Unlike most airlines, Southwest Airlines has been largely profitable. It has survived decades of attempts to undermine its innovative low-cost business model. It has weathered the post-9/11 industry crisis and dealt with Covid-19. However, the airline faces several challenges. For example, competitors are becoming adept at introducing base fares and generating ancillary revenue. Boeing has struggled with delays in approving the 737 MAX 7, which would help Southwest better optimize its fleet costs. And the airline has also recognized changing customer expectations. Elliott Investment insists that Southwest Airlines needs a change in leadership, from the CEO to the board. In its latest move, Elliott intends to ask investors to approve 10 new board candidates. But what will the bottom line look like? Among the candidates proposed by Elliott are Michael Cawley, the former deputy CEO, COO and CFO of Ryanair, which took Southwest Airlines’ business model and applied its European touch to it with great success; David Cush, the former CEO of Virgin America, which was sold to Alaska Airlines after failing to make a premium low-cost airline model work; Sarah Feinberg, a former senior Department of Transportation official and former head of the Federal Railroad Administration; the Honorable Josh Gotbaum, the former Chapter 11 trustee of Hawaiian Airlines, which is also moving toward a merger with Alaska Airlines; and Dave Grissen, the former group president of Marriott International. Also on the list is Nancy Killefer, a former senior partner at McKinsey in the firm’s Consumer and Retailing Practice and current board member of Meta, apparently to shake up Southwest’s retail model. Also on the list are Robert Milton, the former CEO of Air Canada and ACE Aviation Holdings and former chairman of the board of United Airlines, and Gregg Saretsky, the former CEO of WestJet. Also on the list are Eash Sundaram, the former chief digital and technology officer of JetBlue, and Patty Watson, the current EVP and chief information & technology officer at NCR Atleos. Essentially, Elliott wants to weed out the people protecting the successful Southwest model, who still remember what made it tick, and bring in good people with impressive qualifications but who lack an understanding of Southwest’s unique culture – the secret sauce that has helped the airline survive its many historical trials. To what end? What do you think Elliott intends to do at Southwest Airlines, and will they succeed?
