Southwest Airlines (LUV) CEO Bob Jordan is “committed” to rebuilding the airline after a bitter battle with activist investor Elliott Investment Management.
“Everything is looking forward,” Jordan told me on Morning Brief, emphasizing his confidence in the ailing airliner’s turnaround.
“This is probably the most important transformation in our history because we are changing something so fundamental…We will get through it,” Jordan said.
Southwest Airlines’ agreement with Elliott, reached earlier this month, secures Mr. Jordan’s top position and includes the appointment of six directors to the company’s board, including five was proposed by Mr. Elliott. The new additions are two industry veterans, former Virgin America CEO David Kush and former WestJet CEO Greg Saretzky.
Pressure is mounting on Jordan, who began his career with Southwest in the late 1980s and has been in charge since February 2022, to deliver improved results in a timely manner. The company’s stock is up just 4.9% since the beginning of the year, but is down 14% over the past two years, underperforming many of its competitors and the broader market.
But Jordan is betting that the company’s “transformation plan” laid out last month will be reflected in its balance sheet. The strategy includes ways to increase efficiency and reduce costs, as well as plans to increase revenue and loyalty through reserved seats and premium reservations, which have long distinguished Southwest Airlines from its competitors. This is a move to end the practice.
The company predicts its efforts will add an additional $1.5 billion to its pre-interest and tax earnings next year, reaching $4 billion by 2027.
Jordan highlighted early progress on the turnaround plan during the company’s third-quarter earnings call, telling analysts that “all actions to achieve these goals are on track and proceeding as planned.” “I’m here,” he said.
While Jordan is optimistic about future developments, Citi analyst Stephen Trent urges patience, which may be difficult for shareholders to understand.
“We need at least a few quarters to see what progress the airlines are making…what they proposed at their investor day will take time,” Trent cautioned.
How long will it take to solve a multi-billion dollar problem?
The appointment of a new board of directors, effective November 1, marks a new beginning for Southwest Airlines. Despite Elliott’s push to fire Jordan and the controversial negotiations, Jordan told Yahoo Finance that he and the new board members are “completely aligned” on the company’s vision for the future. he said.
“At the end of the day, you want the board to challenge you, and you want the board to make Southwest Airlines a better company…We have a great plan and everyone is committed to that plan. I look forward to implementing it,” Jordan told Yahoo. finance.
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