Southwest Airlines (LUV.US) shareholder Elliott's total economic exposure has risen to 19.9%.

On Wednesday, Southwest Airlines (LUV.US) and activist investor Elliott Investment Management signed an amended cooperation agreement that increases Elliott's maximum total economic risk exposure during the term of the agreement from 14.9% to 19.9%, according to a filing. Additionally, Southwest Airlines' executive vice president of business transformation, Ryan Green, has informed the company of his decision to step down from his current role effective April 1, 2025.

The maximum total economic risk exposure refers to the maximum potential loss or risk exposure a portfolio or enterprise can bear under economic changes (such as market volatility, interest rate changes, currency fluctuations, etc.). It represents the most severe economic loss that an investor or company may face when confronted with a series of external economic shocks (such as a global economic recession, trade war, natural disasters, political instability, etc.).

Southwest Airlines and Elliott had engaged in a public battle for over four months last year. In June last year, Elliott disclosed its ownership of approximately $2 billion worth of Southwest Airlines shares. After years of underperformance, Elliott called for a change in the company's strategy and leadership and targeted Southwest Airlines' chairman Gary Kelly and CEO Bob Jordan. Elliott argued that the airline's leadership refused to upgrade its operations, hurting shareholder interests and leaving the airline unable to withstand competitive challenges.

However, the two sides reached a settlement in October last year. Southwest Airlines appeased Elliott by accelerating Gary Kelly's retirement, appointing six new board members chosen by Elliott, and implementing operational reforms, including more red-eye flights, new seat policies, and a global partnership with European airlines.

On February 18, Southwest Airlines announced that it would cut approximately 15% of its corporate positions, affecting around 1,750 positions. The layoffs primarily targeted corporate headcount and leadership roles, with the senior management committee slated to be cut by 15%. The significant move aims to cut costs while also marking the company's first-ever layoffs. The layoff plan will begin in late April and is expected to be "essentially complete" by the end of the second quarter.

Despite the improvement in Southwest Airlines' financial performance in the last quarter of 2024, the company warned on January 30 that costs would grow faster than expected, eroding the benefits of strong demand for leisure travel. Southwest Airlines attributed the reason to "ongoing inflationary pressures," including expensive labor contracts approved last year. The company expects to save $210 million this year and $3 billion next year from the layoffs.