Elliott Investment Management (Elliott), an activist investment firm that has launched a proxy battle against Southwest Airlines’ management, has continued to criticize the airline and its leadership, reiterating its calls for the removal of the chief executive officer (CEO) of the carrier.
Long series of failed improvement initiatives
After Southwest Airlines
had presented its three-year transformation plan on September 26, Elliott issued its statement in response to the changes announced at the airline’s Investor Day.
“Today’s Investor Day will have a familiar ring for many shareholders: Another promise of a better tomorrow from the same people who have created the problems we face today.”
The investment firm continued that without credible leadership to execute this plan, which was filled with long-dated promises of better financial performance, the plan risked becoming the latest in the airline’s long series of failed improvement initiatives.
Elliott highlighted that in 2021 and 2022, Southwest Airlines made similar promises that would enhance its profitability in the billions. Instead, the carrier’s profitability has deteriorated in the billions under the leadership of Bob Jordan, the president and CEO of Southwest Airlines, the investment firm alleged.
During the airline’s investor day in December 2021, back when its CEO was still Gary Kelly, the current executive chairman of the board until May 2025, it estimated its new strategic initiatives should deliver $1 billion to $1.5 billion of incremental earnings before interest and taxes (EBIT) in 2023.
Photo: Wenjie Zheng | Shutterstock
The initiatives included Southwest Business, participation in the global distribution system (GDS), a new fare product with a modern revenue management system (RMS), a new Chase co-brand credit card agreement, and fleet modernization to maintain its low-cost advantage.
However, the latter point hinged on Boeing
delivering the 737 MAX 7. The Federal Aviation Administration (FAA) still has not certified the type, nor the largest 737 MAX
type, the MAX 10.
Southwest Airlines’ investor day in December 2022, with Jordan having taken over the reins of the company by then, only provided an update to the plans it unveiled in 2021. Southwest Airlines said that it had completed all of its initiatives except one, namely modernizing its RMS. At the time, the company had estimated the completion of that process by mid-2023.
Still, the airline also said that after focusing on ‘the basics’ in 2022, it was ready to move past them in 2023.
Questioning Jordan’s leadership
Nevertheless, Elliott has continued questioning Jordan’s leadership, asking whether the CEO, who has “delivered years of unacceptable financial results,” was the right person to execute the transformational initiatives announced during the latest investor day.
The investment firm added that he was not, noting that following “extensive engagement with Southwest’s leadership,” it came to the conclusion that the airline’s leadership was incapable of delivering on the carrier’s potential.
Photo: Markus Mainka | Shutterstock
Elliott’s previous statements said that while the two parties have been discussing issues related to the airline, Southwest Airlines has refused to budge regarding the question of Jordan’s job at the airline.
“Today’s announcement that adding assigned seating and premium products will take multiple years to implement – when peers have implemented similar changes in much shorter time frames – is further evidence that […] Jordan lacks the vision and capability to execute on these initiatives.”
According to Elliott, the day was filled with more long-date promises through which Jordan was playing for time and not success. However, his toys were shareholders’ cash, the investment firm jabbed.
The investment firm concluded that it has remained adamant about calling a special shareholders’ meeting to elect an independent and “best-in-class Board of Directors” to secure a stronger Southwest Airlines.
When Elliott initially announced its significant shareholding in the airline, it presented its plan on how to get the carrier back on its feet in June, titling it ‘Stronger Southwest.’
An even better Southwest Airlines
Southwest Airlines introduced its transformative business plan titled ‘Southwest. Even Better.’ during its investor day on September 26.
In addition to announcing new transformative measures, the carrier also shared more details about the already-announced changes to its seating processes, including assigned and premium seating, red-eye flights, and overall cabin improvements.
Its free bag policy will continue, with the airline arguing that it would lose out more on market share quantified in dollars than it would earn revenue from bag fees.
Photo: Markus Mainka | Shutterstock
A ground-breaking change was the announcement of a partnership with Icelandair, Southwest Airlines’ first-ever partnership with an airline. The carrier teased that at least one more partnership should be finalized in 2025.
Simple Flying previously explored the changes that Southwest Airlines announced on September 26 here: