Southwest Unveils Major Plan Amid Elliott Pressure

Southwest Airlines announced a comprehensive transformation plan during its investor day in response to pressure from activist investor Elliott Management, which has built an 11% stake in the company and is pushing for leadership changes. The new strategy includes replacing the open-seating policy with premium seating charges, introducing redeye flights, expanding international partnerships, notably with Icelandair, and offering vacation packages by 2025. Additionally, the airline plans to reduce aircraft capital expenditures by $500 million and achieve $4 billion in incremental EBIT by 2027. Southwest also authorized $2.5 billion in stock buybacks and appointed former Spirit Airlines CEO Bob Fornaro to its board. Despite these measures, Southwest faces challenges such as below pre-pandemic passenger volumes and a 40% drop in stock value over the past three years. The market reacted positively, with shares surging over 10%.