Elliott Management takes $1.9B stake in Southwest Airlines

Elliott Investment Management has taken up an activist investor stake in Southwest Airlines (LUV) worth up to $1.9 billion. Yahoo Finance's Market Domination team breaks down Elliott's note and its plans it may have for Southwest's leadership as it hopes to turn the stock around.

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This post was written by Luke Carberry Mogan.

Video transcript

Activist Elliott Investment Management has built a stake of nearly $2 billion in Southwest Airlines, the firm planning to push for leadership changes at the airline that has lagged rivals.

So Elliott does reveal this.

This stake it means Elliott, by the way, is now one of its biggest shareholders here.

Tough statement by Elliott They really go after management here.

CEO Bob Jordan executive chairman Gary Kelly for poor execution for a stubborn unwilling, they say, to evolve the company's strategy.

Uh, say they have presided over a period of severe underperformance, that they're not up to the task of Modernising the airline and that they are you.

A turn around is achievable here, and the stock could hit 49 within 12 months.

And that would that would represent, of course, big upside here, Julie.

Yeah, and what's so interesting to me is Southwest for years was sort of maybe not the gold standard among airlines, but certainly gold among the discounters was known as really running a tight ship in terms of costs was appealing to folks who grew like crazy.

If you look at the challenges now that Elliott highlights, but you know the market is well aware of as well.

The company in the first quarter had reported deeper losses than estimated worse revenue than expected.

The company remember only flies Boeing 737.

So it's been hurt in particular by all of the issues and delays with deliveries 737.

They're cutting some airports from routes as a result of all of this.

And remember back in 2022 when they had those, um, that big disruption to their booking system and flight system.

Um, that was a tech disruption that happened in 2022 but they never they had a hard time sort of coming out of that and recovering from that.

So all of that adding up to this case that Elliott is making yeah, in terms of what happens next to it's an activist who usually would think, OK, you know, M and a divestitures, Um, but interesting.

The airlines and they were first contacted by Elliott yesterday.

So clearly early days here and yeah, well, and the company is kind of saying that they are willing to hear what Elliott has to chat.

Yeah, OK,