereby benefiting all stakeholders involved.

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