(Reuters) - Southwest Airlines' shares rose about 7% in premarket trade on Monday after activist investor Elliott Investment Management reported an about $1.9 billion stake in the US carrier.
"Southwest's poor execution and leadership's stubborn unwillingness to evolve the Company's strategy has led to deeply disappointing results for shareholders, employees and customers alike," Elliott said in a statement.
Southwest, one of the largest US airlines, has been grappling with higher costs and slower-than-expected revenue growth due to delays in 737 MAX aircraft deliveries from planemaker Boeing.
The carrier has said delivery delays have led to "significant challenges," leaving it overstaffed and forcing it to temper its growth plans. The Dallas-Texas-based company's shares have fallen nearly 4% this year, compared with an about 12% rise in the S&P 500 index.
"We are not surprised by the activist interest in Southwest given the very strong franchise with valuable tangible and intangible assets," Raymond James analyst Savanthi Syth wrote in a note.
Elliott is known for pushing for changes in companies to boost shareholder returns.
Southwest, however, is not alone in struggling with Boeing delays. Rival United Airlines also took a $200 million hit in the first quarter from the disruptions at Boeing.
Despite these challenges, the airline sector expects to do well over strong demand for summer travel.
Southwest shares trade about 19.52 times their forward profit estimates, compared with United's 4.74 and above the industry multiple of 7.19.