A prominent U.S.-based hedge fund and activist investor firm has taken a significant stake in Southwest Airlines, it has emerged, and the company is reportedly looking to make big changes at the Dallas-based carrier, according to sources cited by the Wall Street Journal.
The hedge fund is Elliott Investment Management, which was founded in 1977 by Paul Singer and which now manages assets worth in excess of approximately $77 billion.
As an activist investor, Elliott’s strategy is to invest in companies with the very purpose of pushing for major changes – either in the management or the company’s strategy – in order to improve the stock price.
Southwest Airlines is a well-loved and well-run airline, but its performance has been lacklustre in recent years, and CEO Bob Jordan has already told investors that the carrier is open to making a raft of changes in order to improve the bottom line.
In fact, Jordan says the only thing off the table at the moment is changing Southwest’s generous two-free checked bags policy, although the airline continues to be hit by the fallout from problems at Boeing, which is the airline’s sole aircraft supplier.
Neither Southwest nor Elliott has commented on the news, although in a letter to Southwest’s board, Elliott said it was seeking ‘upgraded’ leadership and a comprehensive business review in the hope of achieving a 77% return on its $1.9 billion investment if Southwest’s stocks can hit $49 per share.
Last month, it emerged that billionaire activist investor Carl Icahn had taken a big stake in embattled carrier JetBlue. Just like Southwest, management at JetBlue has been trying to shake up the airline’s business model in order to get the company out of the doldrums.
The airline’s efforts to expand have been hampered by the Biden administration, which successfully blocked a partnership with American Airlines and then a planned merger with low-cost rival Spirit Airlines.
