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Southwest ( LUV ) struggling to restore profit margins

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Airline expected to share new product and route strategy

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Analysts say airline must address Boeing ( BA ) delay problem

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Activist investor wants to overhaul Southwest ( LUV ) leadership

(Adds details of new initiatives)

By Rajesh Kumar Singh

CHICAGO, Sept 26 (Reuters) - Southwest Airlines ( LUV )

on Thursday unveiled a slew of measures including partnerships

with international carriers, vacation packages, and

sale-and-leaseback transactions of aircraft to turn around its

business and boost profit margins.

The initiatives came as the U.S. carrier faces pressure

from an activist investor to shake up its management.

Southwest ( LUV ) said the measures would help produce at least a

10% operating margin, 15% return on its invested capital and

more than $1 billion in free cash flow by 2027. It also

announced a new $2.5 billion share buyback program.

The pioneering low-cost airline once boasted a record 47

consecutive years of profit before the COVID-19 pandemic. But

aircraft delivery delays by planemaker Boeing's ( BA ), excess

capacity in the domestic airline industry and post-pandemic

travel patterns have all combined to depress earnings.

Its passenger volumes are running below pre-pandemic levels

and shares have lost about 40% of their value in the past three

years. It has downgraded its outlook at least eight times in the

past 20 months despite booming travel demand and analysts expect

profit in 2024 to plunge about 83% from a year ago.

As investors and analysts gather in Dallas on Thursday for

Southwest's ( LUV ) first public investor meeting since 2022, they want

a credible strategy and timeline to restore its long-term

profitability.

The stakes are high. Activist investor Elliott Investment

Management has launched a campaign to oust CEO Bob Jordan and

replace two-thirds of Southwest's ( LUV ) board of directors, blaming

them for the airline's underperformance. Elliott plans to

request a special shareholder meeting as soon as next week to

force the changes.

While Southwest ( LUV ) has offered the hedge fund some concessions,

it has repeatedly backed Jordan, calling him the "right leader"

to execute a "significant transformation" of its business and

improve financial results.