Bob Jordan, the embattled chief executive of Southwest Airlines, has refused to resign in the face of mounting pressure from an activist investor hedge fund which has taken a big stake in the Dallas-based carrier in an attempt to oust Southwest’s leadership team and shake up the airline’s strategy.
Earlier this week, Elliott Investment Management revealed that it had taken a $1.9 billion stake in Southwest with the aim of gaining a 77% return on its investment by getting the airline’s shares as high as $49 per share.
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.
Elliott hasn’t outlined any concrete plans for how it would change Southwest’s business strategy, but in a pitch deck and presentation, the firm blasted Southwest’s current leadership team for failing to keep up with changing consumer demands.
As a result, Elliott says Southwest is lagging behind bigger rivals who have managed to compete with budget carriers while tapping into consumer trends for more premium experiences.
“I have no plans to resign,” Jordan told reporters as he left a Politico event in Washington DC on Wednesday.
“Elliott can provide us ideas. They can talk to other shareholders, but Elliott is not directing the company,” Jordan continued.
Southwest is expected to outline its vision for the future of the airline at an investor day in September. The airline has already announced plans to upgrade the passenger experience with improved Wi-Fi and power outlets, along with new seats and larger overhead bins.
Far bigger changes could, however, be on the way with Jordan and the rest of the Southwest leadership considering a step change in the way the airline markets different products to better compete with rivals.
“We’ve got an investor day in September and I’m eager to lay out a very broad plan for how we improve the company both from a customer perspective but from a financial perspective,” Jordan added.
Jordan also noted that Elliott’s presentation was “fairly light” on details.
