Southwest and Elliott Reach Truce
Southwest Airlines months-long proxy fight with activist investor Elliott Investment Management appears to finally be coming to a close after the two parties reached an agreement Thursday.
As part of the agreement, five of Elliott’s board candidates will be appointed to Southwest’s Board, one additional candidate sourced by Southwest will join as well, and executive chairman Gary Kelly will step down sooner than originally planned — but CEO Bob Jordan will remain in his role. The five directors will give Elliott a significant voting bloc, but not a majority on the 13-person board. Kelly will now step down next month from his role as executive chairman instead of his planned retirement in 2025 so he can spend more time with his family, er, more time in the Florida Panhandle, or whatever excuse you prefer.
What’s not yet known at this point is what will happen to Elliott’s podcast pushing its board nominees. With Thanksgiving and the holidays right around the corner, there’s a cautious optimism Elliott will use the pod to push creative and safe turkey preparation options for families this holiday season but no one from Elliott was willing to commit at this point.
If At First You Don’t Succeed…Frontier and Spirit Run it Back
It’s been rough goings for Spirit recently, and with the carrier floating the idea of entering bankruptcy proceedings, rumors that it has re-entered merger discussions with Frontier emerged earlier this week.
As a reminder, we’ve been down this road before. Frontier and Spirit tried this previously before JetBlue stormed in and outbid Frontier for Spirit, a deal that made sense to basically no one who’s name didn’t rhyme with “Shrobin Shayes”, and was eventually killed off by the courts early this year after a challenge by the Department of Justice.
The aftermath of JetBlue’s failed takeover left Spirit in limbo as it struggled in a post-pandemic world. The talks are still very early, but Frontier would be taking advantage of a “buy-low” situation with Spirit as opposed to JetBlue’s unique “buy high and keep making it higher as the deal progresses” strategy from before.
A combined Frontier and Spirit would be the fifth largest airline in the U.S. by seats, and their combined network would were 115 cities including 24 international destinations.
AA’s Q3 Loss Gives Way to Optimistic Outlook
American Airlines posted a net loss of $149 million for the year’s third quarter despite record revenue of $13.6 billion. On the bright side, AA raised its profit expectation for the year’s final three months to earn between 25 and 50 cents per share, potentially higher than the 29 cents originally predicted.
AA’s $149 million loss is an improvement on the $545 million hit it took during Q3 a year ago. Its largest expense for the quarter, outside of salary, was fuel at just shy of $3 billion, making the decision to not sign up for the 10% off fuel card sweepstakes at the local Stop ’n Shop looking very shortsighted now.
AA’s third quarter included the highest completion factor of U.S. network carriers* and its third highest since merging with US Airways more than a decade ago. It ended the quarter with just shy of $12 billion in liquidity, an amount that’s mostly being spent on kickbacks to travel agents to woo back business that was lost earlier in the year.
*those still recovering from the CrowdStrike outage that was obviously the sole factor in any shortcomings were excluded from the ranking.
Southwest’s Q3 Ends in Profit
Despite a tumultuous summer, Southwest Airlines Q3 ended up $67 million to the good on gross revenues just shy of $7 billion. CEO Bob Jordan, who will remain in his role for the foreseeable future, said the carrier will move forward with a $250 million stock buyback once it figures out where Elliott keeps its checkbook.
The $6.9 billion of gross revenue was a 5.3% increase from a year ago, while Southwest saw a nearly 3% jump in RASM from last year as well. It says its strong performance was due to capacity moderation and progress in managing tactical initiatives to drive results, which is kinda like when a football coach who’s on the hot seat says his team won due to a good gameplan, and not because the players played well.
The carrier expects fourth quarter unit revenue to increase between 3.5 and 5.5% on a YoY basis with capacity being down about 4% from Q4 in 2023. Overall, Southwest ended with $9.4 billion in cash, plus a credit for all the ads it had purchased during Elliott’s podcast series that it no longer needs.
Czech Airlines Isn’t OK
Czech Airlines will operate the final flight of its 102-year history tomorrow as the carrier operates Flight 767 from Paris/CDG to Prague after which the carrier’s OK flight code will be retired and Czech Airlines will be folded into Smartwings.
Its livery will live on, as Smartwings will operate a handful of aircraft in the Czech branding, including two A320s that will remain unchanged and four new A220s that are being delivered in the next year. The carrier will also be exiting SkyTeam and its flights will operate under Smartwings’s far less fun QS code.
This process began in 2018 when Smartwings purchased an overwhelming majority of the struggling carrier but chose to keep its independent brand. But as time wore on, the Paris – Prague run became the lone route still operating under the OK code, making this day inevitable.
- Aer Lingus is adding service to Indianapolis. 4x weekly flights begin in May.
- Air Canada is beginning a codeshare agreement with airBaltic.
- airBaltic is finally adding the nonstop service to Rzeszów we’ve all been waiting for. Thank you Air Canada.
- Alaska Flight 300 returned to Portland (OR) shortly after takeoff last Sunday after sustaining a bird strike. Passengers were accommodated on later flights to Orlando once the Basic Economy passengers finished cleaning the remnants of the strike off the aircraft.
- Allegiant CEO Greg Anderson thinks the new CEO is doing a great job.
- American says its going to crack down on people boarding for their group is called. Main Cabin customers who try to board early will be politely asked to wait their turn. Basic Economy passengers who jump the line will be turned over to local authorities.
- American Jet, the not-at-all-confusingly named Argentinian carrier plans to enter into scheduled service next year.
- BA is suspending flying to Tel Aviv until Q2 of next year.
- Delta is growing its stake in Wheels Up.
- Emirates is adding five freighters.
- Finnair is adding flights next summer.
- flydubai is finally adding new service to Bhairahawa, Nepal. Thanks Air Canada.
- JetBlue is being sued for over an ice cream sandwich that was “too cold.” Reminds us of this.
- Korean is adding service to Fuzhou (FOC) from Seoul/ICN beginning in December.
- Lufthansa will increase its stake of ITA Airways to 41% early next year.
- Oman Air is increasing its frequencies to Moscow on Dec 1 from 3x to 5x per week, and then to 6x weekly on Christmas. This is great, because what the world really needs is more service between Muscat and Moscow.
- PSA is adding 14 CRJ-900s.
- Qantas seemingly owes everyone some money these days.
- Qatar Airways is adding Starlink.
- Ryanair is headed to court. Again. This time with Aer Lingus and others.
- SAS is the latest carrier to add service to the bustling hub that is Nuuk.
- South African Airways says it needs cash. Don’t we all.
- Surinam Airways cut its debt.
- t’Way asked k’Orean for a B777.
- Uganda Airlines secured slots at London/Gatwick.
- WestJet has a new ad campaign.
- Wizz Air is reopening a base at Chişnǎu Airport in Moldova.
Why are there fences around cemeteries? Because people are dying to get in.
9 comments on “Cranky Weekly Review Presented by San Francisco Bay Oakland International Airport: Southwest and Elliott Find Détente, Frontier and Spirit Can’t Quit Each Other”
A Frontier-Spirit merger does avoid the concern about JetBlue’s plans that would have eliminated Spirit as a low-fare competitor. The question in this case would be how much do Frontier and Spirit overlap, and how much do they put pressure on each other to keep fares low, vs competition with other airlines.
Re: JetBlue ice cream. Yes, ice cream is cold. I’ve often had frozen desserts served on airplanes that I had to wait a few minutes for it to warm up enough to no longer be frozen solid and actually be edible. The first thing that comes to mind is the infamous McDonalds hot coffee lawsuit.
May want to educate yourself on the mcd lawsuit, it was not frivolous in 5hr least
But a Spirit/Frontier merger would still eliminate an ULCC, and that was in and of itself a major part of the B6/NK judge’s ruling – that loss of an ULCC nationally was a key reason to block the merger, not necessarily just the loss of specific city-pair competition or service to specific markets, although that was also a concern (but one that new entrants such as Avelo and Breeze can solve.)
It is also possible that a new trial judge could interpret a NK/F9 merger differently than the judge did in B6/NK and not approach it with the emphasis on a ULCC (as opposed to competitors in general) the JetBlue judge did, and just propose narrower remedies. Or take Spirit’s horrific financial condition into account and conclude “we’re going to lose an ULCC anyway” approach.
We’ll have to see the specific merger proposal before we can speculate much more…and the outcome of the election.
Rzeszow airport is the main entry/exit point since 2022 for Ukraine. When Joe Biden goes to Kyiv… Air Force One lands at Rzeszow airport and he then travels onwards by land. Airspace over Ukraine for civil purposes is closed.
Yes, that’s the way he went the one time he visited. Luckily, they offer services for those who are unaware of where they are.
My prediction: In 2025 Iceland will be out and Greenland will be in as a hot vacation destination and Nuuk will become the new Reykjavik.
Being a tourist in Greenland is expensive. Really expensive. Greenland makes Iceland or even the Faroe Islands look like a place for those who are just plain cheap. You may well get better value for your money by going to Antarctica instead – Antarctica sees a suprisingly large number of tourists each year and it’s very possible to get a modestly priced trip there. I have yet to see anything reasonably priced for trips to Greenland.
I’m thinking that Southwest and Elliot reached a deal because neither party could definitively figure out which way the proxy vote would turn out. As the old saw goes, “You’re better off with the devil you know than the devil you don’t.” It should be interesting to see how – and how much – Southwest changes. I’m hoping the carrier doesn’t totally get rid of of the major elements that set it apart from other airlines. It would be a shame if Southwest becomes just another cookie cutter airline.
I think you’re right, and that the other major shareholders left them in the dark deliberately to achieve just this sort of outcome. Elliott rushed all this and didn’t have the votes lined up, and in actions like this the classic legal quip “don’t ask a question you don’t already know the answer to” applies.