Southwest Airlines raised its third-quarter revenue forecast, authorized $2.5 billion in share buybacks and announced a slew of changes to its business as it continues to face pressure from activist hedge fund Elliott Investment Management.
The company says its business plan will rake in an additional $4 billion in earnings before interest and taxes by 2027.
Southwest said it expects unit revenue growth up to 3% in the third quarter compared to the same period last year – up from previous estimates of a 2% decline.
The revenue recast was helped by summer travel, including rebooking passengers who had originally bought tickets for airlines affected by the CrowdStrike outage in July.
The airline also announced it was bringing Bob Fornaro – who previously served as chief executive at Spirit Airlines and then sat on its board – onto its board of directors.
Fornaro served as CEO of AirTran from 2007 until 2011, when Southwest acquired the budget airline.
He then served as a consultant for Southwest.
“Bob is an exceptional leader and brings a wealth of industry experience to our Board,” Chairman Gary Kelly said in a statement. “As a former consultant to Southwest, Bob has provided an objective review and important perspective on Southwest’s transformation plan.”
Fornaro’s appointment follows criticism from Elliott — the activist hedge fund led by billionaire investor Paul Singer – that Southwest’s board members lacked industry expertise.
Southwest executives are presenting their plan for the company’s future during an investor presentation at the airline’s Dallas headquarters on Thursday.
The presentation comes amid growing pressure from Elliott, which has called for sweeping changes among the airline’s top leadership.
The hedge fund has been targeting CEO Bob Jordan and Kelly, who served as CEO before Jordan, in particular.
Southwest said in early September that Kelly had agreed to retire after the company’s annual meeting next year, but it intends to hold onto Jordan.
Elliott later said it still wanted leadership changes at the top.
The hedge fund did not immediately respond to requests for comment.
Southwest has already revealed business changes meant to fend off Elliott’s advances.
Over the summer, the airline announced it would introduce assigned seating – a first for the nearly 60-year-old company – and seats with extra legroom.
The company stayed firm on its free luggage-check policy on Thursday, though, saying it “generates market share gains in excess of potential lost revenue from bag fees.”
On Wednesday, Southwest told staff it is slashing arrivals and departures to and from Atlanta’s Hartsfield-Jackson International Airport – the world’s busiest airport, according to a company memo obtained by CNBC.
The airline is also cutting 300 pilot and flight attendant positions that service the area to save on costs, the memo said.
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