Southwest CEO Bob Jordan stated that he has no plans to resign in response to activist fund Elliott Investment Management’s calls for a major leadership change at the airline. Jordan mentioned that while he will not step down, he is open to considering feedback from Elliott. He emphasized the need for Southwest to adapt its business model to changing customer demands and expectations, acknowledging the shift towards self-service and mobile app capabilities.
Southwest, known for democratizing the skies with its low fares and open boarding, is facing pressure from Elliott to make significant changes, including the resignations of Jordan and Chairman Gary Kelly. Artisan Partners, another stakeholder in Southwest, also supports a leadership change to help the airline navigate its recent underperformance. Southwest is considering implementing assigned boarding and seating, along with launching a premium cabin, as part of potential business model changes.
Despite facing challenges such as delivery delays with the Boeing 737 Max 7 and high labor costs, Southwest has not been profitable in 2024. The airline reported a first-quarter loss below Wall Street expectations, prompting discussions on necessary changes to drive long-term value for shareholders. Southwest executives are expected to reveal more adjustments to their business model during an investor day in September, addressing criticisms of being slow to change and resisting partnerships with online travel agencies.
Elliott has expressed concerns about Southwest’s leadership, with many executives having been with the airline for an average of 25 years. The activist fund’s push for a change in leadership is part of its strategy to drive value for shareholders, as seen in its previous investments in companies like Dean Hotels and Travelport. Southwest, however, is confident in its current plan and team, doubling down on its strategy amid Elliott’s pressure. The airline remains focused on delivering long-term value and addressing its underperformance in the market.
The performance of airline sector stocks within the ST200 index, which includes companies publicly traded across global markets, is highlighted to provide context on the current state of the industry. The Skift Travel 200 merges the financial data of nearly 200 travel companies to offer insights into the overall performance of the sector. As Southwest grapples with pressure from activist investors and the need for strategic changes, the broader airline industry continues to navigate challenges and opportunities in the market.
