Southwest Airlines LUV
Southwest's market cap has halved as a 36-year-insider CEO refuses to evolve; replacing the Board and CEO and modernizing the commercial model targets $49 — 77% upside.
Thesis
Elliott has built a ~11% / $1.9B stake in Southwest Airlines and argues the legendary low-cost carrier has squandered its operational legacy under Executive Chairman Gary Kelly and CEO Bob Jordan — insiders with 38 and 36 years at the company and zero external airline experience. While the U.S. industry posts record post-COVID profits, Southwest's 2024 EBITDAR is tracking ~50% below 2018, the stock has lost more than half its value in three years and now trades below March 2020 lows, and the market value of its aircraft alone ($17B) exceeds the company's entire enterprise value. Elliott calls for refreshing the Board with directors who have outside-airline expertise, hiring an external CEO, and running a comprehensive Board-level business review of commercial strategy, unit costs, network and technology. Restoring 19% best-in-class EBITDAR margins drives a $49 share price — 77% upside.
SCQA
Southwest is the largest U.S. domestic carrier — 22% passenger share, 819 aircraft, 137M customers and 47 consecutive years of profitability built on Herb Kelleher's pioneering low-cost model.
A 36-year-tenured CEO and 38-year Executive Chairman have refused to modernize commercial strategy or operations; 2024 EBITDAR will be ~50% below 2018 while peers exceed it, and the stock has shed more than half its value in three years.
Refresh the Board with truly independent directors with external airline experience, hire a new CEO from outside Southwest, and run a comprehensive board-level review of commercial strategy, unit costs, network and technology.
Restoring 19% best-in-class EBITDAR margins drives a $49 share price within 12 months — 77% upside — and lifts annual employee profit sharing by ~$790M.
The three reasons
- 1
Southwest has lost >50% of market value in three years; 2024 EBITDAR will be ~50% below 2018 while peers exceed it
- 2
Insular leadership (74 combined years at Southwest, zero outside-airline experience) refuses to evolve a dated commercial model
- 3
Restoring best-in-class 19% EBITDAR margins under new leadership yields a $49 share price — 77% upside
Primary demands
- Reconstitute the Board with independent directors who have external airline, customer-experience and technology expertise
- Retire the Executive Chairman role and replace CEO Bob Jordan with an external hire from outside Southwest
- Form a Board-level committee to run a comprehensive business review of commercial strategy, unit costs, network and technology
- Reverse the July 3 'poison pill' adopted to block Elliott from going above 12.5%
KPIs cited
Pattern membership
Composition what's on the 74 slides
Slide gallery ·
Notes
Bundle PDF: 10-page front matter combining a June 10 2024 letter to the Southwest Board, a July 8 follow-up letter (post poison-pill), then the 50-slide 'Stronger Southwest' deck dated June 10 2024. Filed as DFAN14A by Elliott. Authors signed: John Pike (Partner) and Bobby Xu (Portfolio Manager). Deck co-opts Southwest's blue + yellow visual identity into the 'Stronger Southwest' brand — a notable rhetorical move (presents itself as a friendly turnaround plan rather than an attack). Strong CEO-quote-contradiction tables (Bob Jordan calling each declining quarter 'great' / 'strong' / 'record'). Peer-gap and TSR-bottom-decile framing throughout. Page-numbering note: deck slide 1 is PDF page 12; notable_slide_pages use PDF page numbers. Outcome (factual, post-cutoff): Elliott won — Gary Kelly stepped down as Executive Chairman, Bob Jordan retained but Board reconstituted, Southwest later announced assigned seating and bag fees — i.e., reversed several 'absolutely never' positions Elliott highlighted on slide 31. Leaving campaign_outcome unknown per extraction-time policy.