Southwest’s recent leadership shakeup has garnered significant attention, particularly from activist investor Elliott Management. Known for its disruptive tactics in corporate boardrooms, Elliott has set its sights on Southwest Airlines, with CEO Robert Jordan firmly in its crosshairs.
The recent series of events at Southwest began with Chairman Gary Kelly announcing his retirement next year, along with six other board members resigning in November. This move cleared the way for Elliott to push for further changes within the company.
Elliott wasted no time in making its intentions known, calling the departure of seven directors “unprecedented” and announcing plans to convene a special meeting to remove CEO Robert Jordan and implement a new strategy. With a sizable stake in the airline, Elliott is making it clear that it intends to have a say in Southwest’s future direction.
One of the key changes Elliott is pushing for is the end of free open seating on Southwest flights, a move that would align the airline more closely with its competitors. Additionally, Elliott is advocating for the addition of former Spirit Airlines CEO Bob Fornaro to the board, suggesting a potential shift towards a more ultra-low-cost carrier model.
In response to Elliott’s demands, Southwest announced a $2.5 billion share buyback program and unveiled plans to add $4 billion in earnings before interest and taxes by 2027 through a three-year transformation initiative. However, Elliott remains critical of the airline’s approach, accusing Jordan of delaying necessary changes and playing for time rather than seeking real success.
The move towards a more aggressive stance by Elliott comes as Southwest’s stock struggles to regain its pre-pandemic levels, with the airline’s market performance lagging behind its competitors and the broader market. Despite a brief uptick following the recent announcements, Southwest’s stock remains down significantly from previous highs, leading to shareholder concerns about the company’s future prospects.
Elliott’s push for change at Southwest is not without precedent in the corporate world, with past examples of activist investors successfully reshaping companies’ leadership and strategies. The significant turnover on Southwest’s board signals a potential shift in the airline’s direction and a willingness to address shareholders’ concerns.
As the battle between Elliott and Southwest continues to unfold, the focus remains on the airline’s ability to adapt to changing market conditions and deliver value to its shareholders. With Elliott’s aggressive tactics in play, Southwest’s leadership will need to navigate carefully to ensure a positive outcome for the company and its investors.