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Elliott Investment Management acquires a significant stake in Southwest Airlines
Elliott Investment Management purchases multi-billion dollar stake in Southwest Airlines – Hedge fund aims to enforce changes at the struggling airline.
Elliott Investment Management, the hedge fund of activist investor Paul Singer, has acquired a multi-billion dollar stake in Southwest Airlines and is reportedly planning changes at the recently struggling airline.
According to information from the "Wall Street Journal," Elliott Investment Management has purchased nearly two billion US dollars worth of Southwest shares. With this stake, Elliott would be one of the largest investors in the airline, whose market capitalization currently stands at around 16.6 billion US dollars. It is expected that the hedge fund will soon hold talks with Southwest's management to implement strategic changes.
Elliott Investment Management's Exact Strategy for Southwest Airlines is Still Unknown
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Southwest Airlines, known as a low-cost airline without seat reservations or upgrades, has faced numerous challenges in recent years. In the first quarter of 2024, the company reported a loss of $231 million, compared to $159 million in the same period last year. Additionally, Southwest expects higher costs and slower revenue growth due to supply issues at Boeing, the airline's main supplier. Instead of the planned 46 aircraft, Boeing will only be able to deliver 20 aircraft this year.
To improve financial performance, Southwest Airlines announced it will withdraw from four airports and consider major changes to its business model. CEO Bob Jordan mentioned in a press release the possible introduction of assigned seating and premium cabins. "We have adapted in the past, adding things like Wi-Fi, larger overhead bins, and power outlets in the seats, and we will continue to adjust as needed," said Jordan.
The announcement of Elliott Investment Management's entry caused Southwest Airlines' stock to rise significantly on Monday. On the NYSE, the stock temporarily increased by 7.59 percent to 29.86 USD.
Since the beginning of the year, Southwest Airlines' stock has lost 3.91 percent in value, placing it behind competitors Delta Air Lines and United Airlines, whose stocks have already increased by 25.38 percent and 28.45 percent respectively this year. It remains to be seen whether Southwest Airlines can catch up to the competition in the coming months with the support of Elliott Investment Management.
