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Southwest Airlines has agreed to grant five board seats to Elliott Management nominees on its 13-member board in return for the activist investor dropping its demand for a special board meeting. This significant concession reflects the pressure exerted by Elliott Management, which has already influenced the airline’s strategic moves towards assigned seating, premium seating, partnerships, and redeye flights—areas where Southwest had previously been slow to act.

Despite these changes, Elliott Management remains unsatisfied, continually pushing for more without specifying clear targets. They have pointed out that Southwest is not adopting strategies from lower-valued competitors, such as introducing basic economy and baggage fees, and seem to desire leveraging the balance sheet for share buybacks. CEO Bob Jordan retains his position under the current arrangement, though there is speculation on whether he might soon step down, potentially paving the way for COO Andrew Watterson to take the helm.

Market reaction to the news of Elliott gaining influence, combined with Southwest's quarterly results announcement, was notably negative. Even with revenue and profit surpassing analyst expectations, and an accelerated stock buyback alongside a promising 2025 revenue forecast, Southwest's stock experienced a sharper decline than that of American Airlines, which posted losses. This indicates market disappointment with the outcome of Elliott's involvement.

During the third quarter earnings call, COO Andrew Watterson mentioned improvements in the airline's revenue management system, which is now enhancing flight profitability after initial implementation challenges. He highlighted the robust growth of Hawaii route revenues and plans to reduce inter-island capacities next year while adding redeye flights to improve connectivity.

Analyst discussions were heavily focused on Southwest's strategy to 'monetize their order book' through selling planes, with an indication that the airline might not receive the Boeing 737 MAX 7 until perhaps 2026. In terms of future revenue, potential seating changes and partnerships could enhance their relationship with Chase, especially through premium credit card offerings. However, these aspects are not yet reflected in Southwest's optimistic presentations.

CEO Bob Jordan emphasized the airline’s commitment to cost-cutting measures, including reducing corporate overhead and potentially restructuring employee roles. As Elliott's influence grows within the boardroom, Southwest must navigate these changes carefully to sustain its unique corporate culture and product differentiation.