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Elliott Takes Nearly $2 Billion Stake in Southwest Airlines

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It’s unclear what changes Elliott will push for at Southwest. Other companies Elliott has built activist stakes in have seen their CEOs resign.

Elliott Investment Management, an activist fund, has built a nearly $2 billion stake in Southwest Airlines, The Wall Street Journal reported — citing sources. 

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The stake made Elliott one of Southwest’s largest investors. Southwest has a market cap of approximately $16.6 billion. The carrier did not immediately respond to a request for comment. 

According to The Journal report, Elliott plans to “engage” with Southwest’s management team and press on changes to reverse the carrier’s recent underperformance. It’s unclear what this engagement would look like. Elliott also did not immediately respond to a request for comment. 

Elliott has built major stakes in other large companies like SoftBank, Texas Instruments and Johnson Controls. The firm has also invested in travel companies like Dean Hotels and Travelport. Multiple companies Elliott has invested in have seen their CEOs step down, including telecommunications giant Crown Castle and energy company NRG. 

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JetBlue made headlines earlier in the year when activist investor Carl Icahn reported a 9.1% stake in the carrier, saying he believed its shares were undervalued in a regulatory filing. Icahn became the third-largest investor in JetBlue and won two seats on its board.

Southwest Debates Bigger Changes to Its Business Model

Southwest, whose business model relies on open seating and boarding in an all-economy cabin, has not been profitable so far this year. Delivery delays with the Boeing 737 Max 7 and sustained demand for premium travel have hampered the carrier’s bottom line. 

The airline reported a first-quarter loss of $231 million compared to $159 million during the same time last year, which was slightly below Wall Street expectations and worse compared to its competitors. Southwest also exited four airports, a rare move for the carrier. 

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More recently, Southwest executives have been mulling over major changes to its business model. CEO Bob Jordan discussed potentially implementing assigned seating and adding premium cabins to Southwest’s fleet. These changes would be some of the biggest in Southwest’s 57-year history. 

“We have transformed before, adding things like Wi-Fi, larger bins and in-seat power, and we will continue to adapt as needed,” he said during Southwest’s first-quarter earnings call.  

Jordan, however, has ruled out baggage fees. Airlines like American, JetBlue and United raised baggage fees this year, citing rising operating costs and inflation. Southwest lets customers check in two bags with no fees attached. 

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Southwest has been rolling out changes, including a partnership with Google Flights. For years, Southwest resisted displaying its fares on online travel agencies and search platforms like Google Flights to cut distribution costs and build customer loyalty. 

Airlines Sector Stock Index Performance Year-to-Date

What am I looking at? The performance of airline sector stocks within the ST200. The index includes companies publicly traded across global markets including network carriers, low-cost carriers, and other related companies.

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The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more airlines sector financial performance. 

Read the full methodology behind the Skift Travel 200.

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