Southwest Airlines, Under Pressure, Lays Out 3-Year Overhaul

26.09.2024 - 14:07 / nytimes.com / Bob Jordan / Elliott Management

Southwest Airlines announced a three-year plan on Thursday to revitalize its operation and customer offerings as it defends against an activist investor calling for new leadership and a strategy overhaul.

The plan expands on a series of changes by Southwest in recent months, including plans to add premium seats, introduce red-eye flights and replace its pick-your-own seating system with assigned seats, starting in 2026.

The airline said on Thursday that it would begin selling vacation packages and was partnering with international airlines, starting with a connection in Baltimore via Icelandair next year. It also plans operational changes, including turning planes around faster and finding ways to save on costs.

“We’re now ushering in a new era at Southwest, moving swiftly and deliberately to transform the company,” Bob Jordan, the airline’s chief executive, said in a statement.

Southwest shares jumped more than 10 percent in early trading on Thursday after the announcement.

The airline is making the moves under rising pressure from an activist hedge fund, Elliott Management, which has amassed a stake of more than 10 percent, worth almost $2 billion. Elliott has said the airline is underperforming and has placed blame on Mr. Jordan, who has worked at the airline for decades.

The hedge fund contends that Southwest can better contain rising costs and improve profit margins. To do that, Elliott says, the airline needs new board members and a new chief executive. The hedge fund plans to call for a shareholder meeting as soon as next week to vote on candidates it has proposed for the airline’s board, mostly former industry executives.