Southwest Airlines Trims Nearly A Third Of Flights Through Atlanta, Hits Back At Elliott’s Letter: Retail Sentiment Stays In The Green

Southwest Airlines (LUV) is reportedly trimming nearly a third of its flights through Atlanta, Ga., to reduce unprofitable routes.

According to a Bloomberg report, the number of weekly flights to or from the city will come down to 381 from 567. Following the changes, the airline will serve 21 cities from Atlanta, down from 37, the report said.

Southwest also said it will offer transfers to workers impacted by the decision and doesn’t plan layoffs. “Decisions like these are difficult for our company because of the effects on our people, but we have a history of more than 53 years of ensuring they are taken care of,” Southwest said, according to the report.

The latest move comes at a time when the airline is facing pressure from activist investor Elliott Investment Management for a leadership change and a review of its operations.

On Tuesday, Elliott Investment Management announced in an open letter to Southwest Airlines’ shareholders that it intends to call for a special meeting of shareholders as early as next week “given the urgent need for leadership change.” The activist investor alleged that Southwest's management and board have chosen a go-it-alone path with the goal of obstructing a leadership change that is urgently needed.

Elliott had also raised concerns about Southwest Airlines providing several potential record dates to banks and brokers in anticipation of the activist investor calling a special meeting.

“The use of these so-called ‘false record dates’ can be a defensive strategy used to disenfranchise shareholders by not allowing investors the opportunity to get their shares into a voteable position prior to the record date,” it had written in the letter.

Southwest responded saying Elliott’s suggestion about the airline setting “false record dates” as a defensive strategy is untrue and disingenuous.

“Elliott is well aware that the use of rolling record dates to facilitate efficient and timely shareholder action is common practice when the timing of an upcoming meeting (particularly a threatened special meeting) is unknown,” it said in a statement.

Southwest said if Elliott submits a request for a special meeting, the board will fulfill its duties to carefully review the request in good faith. “Shareholders need not take action at this time,” it added.

Amidst all the developments, retail sentiment on Stocktwits continues to trend in the ‘bullish’ territory (55/100), albeit with a lower score.

Southwest Airlines shares have gained just over 4% this year, significantly underperforming the benchmark indices. In early August, the stock took a support at the $24 level, and is currently trying to break out of the short-term resistance of $30. Investors are currently waiting for the special meeting of shareholders, likely to be called as early as next week.

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