Elliott Statement on Southwest Airlines' Investor Day

Rhea-AI Summary

Elliott Investment Management L.P. has released a statement criticizing Southwest Airlines' (NYSE: LUV) Investor Day presentation and leadership. The statement highlights:

• Skepticism about Southwest's promises of future improvements, citing past failed initiatives
• Criticism of CEO Bob Jordan's leadership, pointing to profitability deterioration under his tenure
• Concerns about the timeline for implementing assigned seating and premium products
• Elliott's intention to call a special meeting for shareholders to elect a new Board of Directors

Elliott disclosed a combined economic exposure of approximately 11.0% of Southwest's outstanding common stock. The statement indicates Elliott's determination to pursue changes in Southwest's leadership and strategy.

Positive

• Elliott Investment Management has a significant stake (11.0%) in Southwest Airlines, potentially influencing company decisions
• Southwest Airlines is planning to implement assigned seating and premium products, which could improve customer experience and revenue

Negative

• Southwest Airlines has experienced profitability deterioration under CEO Bob Jordan's leadership
• Elliott criticizes Southwest's leadership as incapable of delivering on the company's potential
• Implementation of assigned seating and premium products is expected to take multiple years, longer than industry peers
• Elliott is planning to call a special meeting to potentially replace the current Board of Directors, indicating instability in governance

Insights

Financial Analyst

Elliott's statement reveals significant dissatisfaction with Southwest Airlines' leadership and performance. The activist investor, holding an 11% economic interest in LUV, criticizes CEO Bob Jordan's ability to execute on promised improvements. Key points include:

• Elliott claims Southwest failed to deliver on billions in profitability enhancements promised in 2021-2022
• The investor questions the credibility of new long-term initiatives announced at the Investor Day
• Elliott plans to call a special shareholder meeting to elect a new board
• The firm argues that implementing assigned seating and premium products should not take "multiple years"

This activist pressure could lead to major changes in Southwest's leadership and strategy, potentially impacting the airline's future direction and shareholder value. The market will likely closely watch this developing situation and its implications for Southwest's operational and financial performance.

Airline Industry Expert

Elliott's critique of Southwest's leadership and strategy highlights several industry-specific challenges:

• The slow implementation of assigned seating and premium products is particularly concerning, as these are standard offerings among major carriers
• Southwest's unique operating model, which has historically set it apart, may now be hindering its ability to adapt to changing market conditions
• The airline's profitability deterioration in a post-pandemic environment where other carriers are recovering suggests deeper operational issues

This situation underscores the pressure on legacy low-cost carriers to evolve their business models. If Elliott succeeds in driving change, it could lead to a significant shift in Southwest's competitive positioning and potentially reshape the U.S. airline landscape. Investors should monitor how these changes might affect Southwest's cost structure and its ability to maintain its traditionally strong customer loyalty.

WEST PALM BEACH, Fla., Sept. 26, 2024 /PRNewswire/ -- Elliott Investment Management L.P. ("Elliott"), today released the following statement on behalf of Partner John Pike and Portfolio Manager Bobby Xu regarding Southwest Airlines Co. (NYSE: LUV) (the "Company" or "Southwest"):

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. Without credible leadership that can execute, this plan – filled with long-dated promises of better performance – risks becoming the latest in Southwest's long series of failed improvement initiatives.

In 2021 and 2022, Southwest made similar promises of billions of dollars in profitability enhancements. Instead, we've seen billions of dollars of profitability deterioration under the leadership of CEO Bob Jordan.

The Board continues to evade the most critical question facing Southwest: Why is Mr. Jordan – who has delivered years of unacceptable financial results and, until very recently, was dismissive of the actions announced today – the right leader to execute on these "transformative" changes?

The answer is clear: He is not. We came away from extensive engagement with Southwest's leadership – including in-person meetings and more than a dozen phone calls – even more convinced that current leadership is incapable of delivering on Southwest's potential. 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 Mr. Jordan lacks the vision and capability to execute on these initiatives. This is yet another long-dated promise through which Mr. Jordan is playing for time, not success, but he is playing with shareholders' money.

We remain determined to call a special meeting at which shareholders' voices can be heard. We encourage our fellow shareholders to call back their shares and prepare to elect an independent best-in-class Board of Directors capable of securing a stronger Southwest for its customers, employees and shareholders.

To learn more about Elliott's investment in Southwest, please visit StrongerSouthwest.com.

CERTAIN INFORMATION CONCERNING THE PARTICIPANTS

Elliott Investment Management L.P., together with the other participants named herein (collectively, "Elliott"), intend to file a proxy statement and accompanying proxy card with the Securities and Exchange Commission ("SEC") to be used to solicit proxies with respect to the election of Elliott's slate of highly qualified director candidates and other proposals that may come before the next shareholder meeting of Southwest Airlines Co., a Texas corporation (the "Company"), whether an annual or special meeting of shareholders.

THE PARTICIPANTS STRONGLY ADVISE ALL SHAREHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS, INCLUDING A PROXY CARD, AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR.

The participants in the solicitation are anticipated to be Elliott Investment Management L.P. ("EIM"), Elliott Associates, L.P. ("Elliott Associates"), Elliott International, L.P. ("Elliott International"), The Liverpool Limited Partnership ("Liverpool"), Elliott Investment Management GP LLC ("EIM GP"), Paul E. Singer ("Singer"), Michael Cawley, David Cush, Sarah Feinberg, Joshua Gotbaum, David Grissen, Nancy Killefer, Robert Milton, Gregg Saretsky, Easwaran Sundaram and Patricia Watson.

As of the date hereof, Elliott has combined economic exposure in the Company of approximately 11.0% of the shares of its Common Stock, $1.00 par value per share (the "Common Stock"), outstanding. As of the date hereof, EIM, the investment manager of Elliott Associates and Elliott International (together, the "Elliott Funds") with respect to the shares of Common Stock held by the Elliott Funds and/or their respective subsidiaries, beneficially owns 61,116,500 shares of Common Stock. Additionally, as of the date hereof, the Elliott Funds are party to notional principal amount derivative agreements in the form of cash settled swaps with respect to an aggregate of 4,808,000 shares of Common Stock (the "Derivative Agreements"). Elliott Associates, Elliott International and Liverpool are the direct holders of the shares of Common Stock beneficially owned by EIM, and are party to the Derivative Agreements. Liverpool is a wholly-owned subsidiary of Elliott Associates. EIM GP is the sole general partner of EIM. Singer is the sole managing member of EIM GP. As of the date hereof, Mr. Cawley holds 19,765 shares of Common Stock, Mr. Cush holds 10,000 shares of Common Stock, Ms. Feinberg beneficially owns 3,068 shares of Common Stock, including 2,800 shares of Common Stock held directly and 268 shares of Common Stock held by her domestic partner, Mr. Gotbaum holds 19,162 shares of Common Stock, Mr. Milton holds 1,953 shares of Common Stock, Mr. Saretsky holds 4,000 shares of Common Stock, Mr. Sundaram holds 2,073 shares of Common Stock, and Ms. Watson beneficially owns 5,243 shares of Common Stock, including 3,964 shares of Common Stock held directly and 1,279 shares of Common Stock held by her spouse.

About Elliott

Elliott Investment Management L.P. (together with its affiliates, "Elliott") manages approximately $69.7 billion of assets as of June 30, 2024. Founded in 1977, it is one of the oldest funds under continuous management. The Elliott funds' investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, high net worth individuals and families, and employees of the firm. 

Media Contact:
Casey Friedman                                             
Elliott Investment Management L.P.                                     
(212) 478-1780                                              
cFriedman@elliottmgmt.com

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SOURCE Elliott Investment Management L.P.

FAQ

What is Elliott Investment Management's stake in Southwest Airlines (LUV)?

Elliott Investment Management disclosed a combined economic exposure of approximately 11.0% of Southwest Airlines' (LUV) outstanding common stock.

What changes is Elliott proposing for Southwest Airlines (LUV)?

Elliott is proposing to call a special meeting to elect a new Board of Directors for Southwest Airlines (LUV), aiming to improve leadership and execution of strategic initiatives.

What new products is Southwest Airlines (LUV) planning to implement?

Southwest Airlines (LUV) is planning to implement assigned seating and premium products, although the timeline for implementation is criticized as being too long.

Why is Elliott critical of Southwest Airlines' (LUV) CEO Bob Jordan?

Elliott criticizes CEO Bob Jordan for presiding over profitability deterioration at Southwest Airlines (LUV) and questions his ability to execute on new strategic initiatives.