Elliott Discloses $1.9 Billion Stake in Southwest Airlines

Southwest

Southwest Airlines (NYSE:LUV) saw its shares climb approximately 7% in premarket trading on Monday after activist investor Elliott Investment Management disclosed a substantial $1.9 billion stake in the company.

Elliott Investment Management criticized Southwest Airlines’ recent performance, stating, “Southwest’s poor execution and leadership’s stubborn unwillingness to evolve the company’s strategy have led to deeply disappointing results for shareholders, employees, and customers alike.”

Southwest Airlines, one of the largest carriers in the United States, has been facing increased costs and slower-than-expected revenue growth due to delays in receiving 737 MAX aircraft from Boeing (NYSE:BA).

The airline has acknowledged that the delays have created “significant challenges,” leading to overstaffing and the need to scale back growth plans. Shares of the Dallas, Texas-based airline have declined nearly 4% this year, in contrast to the S&P 500 index’s approximately 12% increase.

Raymond James analyst Savanthi Syth commented, “We are not surprised by the activist interest in Southwest given the very strong franchise with valuable tangible and intangible assets.”

Elliott is known for advocating changes in companies to enhance shareholder returns. Southwest is not the only airline dealing with Boeing’s delays. United Airlines (NASDAQ:UAL) also reported a $200 million impact in the first quarter due to Boeing’s disruptions. Despite these hurdles, the airline industry anticipates robust performance driven by strong summer travel demand. Currently, Southwest shares are trading at about 19.52 times their forward profit estimates, compared to United Airlines’ 4.74 and above the industry average of 7.19.

Featured Image: Wikipedia

Please See Disclaimer