Southwest Airlines Prepares To Share Profitability Plan with Investors

Southwest Airlines will lay down its strategy Thursday, aiming to restore long-term profitability and steer the company to pre-pandemic levels.

The news comes at a challenging time for the low-cost carrier, as its passenger volumes remain below where they were before the pandemic, and its shares have decreased by about 40% over the past three years. Moreover, Southwest has downgraded its outlook at least eight times in the last 20 months and is currently facing pressure from an activist investor to revamp its management.

In a press release earlier this week, Southwest revealed that it is "executing a transformational plan including tactical and strategic initiatives that will position the airline to elevate the customer experience, improve financial performance and drive sustainable shareholder value."

Southwest said it is hosting its Investor Day in Dallas on Thursday, when shareholders will have the opportunity to hear more about these initiatives and the airline's plan to restore its long-term profitability.

Activist investor Elliott Investment Management has launched a campaign calling for the removal of CEO Bob Jordan and the replacement of two-thirds of the board of directors, citing the airline's underperformance. Elliott is planning to request a special shareholder meeting as soon as next week to push for these changes, according to Reuters.

Southwest has offered Elliott several concessions, but continues to back Jordan, calling him "the right leader to successfully execute the company's robust strategy to transform the airline and deliver sustainable shareholder value."

The carrier also noted that a leadership change in the middle of a significant transformation would be detrimental to its shareholders. It further said that handing the control of the board to Elliott and the latter's director candidates would "present a catastrophic risk to shareholders."

Southwest pointed out that while Elliott has highlighted issues within the company, it has not provided constructive ideas to help improve business operations.

Ahead of Thursday's meeting, the airline has already communicated to its employees that it needs to adapt its network to align with the changing patterns of business travel in the post-pandemic landscape, according to Reuters' report.

On Wednesday, Southwest slashed its flights to and from Atlanta and told hundreds of its workers to relocate. According to analysts, the airline needs to cut more flights across its network, as excess seats on domestic flights could negatively impact airfares.

In recent months, the airline industry has dealt with issues related to overcapacity, which has affected earnings. However, airlines with a range of revenue streams like Alaska Air, Delta Air Lines and United Airlines, have been able to perform better.