Southwest Airlines’ plan to fight activist Elliott includes major share buyback

Southwest Airlines (Love)’ management advocates maintaining leadership during her investors day thursdayand one aspect of the plan is that the company’s stock is up more than 10%. Under pressure from an activist investor, the carrier authorized $2.5 billion in stock buybacks.

“Southwest is balancing its capital allocation priorities to minimize capital expenditures on aircraft, continue to invest in infrastructure that optimizes operations and manage debt to maintain the airline’s investment-grade balance sheet, while returning capital to shareholders through dividends and share repurchases,” the company said in a statement previewing its investor day presentations.

In the background of the announcement is a activist investor campaign by hedge fund Elliott Management. It wants to clean house and conduct a comprehensive review of the company, having lost patience with the company’s attempts to escape a period of financial difficulties. Things like gabolishing his legacy of open seating and open boarding policy, including shiftsAre too little, too lateElliott has maintained.

“Southwest’s management and board have chosen to go it alone, with the goal of thwarting a leadership change that is urgently needed,” the fund wrote in a recent letter to other shareholders.

But market reaction suggests that $2.5 billion buys a lot of patience.