Southwest shares jump after activist Elliott buys $2B stake

Southwest Airlines shares jumped on Monday after activist investor Elliott Investment Management took a $2 billion stake in the carrier.

Elliott, in a letter sent to Southwest’s board on Monday, called on the airline to make leadership changes and take other actions, arguing the carrier needed to improve its financial performance.

In the letter, Elliott executives said Southwest should remake its board with “new, truly independent directors” and hire new leadership from outside the company. It also urged the carrier to form a committee to “evaluate all available opportunities to rapidly restore the Company’s performance to best-in-class standards.” 

The activist investor took issue with Southwest’s executive chairman, Gary Kelly, and CEO, Bob Jordan, criticizing their leadership and arguing they were “not up to the task of modernizing” the airline.

“We are convinced the issues the Company currently faces are addressable with the right leadership and a comprehensive, unbiased evaluation of available opportunities,” Elliot said.

The airline’s shares posted a nearly 7% increase in the morning as investors reacted to Elliott’s investment. The activist investor’s stake was first reported by The Wall Street Journal.

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A Southwest spokesperson told FOX Business it “maintain[s] an open dialogue with our shareholders and value[s] their perspectives related to enhancing shareholder value.”

Elliott said it wanted to meet with the carrier in its letter. Southwest said it was “first contacted by Elliott yesterday and look forward to better understanding their views on our company.”

The company stood by its leadership, saying, “The Southwest Board of Directors is confident in our CEO and management’s ability to execute against the company’s strategic plan to drive long-term value for all shareholders, safely and reliably serve our customers and deliver on our commitments to all of our stakeholders.”

News of Elliott’s activist investment comes roughly a month and half after Southwest reported first-quarter operating revenue of $6.3 billion and a net loss of $231 million.

At the time, it said it “expects full year 2024 year-over-year operating revenue growth approaching high-single digits when adjusted for current trends and planned reductions for post-summer schedules.” It had previously anticipated double-digit growth before Boeing delivery delays and related capacity reductions.