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Southwest Airlines CEO Vows to Fight Hedge Fund’s Push for Changes
In a recent development, the activist hedge fund Elliott Management is making moves to force changes at Southwest Airlines. CEO Bob Jordan has stated that he has no intention of resigning, despite Elliott’s efforts to remove him from the company. If they want him out, they will have to find a way to fire him.
The Wall Street Journal reported that Elliott has acquired a $2 billion stake in Southwest Airlines, which represents an approximately 11% economic interest in the company. This move is part of Elliott’s push for significant changes within the airline.
Elliott’s Concerns and Proposed Changes
In a letter addressed to the Southwest board of directors, Elliott expressed concerns about the carrier’s stock performance since 2021. The fund criticized the company for poor execution and the leadership’s reluctance to evolve its strategy, leading to disappointing results for shareholders, employees, and customers.
Elliott’s proposed changes include the installation of new directors and executives to conduct a comprehensive business review. The fund aims to improve the customer experience and provide more premium features for key business travelers.
Analyst Helane Becker from TD Cowen noted that while Elliott’s presentation focused on enhancing the airline’s offerings, some investors questioned the realism and effectiveness of the proposed plans. Despite Southwest already working on implementing similar strategies, Becker maintained a “hold” rating on the airline’s stock.
Market Response and Future Outlook
Following these developments, Southwest Airlines’ shares experienced volatility in the stock market. After a 7% increase on Monday, the stock fell by nearly 6% on Tuesday, reflecting investor uncertainty. Year-to-date, the company’s shares are down by 2%, highlighting ongoing challenges and investor skepticism.
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