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Southwest Airlines: Elliott focuses on dividends

Management attacked, but American low-cost has one of the best balance sheets in the sector

The top management of the US airline Southwest was mocked by Elliott investment fund. The latter recently acquired an 11% stake in the low-cost air carrier, a stake worth two billion dollars. The entry into the company's capital was accompanied by brutal criticism of the current management.

The Elliot fund, in fact, has declared that it wants to bring about a strong change in the management of the company which is facing a moment of great difficulty. In particular, the failure to deliver 26 aircraft out of the 46 B-737 MAX expected in 2024 will make it difficult for the company to achieve the objectives set by the industrial plan. This will in fact lead to a lower ability to respond to passenger demand for flights; as a consequence there will be less revenue, while operating costs remain high.

According to some analysts, this situation means that the management has become an easy target for the Elliot fund, whose main objective is to guarantee generous dividends to its shareholders. In fact, the Investment Group would not recommend any specific operational improvements for Southwest. A fact that has alarmed trade unions, which are asking for guarantees for workers.

The Elliott fund described the investment in Southwest as "the best restructuring opportunity in the airline industry in twenty years". As stated, the company's recent economic results, in terms of profitability, have been below analysts' expectations. This is also due to contingent factors, such as inflation, which is hitting global air transport hard.

Southwest has long maintained one of the best financial statements in its industry. While the main financial giants have long demonstrated that they aim almost exclusively at privatizing companies and then controlling them financially through a minority stake: in short, dividends are needed for shareholders. A fear also put in black and white by the American newspaper "Washington Post", which recently reported: "The unique culture of this company is a value worth preserving".

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AVIONEWS - World Aeronautical Press Agency