Elliott Investment Management, an investment fund known in the financial community for its activist stance, has requested the resignation of Southwest Airlines CEO. The asset management firm holds a $1.9 billion equity position in the airline, equivalent to nearly 11% of the airline’s market cap as of June 2024.
In a letter sent to the Dallas-based airline’s board of directors, Elliott Investment Management voiced strong criticism of the way the airline has been managed in recent years.
The investment fund said it was concerned about Southwest Airlines falling behind its industry peers in critical areas such as IT systems setup, the exploitation of revenue generation opportunities and its operational efficiency.
Eliott also blamed what it called Southwest Airlines’ outdated IT systems and processes for the general outage which grounded a large portion of the airline’s fleet in December 2022 and left millions of passengers stranded.
The asset management firm also noted in its missive that the airline’s share price has fallen by more than 50% since its peak in April 2021 and that it has barely recovered from the drop it experienced during the COVID pandemic.
Elliot did not mince words in its call for corporate change, stating that Southwest follows outdated management practices which, by weighing down share prices, are also financially detrimental to the airline’s own employees.
According to Eliott, if the airline changes its leadership, strengthens its board and implements a thorough business review it could see its share price soar to $49 per share within a period of 12 months, an almost 65% increase over current market prices.
Meanwhile, Southwest Airlines has replied by defending its current systems upgrade programs and signaling its willingness to engage in conversations with the discontent investors.