Southwest Embraces the 80 Percent Rule

The airline once took forever to make decisions. CFO Tom Doxey told me he wants to shed that reputation and move fast. He asks: "Can we get to 80 percent there on this?" If it's yes, they do it.

Dear readers,

I know the knock on Elliott Management — that it targeted Southwest for its balance sheet, calculating it could use the value in it to boost the airline’s stock price and earn a tidy profit in (what it hoped would be) a short period. The thinking goes that the investment company, which historically has not put money in airlines, probably doesn’t care what Southwest does five or ten years from now.

That can be detrimental to Southwest, of course, and I know there’s a lot of fear in the industry about this. But so far, I think this relationship is turning out OK for Southwest (less so for Elliott, which is far from reaching the 12-month stock price target of $49 that it set when it bought its first stake in June 2024; shares closed Tuesday at $31.91). In fact, you might even call me cautiously optimistic about how Southwest has evolved since Elliott’s initial investment.

Last week, I had an interview with CFO Tom Doxey¹ that affirmed my view that Elliott’s investment in Southwest is a net gain because it quickly forced a shift in culture at the airline that might not otherwise have come.²

To illustrate this point, I share with you the saga of Southwest’s upcoming Boeing 737-700 retrofits, plus more from my interview with Doxey.