Southwest Airlines faces potential change in leadership as Elliott Management takes a $1.9 billion stake and aims to remove CEO and chair.

• Southwest Airlines is facing leadership changes due to activist Elliott Management's $1.9 billion stake in the company.
• The stake makes Elliott one of Southwest’s largest shareholders.
• Southwest has struggled with challenges including Boeing's 737 Max delivery delays.

Elliott Management, an activist hedge fund, has accumulated a $1.9 billion stake in and intends to advocate for leadership changes at the airline that has underperformed its major competitors.

Elliott wants to replace Southwest CEO Bob Jordan and chair Gary Kelly, as the airline has fallen from being a "best-in-class" to a "big laggard," according to a presentation detailing its case for change.

According to FactSet, Elliott's stake size makes him one of Southwest's largest shareholders as an activist.

On Monday, premarket trading saw Southwest shares rise by approximately 7%. As of Friday's closing, the company had a market capitalization of $16.6 billion.

According to a presentation, Elliott stated that it spoke with numerous former Southwest employees during an 18-month research period and also spoke with shareholders and surveyed more than 2,000 flyers to understand why consumers chose Southwest over other airlines.

The newest models of the 737 Max planes, which Southwest exclusively flies, have caused delays for the airline, while shifting travel demand patterns after the pandemic have also posed a challenge.

The airline's leaders are now seeking innovative methods to increase revenue and remain competitive with rivals who provide more benefits and products to travelers.

In April 2022, Jordan, who took over as CEO of the airline after Kelly's departure in February 2022, revealed to CNBC that the company is considering switching to a multi-class seating system and a new boarding process.

The airline, which had a reputation for excellent customer service, faced a reckoning after a holiday meltdown in 2022 that cost it over $1 billion. In order to regain the trust of its customers, the airline had to make quick fixes to its internal staff scheduling software.

While Southwest shares have decreased by over 50% from three years ago due to rising travel demand, particularly domestic trips, Delta and United shares have increased by approximately 10% and 7%, respectively.

Elliott's leadership change campaigns at other companies have also been centered on a change in leadership.

In recent months, the activist has invested $2.5 billion in a semiconductor firm, $2 billion in a Japanese conglomerate, and $1 billion in a mining concern.

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