Elliott’s plan for Southwest: new governance, curbed costs, monetize passengers

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By Judson Rollins

June 13, 2024, © Leeham News: Elliott Investment Management announced an activist shareholder campaign against Southwest Airlines' board and management earlier this week.

The airline’s share price has declined 50 percent in three years and sits near its April 2020 value, one month into the COVID-19 pandemic. Elliott says this is due to poor board governance and day-to-day management.

Source: Elliott Investment Management.

“Southwest’s [board] has failed to hold management accountable for poor execution and has been unable to catalyze (or permit) the necessary strategic evolution,” Elliott wrote in a letter to the Southwest board.

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“Instead, the [board] has reinforced an insular culture and outdated thinking in the face of indisputable evidence that change is required.”

To gain a deeper insight into Elliott’s proposed 'Stronger Southwest' plan, LNA studied the firm’s letter and accompanying presentation and spoke with sources familiar with the situation.

  • Elliott blames subpar returns on insular, stagnant board and management.
  • Keys to restored profitability include curbing cost growth, passenger monetization.
  • New board, CEO with industry experience would drive business change.
  • Employee resistance is a likely headwind; will improved profit sharing help?

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