Activist hedge fund Elliott Management has recently disclosed a significant $1.9 billion stake in Southwest Airlines, signaling its intention to advocate for leadership changes within the organization. The move comes as Southwest Airlines has faced challenges, including delays in Boeing’s 737 Max deliveries, impacting its performance compared to industry peers.

Elliott Management aims to replace Southwest’s CEO Bob Jordan and Chairman Gary Kelly with external candidates, citing the airline’s decline from a top-tier player to a significant underperformer. The hedge fund, now one of the largest shareholders in Southwest, is determined to drive the necessary changes it believes are essential for the company’s future success.

In a detailed presentation outlining its rationale for change, Elliott emphasized the urgent need for a transition in leadership, advocating for immediate action to address the airline’s performance issues. The activist group criticized the current executives, highlighting a period of substantial underperformance under their leadership.

Traditionally, the airline industry promotes leaders internally to leverage their industry-specific expertise. However, Elliott pointed out that Southwest’s COO Andrew Watterson, with experience in another airline, stands out as a unique asset within the current executive team.

Responding to Elliott’s move, Southwest Airlines expressed confidence in its current CEO and management team, affirming their ability to execute the company’s strategic plans and deliver value to shareholders. The airline acknowledged Elliott’s engagement and commitment to enhancing shareholder value, emphasizing an open dialogue with all stakeholders.

Southwest Airlines’ stock has experienced a significant decline of over 50% in the past three years, reflecting the challenges faced by the company amidst evolving market dynamics. In contrast, competitors like Delta Air Lines and United Airlines have demonstrated more resilient stock performance over the same period.

As Elliott Management continues to assert its influence on Southwest Airlines, the industry awaits further developments regarding potential leadership changes and the company’s strategic direction in the coming months.