Southwest Airlines, headquartered in Dallas, has always stood apart from its peers since its inception in 1971, initially linking Texas’s largest cities.
However, this week, one of its major shareholders, hedge fund Elliott Management, declared that it no longer views Southwest as a top-tier airline and called for a significant overhaul, including the replacement of the CEO and chair.
“When activists intervene, they typically seek swift changes in policies and strategies. The question now is how quickly Southwest will act on Elliott’s recommendations,” explained CNBC airline reporter Leslie Josephs.
In recent months, CEO Bob Jordan hinted at potential changes such as introducing premium seating options and assigning seats on flights, departures from Southwest’s traditional open seating policy.
Elliott Management’s demands go further, including the elimination of Southwest’s unique policy of allowing two free checked bags. This policy has been a draw for travelers, as noted by Linda Kindt at Love Field.
“We appreciate the free luggage, especially on short trips between Grand Prairie and Dallas, and Southwest’s competitive prices,” Kindt remarked.
Following Jordan’s response to Elliott’s proposals at an industry event, Southwest issued a statement emphasizing its commitment to innovation and evolution.
“Southwest is focused on building upon its strong legacy of innovation and welcomes feedback from all shareholders. The board comprises directors with diverse skills and expertise, including seven new members appointed in the past three years. The board remains confident in the leadership of our CEO and team to adapt the business and create lasting value for stakeholders.”
Josephs highlighted that Southwest has faced challenges with lower profit margins compared to rivals and a slower recovery from the holiday disruptions of 2022, suggesting that change is necessary.
“Southwest is navigating a new phase, as Bob Jordan described it earlier this week, moving beyond its initial Texas roots to a broader market. They’re now in what he termed the third generation of Southwest, seeking ways to evolve without alienating their loyal customer base,” she explained.
