Southwest Airlines Co (NYSE:LUV) shares flew higher premarket on Monday, fueled by news that activist investor Elliott Investment has built a stake.
Known for agitating for management to make changes in companies on both sides of the Atlantic, the activist investor sent a letter to the board of the Dallas, Texas group, reports revealed.
"Southwest's rigid commitment to a decades-old approach has inhibited its ability to compete in the modern airline industry," Elliott said in the letter.
Management had shown a "stubborn unwillingness" to modernize, resulting in the airline being saddled with "outdated software, a dated monetization strategy and antiquated operations processes".
Now one of the airline's largest shareholders suggested ways, Elliott said in the letter that it claimed could boost the stock by 77% within a year, including an "upgrade" of leadership and business strategy.
The activist said it has invested around $1.9 billion in buying close to an 11% stake.
In April, alongside a quarterly loss, Southwest warned that its growth plans would continue to be hampered by expected delays of Boeing aircraft well into 2025.
Its capacity growth for the full year was cut from 6% to 4% due to the delays as only 20 Boeing 737 planes are expected, down from the 46 originally forecast.
Southwest's share price was up 7% at $29.65 in premarket trading, down by more than 50% since the onset of Covid.
** Update: adds letter details **