Activist investor pushed for a revamp of the airline’s board and replacement of top executives
24 October 2024 - 14:20
byShivansh Tiwary
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Southwest Airlines on Thursday announced an agreement with activist investor Elliott to end a months-long boardroom battle.
As part of the deal, CEO Bob Jordan will retain his job, but executive chair Gary Kelly will accelerate his retirement. The company will also add six new directors to its board.
The deal came as the US carrier reported a surprise third-quarter profit on Thursday, benefiting from improved pricing and demand, as well as rebookings from passengers stranded due to the global cyber outage in July.
The hedge fund pushed for a revamp of the airline’s board and a replacement of top executives. That, along with inflated costs, has pushed it to take steps to restore steady profitability and find high-margin revenue streams, including vacation packages, overnight flights and assigned and premium seating.
During the US summer travel season, an oversupply of airline seats in the domestic sector compelled airlines to sell seats at lower prices to fill their planes, denting their earnings.
Since then US airlines have moderated capacity. Annual domestic seat growth has slowed to 1.5% in October and November from 5.5% in July, according to Bank of America analysts.
Southwest reported an adjusted profit of $89m, or 15c per share, compared with analysts’ average estimate of a loss of $12.65m, or a break-even on a per share basis, according to data compiled by LSEG.
Shares of the carrier rose 1.5% in premarket trading.
It expects fourth-quarter revenue per available seat mile, a proxy for pricing power, to be up 3.5% to 5.5%, on a projected capacity reduction of about 4%.
“We are laser-focused on delivering the robust set of tactical and strategic initiatives included in our plan and returning to the strong financial performance we expect,” Jordan said.
The airline has been hit hard by Boeing’s jet delivery delays and is reeling from elevated operating expenses, including high labour and aircraft maintenance costs.
It continues to expect about 20 new jets from Boeing this year.
Southwest Airlines’ operating revenue rose 5.3% to $6.87bn in the third quarter.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Southwest Airlines, Elliott deal ends boardroom battle
Activist investor pushed for a revamp of the airline’s board and replacement of top executives
Southwest Airlines on Thursday announced an agreement with activist investor Elliott to end a months-long boardroom battle.
As part of the deal, CEO Bob Jordan will retain his job, but executive chair Gary Kelly will accelerate his retirement. The company will also add six new directors to its board.
The deal came as the US carrier reported a surprise third-quarter profit on Thursday, benefiting from improved pricing and demand, as well as rebookings from passengers stranded due to the global cyber outage in July.
The hedge fund pushed for a revamp of the airline’s board and a replacement of top executives. That, along with inflated costs, has pushed it to take steps to restore steady profitability and find high-margin revenue streams, including vacation packages, overnight flights and assigned and premium seating.
During the US summer travel season, an oversupply of airline seats in the domestic sector compelled airlines to sell seats at lower prices to fill their planes, denting their earnings.
Since then US airlines have moderated capacity. Annual domestic seat growth has slowed to 1.5% in October and November from 5.5% in July, according to Bank of America analysts.
Southwest reported an adjusted profit of $89m, or 15c per share, compared with analysts’ average estimate of a loss of $12.65m, or a break-even on a per share basis, according to data compiled by LSEG.
Shares of the carrier rose 1.5% in premarket trading.
It expects fourth-quarter revenue per available seat mile, a proxy for pricing power, to be up 3.5% to 5.5%, on a projected capacity reduction of about 4%.
“We are laser-focused on delivering the robust set of tactical and strategic initiatives included in our plan and returning to the strong financial performance we expect,” Jordan said.
The airline has been hit hard by Boeing’s jet delivery delays and is reeling from elevated operating expenses, including high labour and aircraft maintenance costs.
It continues to expect about 20 new jets from Boeing this year.
Southwest Airlines’ operating revenue rose 5.3% to $6.87bn in the third quarter.
Reuters
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