LUV - Elliott Sends Letter and Presentation to the Board of Southwest Airlines | Benzinga
Discloses Approximately $1.9 Billion Position
Calls for Upgraded Leadership and Comprehensive Business Review
Believes Southwest Stock Can Achieve $49 per Share, a 77% Return
Full Letter and Presentation Available at StrongerSouthwest.com
WEST PALM BEACH, Fla., June 10, 2024 /PRNewswire/ -- Elliott Investment Management L.P. ("Elliott"), which manages funds that together have an investment of approximately $1.9 billion in Southwest Airlines Co. (NYSE:LUV) (the "Company" or "Southwest"), today sent a letter to the Board of Directors of Southwest.
The letter substantiates Elliott's view that Southwest's poor execution and leadership's stubborn unwillingness to evolve the Company's strategy have led to deeply disappointing results for shareholders, employees and customers alike.
Southwest's rigid commitment to a decades-old approach has inhibited its ability to compete in the modern airline industry, Elliott said, and this ethos pervades the entire business with outdated software, a dated monetization strategy and antiquated operational processes. Elliott's letter asserts that the Company's failure to modernize is underscored by Southwest's December 2022 operational meltdown, which stranded more than two million travelers over the holidays.
Elliott noted that Southwest's share price has declined by more than 50% over the past three years and is now below the levels at which it traded in March 2020 during the depths of the COVID pandemic. The letter also highlighted that disappointing financial performance has cost each frontline employee tens of thousands of dollars on average in the form of lower profit sharing and declines in the value of employee-owned stock.
As a result of this poor performance, Elliott believes that new leadership is required at Southwest, which represents the most compelling airline turnaround opportunity in the last two decades, according to the letter.
As part of its "Stronger Southwest" plan, Elliott outlined three recommendations to improve the Company's performance:
1) Enhance the Board
2) Upgrade Leadership
3) Undertake a Comprehensive Business Review
By executing on the Stronger Southwest plan, Elliott believes the Company can return to its rightful position as an industry leader, including generating best-in-class margins and compelling returns for its shareholders. In doing so, Elliott argues that Southwest's stock can achieve $49 per share within 12 months, representing a highly attractive 77% return during the period.
Elliott is convinced that Southwest's issues are addressable with the right leadership and a comprehensive, unbiased evaluation of available opportunities, and looks forward to collaborating with the Company to restore accountability and best-in-class financial performance for the benefit of Southwest shareholders, employees and customers.
The full text of the letter follows:
June 10, 2024
The Board of Directors
Southwest Airlines Co.
2702 Love Field Drive
Dallas, Texas 75235
Dear Members of the Board:
We are writing to you on behalf of funds managed by Elliott Investment Management L.P. (together with such funds, "Elliott" or "we"). Elliott has made an investment of approximately