The hedge fund Elliott Management wants new leadership and big changes at the airline
It looks like the activist hedge fund that is trying to force changes at Southwest Airlines has a fight on its hands. Southwest CEO Bob Jordan told reporters that if Elliott Management wants him out of the company, they will have to find a way to fire him, per the Associated Press.
“I have no plans to resign,” Jordan reportedly told a gathering of reporters Wednesday on the sidelines of an event being put on by Politico.
The Wall Street Journal wrote over the weekend that Elliott had built a $2 billion stake in the airline, which otherwise has a $16.8 billion market cap — an “approximately 11% economic interest,” as the fund calculates it. It is pushing to make a lot of changes at the airline. In a letter to the Southwest board of directors that Elliott made public, the fund said a drop in the carrier’s stock price since 2021 is cause for concern.
“Poor execution and leadership’s stubborn unwillingness to evolve the Company’s strategy have led to deeply disappointing results for shareholders, employees and customers alike,” the letter said. The letter also said that Elliott wants to install new directors and executives, who it then wants to do a “comprehensive business review.”
Helane Becker, an analyst at TD Cowen who covers the airline industry, wrote in a note earlier this week that an Elliott presentation to investors focused on improving the customer experience and offering more premium features to its key business traveler customer base. Still, she was not convinced that Elliott’s plans were as of yet enough to upgrade her Southwest stock rating from its current “hold” designation.
“Many investors we spoke with felt that the presentation showed a naivete about the airline industry and lacked a realistic plan to drive the targeted margin expansion,” she wrote. “The airline is already working to implement much of what Elliott is proposing.”
Southwest shares were flat in Wednesday trading after a volatile start to the week. On Monday, the stock rose 7%. On Tuesday, the stock fell nearly 6%. Shares in the company are down 2% for the year.
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