Would You like a feature Interview?
All Interviews are 100% FREE of Charge
Southwest Airlines has had a tough few quarters, with major delays and cancellations, and disgruntled customers aren’t the only ones losing loyalty.
Large investment companies have acquired large stakes in the airline and are demanding reforms, especially among its management.
Elliott Investment Management said Monday it would invest $1.9 billion in equity in the Dallas-based airline. Wrote an open letter Southwest Airlines’ board of directors has asked shareholders to vote to replace the airline’s management and take the company in a different direction.
RELATED: ‘Totally unacceptable’: Southwest Airlines delays thousands of flights due to ‘technical issues’
“Poor execution and management’s stubborn unwillingness to evolve the strategy have led to extremely disappointing results for shareholders, employees and customers,” the letter said. “In addition to the negative returns to shareholders, this disappointing financial performance has resulted in an average loss of tens of thousands of dollars per frontline employee in the form of reduced employee profit sharing and a decline in the value of Southwest Airlines stock held by employee retirement plans.”
The company also believes Southwest has “the most compelling airline turnaround opportunity” in the industry, and outlined a three-pronged strategy for shareholders to consider: strengthening the board of directors, strengthening leadership (preferably from outside the company), and conducting a comprehensive business review.
Doing so would allow Southwest to reach $49 a share within the next 12 months, a gain of 77%, Elliott predicted.
RELATED: ‘It won’t happen again’: Southwest Airlines CEO says last Christmas disaster is in the past
“Southwest has a proud history, but that history is no reason to support poor leadership and persist with strategies that are no longer successful in the modern airline industry,” the letter said.
Southwest responded to the investment. Firmly in the letter The airline said it was “carefully considering” Elliott’s letter and planned to provide further details about its future strategy at Southwest’s investor conference in September.
“Southwest is confident that it has the right strategy, the right plan and the right team to create long-term value for its shareholders,” the company said in a statement.
Southwest Airlines upset customers last month when an internal “technical issue” caused thousands of flight delays.
It’s the latest setback for the airline’s operations as it seeks to cut costs.
Airlines Estimates for the whole of 2023posted a net loss of $219 million in the fourth quarter due to a disastrous holiday season that left thousands of passengers stranded, delayed or forced to cancel flights.
Related: Southwest Airlines to implement major operational changes after reporting fiscal 2024 financial results
“We have not yet achieved our financial targets,” Southwest CEO Bob Jordan said in an earnings call at the time.
Southwest It was down It was up more than 10% year-over-year as of Tuesday afternoon, and fell nearly 5% in the 24 hours following the release of Elliott’s letter.