Southwest’s CEO, Bob Jordan, has refused to step down amidst a call for his resignation from leading investor Elliot Investment Management.
On 10 June, activist investor Elliot Investor Management sent a letter to the board of Southwest Airlines calling for an overhaul of its leadership and comprehensive business overview to drive performance as a “Stronger Southwest”. It is one of the largest investors in the airline, with an 11% economic interest, and manages funds worth US$1.9 billion.
The letter disclosed that it viewed Southwest’s inability to modernise and its “poor execution and leadership’s stubborn unwillingness to evolve the Company’s strategy” had led to “deeply disappointing results for shareholders, employees, and customers alike.” On CEO Bob Jordan, the letter said that he had “delivered unacceptable financial and operational performance quarter after quarter”.
Photo: Southwest
Its ‘Stronger Southwest’ plan outlined three recommendations to the Southwest board, which were: to enhance the board of directors, upgrade leadership, and carry out a comprehensive business review. By adopting its plan, Elliot estimated that Southwest’s stock could see a 77% return during the next 12 months.
In a statement released on 10 June, Southwest said that it was “thoughtfully reviewing Elliott’s letter and presentation and look forward to further conversations.”
Now, however, CEO Bob Jordan disclosed to CNBC and reporters that he had “no plans to resign”. “We are going to treat Elliot like any other investor. We’ll sit down and listen to them,” he added.
Financials and fleet expansion
Its first-quarter results in 2024 saw a net loss of $231 million but welcomed record first-quarter operating revenues of $6.3 billion. In its report, the airline said that the 737 MAX delays from Boeing present significant challenges for 2024 and 2025 and that it would react and replan to “minimise the operational and financial impacts”.
As reported by CNBC and Reuters, Southwest now only expects to receive 20 planes from Boeing this year and doesn’t expect to use the Boeing MAX 7 – which is awaiting certification – until 2026. In October 2023, Southwest placed an order for 108 Boeing MAX 7s, rounding up its order total to over 300 orders.
As an airline with an all-Boeing fleet, the US OEM’s ongoing problems and delays with its 737 MAX fleet are only going to put more pressure on the low-fare airline. This latest letter from Elliot Investor Management might help to alleviate leadership issues if its advice is implemented and improve stock prices, but it will do little for its aircraft deliveries nor boost its operational profits.
