Activist Investor Who Transformed Southwest Sets His Sights on NCLH

Changes are expected to keep coming at Norwegian Cruise Line Holdings, as activist investor Elliott Investment Management has built a stake of more than 10% in the company and is threatening a proxy fight at the upcoming annual meeting. 

In 2024, Elliott Investment Management took a similar approach to Southwest Airlines, building a $2 billion stake in the carrier followed by an aggressive push for sweeping changes.

The result: Southwest abandoned free checked bags, ended its 50-year open seating policy, and conducted its first-ever mass layoffs. As Forbes contributor Roger Dooley writes: “The airline that built a cult following by being different from every other carrier became, well, every other carrier.”

Dooley notes that the timing of the activist investor’s move is no coincidence. Just days before Elliott went public with its NCLH intentions, the company announced that CEO Harry Sommer was stepping down immediately and would be replaced by John Chidsey, the former CEO of Subway Restaurants. 

Chidsey spent nine years on the NCLH board of directors, but his career has little in the way of ties to the cruise industry.

Dooley says Wall Street has applauded Elliott’s Southwest playbook. The carrier’s shares have risen more than 20% this year, after Elliott’s pushed-for changes took effect. Elliott is now selling off its stake, having achieved a higher stock price. As Dooley writes: “Whether Southwest’s brand can sustain the long-term damage is someone else’s problem.”

The NCLH stock price is less than half of what it was in the pre-Covid years, hence the attraction for the investment company. Elliott says it sees a path to doubling the current share price, but what does that mean for Norwegian Cruise Line and its sister brands Oceania Cruises and Regent Seven Seas Cruises?

Elliott’s letter to Norwegian says it wants to both improve financial performance and guest experience. Dooley, a marketing futurist, says the goals sound great, but they also sound like what every activist says before the cost-cutting begins.

He adds that if the new leadership treats the upscale Regent and Oceania brands as ripe for cost-cutting, they’ll lose loyal customers. By the time such changes begin to seriously impact bookings and revenue, Dooley says, Elliott will have already cashed out.

Acknowledging that Norwegian has underperformed its peers, Dooley says there may be legitimate operational improvements that will save money. 

“But the particular danger here is the combination of an activist investor who has already demonstrated a willingness to sacrifice brand equity at Southwest, and a new CEO without operating experience in the cruise sector, much less luxury hospitality.”