12:17 PM EDT, 06/10/2024 (MT Newswires) -- Southwest Airlines ( LUV ) shares advanced Monday as Elliot Investment Management confirmed its roughly $1.9 billion stake in the low-cost carrier, while the activist investor called for new leadership at the company alongside a broad review of the business.

In a letter to Southwest's ( LUV ) board of directors, Elliot said "poor execution" and "stubborn unwillingness" of the airline's top management to evolve its strategy have led to "deeply disappointing" results for all involved. The company's stock has declined by more than 50% in the past three years and is trading below levels seen during the depths of the COVID-19 pandemic, according to the investment management firm.

Elliot said it owns an economic interest of about 11% in Southwest ( LUV ), confirming earlier multiple media reports about its position. The airline's stock popped in premarket activity on the news and was gaining 8.2% in midday trading.

"Southwest's ( LUV ) rigid commitment to an approach developed decades ago has inhibited its ability to compete in the modern airline industry," Elliot Partner John Pike and Portfolio Manager Bobby Xu wrote in the letter. "This ethos pervades the entire business with outdated software, a dated monetization strategy and antiquated operational processes."

The activist investor recommended the company overhaul its board with external independent directors that have airlines expertise and bring in new leadership to improve its financial performance and operations. The firm also urged Southwest ( LUV ) to evaluate "all available opportunities" as part of a business review.

Southwest ( LUV ) lowered its full-year 2024 revenue outlook in April after reporting weaker-than-expected first-quarter results. At the time, the company said it anticipated growth "approaching high-single digits" compared with a prior view that the top-line would advance by double digits. The airline's reputation also took a hit from mass cancellations and delays in late 2022 amid extreme winter weather.

Elliot believes its leadership and operational review recommendations can help Southwest ( LUV ) "achieve $49 per share within 12 months," reflecting a "highly attractive" 77% return, according to Pike and Xu. The firm said it will be available to meet the airline to discuss the issues and collaborate to improve its performance.

Southwest ( LUV ) maintains an open dialogue with its shareholders and aims to better understand Elliot's views, a spokesperson told MT Newswires in an emailed response. "The Southwest ( LUV ) board of directors is confident in our CEO and management's ability to execute against the company's strategic plan to drive long-term value for all shareholders," the carrier's spokesperson said.

Price: 30.19, Change: +2.44, Percent Change: +8.79