Southwest Airlines LUV
Elliott's $1.9bn, 11% stake argues Southwest's 50% decline reflects an insular 1971-era leadership culture; replacing the Chairman/CEO and refreshing the board can drive shares to $49 (+77%).
Thesis
Elliott Investment Management has built a ~$1.9 billion, roughly 11% economic stake in Southwest Airlines and, after 18 months of research, calls the legendary low-cost carrier the most compelling airline turnaround opportunity in two decades. The stock has fallen more than 50% in three years and 2024 EBITDAR is expected to run nearly 50% below 2018 levels, even as peer airlines enjoy record revenues. Elliott pins the blame on Executive Chairman Gary Kelly and CEO Bob Jordan — a combined 74-year Southwest tenure — citing seven negative guidance revisions in 17 months, ballooning unit costs, the December 2022 meltdown that stranded over two million customers, and a near-doubling of executive pay that followed. Elliott demands three remedies: reconstitute the board with outside airline, customer-experience and technology expertise; hire new leadership from outside; and launch a comprehensive business review. Target: $49 per share within twelve months, a 77% return.
SCQA
Southwest is the legendary U.S. low-cost carrier with 47 consecutive years of profitability, but its rigid 1971-era operating model still dictates every decision on software, monetization and operational processes today.
A 74-year-tenured Chairman/CEO pair delivered seven negative guidance revisions in 17 months, a 50%+ stock decline and the December 2022 meltdown — yet the Board nearly doubled executive pay the following year.
Reconstitute the Board with outside airline, customer-experience and technology directors, hire new leadership from outside Southwest, and launch a Board-level comprehensive business review to modernize strategy, IT and cost execution.
Executing the Stronger Southwest plan can deliver $49 per share within twelve months — a 77% return — and restore best-in-class margins plus meaningful profit-sharing for frontline employees.
The three reasons
- 1
Share price down 50%+ in three years while peers enjoy record industry revenues
- 2
74-year-tenured Chairman/CEO duo delivered 7 negative guidance revisions in 17 months
- 3
$49 target within 12 months — 77% upside — via board refresh and outside leadership
Primary demands
- Reconstitute the Board with truly independent directors with airline, customer-experience and technology expertise
- Replace senior leadership with executives hired from outside Southwest
- Form a Board-level committee to conduct a comprehensive business review that modernizes strategy, cost execution and IT systems
KPIs cited
Pattern membership
Slide gallery ·
Notes
Three-page letter to the Southwest Board that accompanies a separate 'Stronger Southwest' presentation (not included here). Opening salvo of Elliott's public Southwest campaign; signed by John Pike (Partner) and Bobby Xu (Portfolio Manager). Quote-contradiction mechanic: CEO Bob Jordan calling each quarter 'great'/'strong' and management asserting it is 'absolutely committed' to cost control while guiding costs higher. Structured explicitly as 'Southwest Today' vs. 'A Stronger Southwest' (before/after). No charts; all quantitative claims are prose. No valuation bridge for the $49 target — likely detailed in the accompanying deck.