Southwest faces aggressive challenge from Elliott | Wilnesh News

Activist hedge fund Elliott Management has increased its stake by $1.9 billion Southwest Airlines and plans to push for leadership changes at an airline that lags behind its main rivals.

Elliott is seeking to replace Southwest CEO Bob Jordan and Chairman Gary Kelly with outside candidates, he said in a letter and speech on Monday. Elliott believes Southwest has fallen from a “best in class” airline to one of the biggest laggards, according to a presentation detailing its rationale for the changes.

The size of Elliott’s stake makes the activist one of Southwest’s largest shareholders, according to FactSet. Elliott said the activist believes Southwest needs to “pursue every avenue available to effect leadership change.”

In his speech, Elliott said it expected the airline to announce the transition of its chief executive and chairman with “immediate” effect. Elliott said Jordan and Kelly “presided over a period of shocking underperformance” at Southwest.

Shares of Southwest Airlines rose about 7% in premarket trading on Monday. As of Friday’s close, the company had a market capitalization of $16.6 billion.

Elliott said the company spoke with many former Southwest employees during the 18-month research period, according to a briefing note. The activist also said the company spoke with shareholders and surveyed more than 2,000 passengers to understand why consumers choose Southwest over other airlines.

Southwest Airlines has been struggling boeing company The new 737 Max aircraft, the latest model aircraft exclusively operated by the airline, and changing travel demand patterns post-pandemic.

The airline’s leaders are now looking for new ways to increase revenue to better compete with rivals that offer more perks and products to travelers.

Jordan has worked at the airline for decades and succeeded Kelly as CEO in February 2022.

The airline also faces reckoning with a late-2022 holiday meltdown that saw losses of more than $1 billion, forcing an airline long known for good customer service to win over the flying public and make quick fixes to its internal employee scheduling software.

Southwest’s shares are down more than 50% from three years ago, when travel demand, led by domestic travel, began to pick up. In contrast, Delta Airlines The stock price rose approximately 10% during the same period United Airlines That’s down about 7%.

Elliott’s campaigns at other companies have similarly centered on leadership changes. Eliot’s second campaign crown castle 2022 settlement agreement with auto parts suppliers sensata What happened earlier this year are just two examples.

In the past few months alone, the activist has taken a $2.5 billion stake in semiconductor companies Texas Instrumentsholds $2 billion stake in Japanese conglomerate Softbank and $1 billion worth of stakes in mining companies Anglo American.

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