Southwest Airlines continues to battle for its life against activist investor Elliott Investment Management. In hopes of that doing so will allow the airline to see its own turnaround plan to fruition, Southwest bows to Elliott’s mounting pressure and gives in to some of their demands.
As I’ve covered several times now, Elliott Investment Management is an existential threat to Southwest Airlines. Their one and only goal is to extract as much value as possible as quickly as possible from Southwest Airlines. Though they don’t explicitly state this, their statements and actions show their true intentions. Moreover, the company has no clue how to run an airline. This is evident in all of their demands which, essentially, seeks to turn Southwest into another American Airlines.
Of course, why they’d want to turn Southwest into American is itself a real head-scratcher, as American keeps missing its performance targets and is, in fact, currently losing money. Unfortunately, short of invoking its poison pill, there isn’t much Southwest can do about the vultures right now. So, in a move to seemingly buy the airline more time, Southwest bows to Elliott, shaking up its board even more than previously announced.
Southwest Bows to Elliott
As reported by multiple outlets, Southwest bows to Elliott’s mounting pressure, allowing them to appoint five members of their 13-person board. Plus, Executive Chairman, Gary Kelly, will now be leaving on November 1, 2024, rather than next spring. In exchange for these concessions, Elliott will call off its petition for a special board meeting. Presumably, this also means that Southwest CEO, Bob Jordan, gets to keep his job for the time being.
Southwest will also be appointing six board members of its own. According to Matt at Live and Let’s Fly, those appointees include:
- Pierre Breber – former Chevron executive
- David Cush – former Virgin America executive who engineered merger with Alaska Airlines
- Sarah Feinberg – former Chief of Staff to the U.S. Secretary of Transportation and interim president and CEO of the New York City Transit Authority
- Dave Grissen – former Marriott executive
- Gregg Saretsky – former WestJet executive
- Patricia Watson – current executive at NCR Atleos (retail banking company)
Of course, as I mentioned earlier, the above changes are in addition to others previously reported, including the airline hastening it’s slow-walked changes such as a switch to assigned seating and the addition of premium seating, along with overnight flying. It’s also likely why we’re seeing the addition of the ever-annoying preferred seating scheme at airline.
For Now
Will the above changes finally appease Elliott? I doubt it. After all, every time Southwest bows to Elliott, it seems to emboldened the self-serving opportunists. And though Elliott has backed off for now, I doubt they’re done. Again, they’re in it for a quick, high return. They don’t actually care about the airline, its employees, or its passengers. And I’m sure they’ll want to see results far sooner than the 2027 deadline the airline has set for itself in regards to the rollout of its currently envisioned red eye schedule (which will help drive more revenue and increase aircraft utilization).
Other Interesting Bits
As reported by Gary at View from the Wing, more is at play at Southwest than the previously covered changes. This includes the possibility of a more premium credit card than the Southwest Rapid Rewards Priority Visa that currently resides in my wallet. Company executives also acknowledged that the boarding benefits provided by their current lineup must change, and that work on those changes are progressing.
The company also sees its emerging airline partnership initiative as way to further drive value from its co-brand relationship with Chase. However, with nothing active yet, this initiative is seen as more of a challenge than a positive at this point in time.
On Hawai’i, Southwest executives note that revenue is growing rapidly for both inter-island and trans-Pacific flights. They expect this trend to continue, especially true as the airline works to rollout its red eye flights, which will provide better connectivity across the nation for Hawai’i flying. However, it seems that they’re also planning on cutting capacity between the islands. By how much, they didn’t say yet.
Southwest Bows to Elliott, Final Thoughts
Again, I expect the current reprieve to be a temporary one. I just hope the fact that Southwest bows to Elliott buys them enough time to do something, anything to either appease or get rid of them. Until then, the survival of the airline long-term is extremely perilous.
More optimistically speaking, I’m interested to see how my Priority card’s benefits evolve with the coming changes, and how a more premium card product may impact it. To me, the Priority card is an outstanding value, and is seriously one of the best airline cards out there today. So, I hope the coming changes don’t impact it too negatively.
All that said, anyone that’s still angry about Alaska’s acquisition of Hawaiian Airlines, without Alaska’s help, Hawaiian’s fate would’ve likely been something similar to this or worse.