Southwest Airlines stock gets a boost because an activist investor took a $2 billion stake

An activist investor bought a $2 billion stake in Southwest Airlines, and investors are breathing a sigh of relief.

The Wall Street Journal, citing unnamed sources familiar with the matter, reports that activist investor Elliott Investment Management is now one of the airline’s largest shareholders, with a nearly $2 billion stake and plans to give the company’s performance a much-needed turnaround.

Southwest Airlines stock popped 8% in pre-market trading Monday following the report, as shareholders likely welcome any strategy to help remedy the carrier’s underperformance.

The company’s shares ended last week at a price of $27.75 per share, even lower than June 2020 levels, when the COVID-19 pandemic brought air travel to screeching halt.

Elliott, one of the largest activist funds in the world, is looking to do what it does best: give the company new life. One way Elliott and other activist investors do that is by shaking up the C-suite. Other companies that Elliott has built a stake in — including Crown Castle, NRG Energy and Goodyear Tire & Rubber — have swapped out their CEOs, according to The Journal.

In the three years since CEO Bob Jordan took the helm, Southwest has faced growing losses and bad press following its 2022 holiday meltdown that left thousands of travelers stranded. The airline, the fourth-largest in the country by revenue, was ordered to pay $140 million to settle a federal investigation into the mishap. That’s on top of the more than $1.1 billion in losses the company booked from related refunds and reimbursements, extra costs and lost ticket sales over several months.

The airline has had a turbulent year so far. In April, Southwest said it was limiting hiring and ending service to four airports after reporting a $231 million loss for the first quarter of 2024.

Southwest also suffered a hit from delays at Boeing, which has slowed down production of new airplanes as it focuses on quality control issues. Southwest is expecting just 20 Boeing 737 Max 8 jets this year, even as the carrier retires 35 other aircraft. Southwest had planned to receive 46 new planes this year and retire 49 aircraft.