Monday, June 10, 2024 Elliott Investment Management L.P. , which manages funds with a combined investment of approximately $1.
9 billion in Southwest Airlines, has issued a critical letter to the Board of Directors of Southwest Airlines. Elliott has highlighted significant concerns over Southwest’s current execution and the leadership’s reluctance to adapt its strategy, which has resulted in disappointing outcomes for shareholders, employees, and customers alike. Elliott’s letter underscores that Southwest’s adherence to an outdated approach has severely impaired its competitiveness in today’s airline industry.
The company continues to operate with obsolete software, an outdated monetization strategy, and antiquated operational processes. This inability to modernize was dramatically demonstrated by the operational meltdown in December 2022, which left over two million travelers stranded during the holiday season. The letter points out that Southwest’s share price has plummeted by more than 50% over the past three years, dropping below the levels seen during the COVID-19 pandemic in March 2020.
Furthermore, this financial underperformance has adversely impacted frontline employees, costing each tens of thousands of dollars on average through reduced profit-sharing and declines in the value of employee-owned stock. Due to these ongoing issues, Elliott asserts that new leadership is crucial for Southwest, presenting it as the most compelling airline turnaround opportu.
