Southwest Airlines Appoints Rakesh Gangwal to Board Amid Elliott’s Push for Change
Introduction
Southwest Airlines Co. has appointed aviation industry veteran Rakesh Gangwal to its board of directors, as the airline seeks to strengthen its leadership amidst demands for significant change from activist investor Elliott Investment Management.
Background
Elliott, which holds a $1.9 billion stake in Southwest, has been calling for the ouster of CEO Bob Jordan and Chairman Gary Kelly, citing the airline’s poor performance and insular culture. Southwest has responded by adopting a "poison pill" shareholder rights plan and adding independent directors to its board. The airline has also announced plans to expand its offerings, including premium seating and revised boarding procedures.
Rakesh Gangwal’s Appointment
Gangwal, the billionaire co-founder of InterGlobe Aviation, which controls Indian budget carrier IndiGo, has been appointed to the Southwest board. His appointment is part of the airline’s efforts to evolve its composition to include professionals with diverse skills and experience.
Gangwal’s Background
Gangwal has extensive experience in the aviation industry, having co-founded InterGlobe and serving as chairman, president, and CEO of Worldspan Technologies Inc., a travel and transportation information services company. He also spent a decade at United Airlines Inc. and was CEO of US Airways from 1996 to 2001.
Elliott’s Reaction
Elliott responded to Gangwal’s appointment in a letter to Southwest’s board, describing it as a "clear attempt to entrench the current management team." The activist investor renewed its call for the ouster of CEO Jordan and Chairman Kelly, saying that feedback from institutions, individual shareholders, and Southwest employees has been overwhelmingly negative regarding the airline’s performance and leadership.
Southwest’s Response
Southwest has pushed back against Elliott, saying it has made good faith efforts to engage with the activist investor but has focused on personal attacks and set an immediate CEO change as a condition for any serious discussions. The airline remains open to constructive conversations with Elliott and is willing to evaluate other director candidates.
Financial Performance
Southwest’s financial performance has been struggling, with the airline cutting its unit revenue outlook in June and reporting a 6.7% decline in its stock price year-to-date. Elliott has cited the airline’s poor performance and lack of adaptability to changes in travelers’ booking habits as key concerns.
Conclusion
In conclusion, Southwest Airlines’ appointment of Rakesh Gangwal to its board amid Elliott’s push for change highlights the ongoing tension between the airline and the activist investor. While Gangwal’s experience in the aviation industry may bring valuable insights to Southwest, Elliott’s concerns regarding the airline’s leadership and performance remain unaddressed.
FAQs
Q: Who is Rakesh Gangwal?
A: Rakesh Gangwal is a billionaire aviation industry veteran who co-founded InterGlobe Aviation, which controls Indian budget carrier IndiGo.
Q: Why did Elliott invest in Southwest?
A: Elliott invested $1.9 billion in Southwest as part of its efforts to push for significant change at the airline.
Q: What are the concerns Elliott has raised regarding Southwest?
A: Elliott has expressed concerns regarding Southwest’s poor financial performance, insular culture, and lack of adaptability to changes in travelers’ booking habits.
Q: Has Southwest responded to Elliott’s concerns?
A: Yes, Southwest has pushed back against Elliott, saying it has made good faith efforts to engage with the activist investor but has focused on personal attacks.
Author: fortune.com
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