Elliott Investment Management, an activist hedge fund led by billionaire Paul Singer, publicly criticized Southwest Airlines CEO Bob Jordan, attributing the airline’s financial struggles to his leadership, New York Post reports.
This statement on Thursday came just hours after Southwest announced an improved outlook for profits and revenue, causing its shares to rise by 7%.
In a statement, Elliott called into question Jordan’s capability to lead the airline through proposed transformative changes, citing his history of delivering “unacceptable financial results.” The hedge fund expressed its intention to call for a special meeting aimed at ousting the current board and urged shareholders to confirm their voting rights ahead of the meeting.
“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,” Elliott stated.
In response, Southwest defended Jordan and criticized Elliott for failing to establish a “constructive” relationship with the airline. The company accused the hedge fund of prioritizing public attacks over the interests of shareholders.
Following the announcement of its turnaround plan during an investor meeting, Southwest shares closed at $29.93, up 5.4%. The airline raised its revenue forecast for the third quarter, appointed an industry veteran to its board, and claimed that its new business plan would generate an additional $4 billion in earnings before interest and taxes by 2027.
Despite these developments, Elliott warned shareholders to be wary of what it described as “long-dated” promises that echo past assurances. The hedge fund pointed out that similar commitments made in 2021 and 2022 resulted in substantial profit declines under Jordan’s leadership.
Elliott stated that discussions with Southwest leadership had only reinforced its belief that the current management is “incapable of delivering on Southwest’s potential.” However, Southwest contended that Elliott had predetermined its stance before engaging with Jordan or reviewing the airline’s plans, remaining adamant about demanding significant changes in leadership.
Elliott has called for sweeping leadership changes, specifically targeting Jordan and Chairman Gary Kelly, who has agreed to retire next year in light of the pressure from the hedge fund. The activist fund also criticized the airline for a lack of industry expertise on its board, despite Southwest’s claims of adding or appointing eight new board members in the past three years.
Southwest asserted that it had invited Elliott to be involved in the board restructuring process, but the hedge fund barred its candidates from meeting with the airline’s leadership. The airline expressed willingness to consider Elliott’s director candidates for board appointment, provided that they could meet with them.
In a bid to counter Elliott’s influence, Southwest has already begun implementing business changes, such as introducing assigned seating and seats with extra legroom—an unprecedented move for the airline in nearly 60 years. However, Elliott criticized the timeline for these changes, stating that taking years to implement improvements reflects Jordan’s lack of vision and capability to execute necessary initiatives.
