Just days after 
Southwest Airlines
finally settled its differences with activist hedge fund Elliott Management, the carrier has made a unique move, one which sends multiple different signals to investors, the market, and the hedge fund with which it had been dueling all summer. Today, Southwest Airlines announced that Rakesh Gangwal, the founder of Indian low-cost behemoth IndiGo, would be appointed as the new independent Chair of the Board of Directors, according to Airline Economics.
This move comes just days after Southwest and Elliott had finally come to terms, each agreeing to some of the other’s demands, including the early retirement of key airline leadership figures and the appointment of new Elliott-approved directors. Gangwal, in the weeks leading up to the resolution of the two firms’ disagreements, was one of Southwest’s biggest supporters, buying up millions worth of shares of the company’s stock and publicly backing company president and CEO Bob Jordan.
Photo: Markus Mainka | Shutterstock
The appointment of Gangwal sends mixed messages. For starters, Gangwal is undoubtedly an industry titan, one with an extensive reputation within the world of commercial aviation and someone who can “steady the ship” following two difficult years of turmoil at Southwest Airlines. However, the appointment of Gangwal as an independent director may be subject to criticism, as he took a side in the Southwest vs. Elliott Management standoff.
Gangwal’s appointment was not the only move made by Southwest today
It is also important to note that Gangwal’s appointment was not the only one made today, as the airline announced multiple new Board Committee Chairs as well. These included all the following appointments:
- Lisa Atherton as the Compensation Committee Chair
- Douglas Brooks as the Audi Committee Chair
- David Hess as the Safety and Operations Committee Chair
- Chris Reynolds as the Nominating and the Corporate Governance Committee Chair
- Gregg Saretsky as the Finance Committee Chair
Photo: Austin Deppe | Shutterstock
Despite any controversy that surrounded the airline over the past couple of months, Gangwal appears steadfast in his commitment to putting Southwest back on the path toward profitability. In a statement to Airline Routes & Ground Services, Gangwal had the following words to share:
“We are embarking on the next era of change at Southwest as we build upon its many successes and storied past. Our critical priority as a newly constituted Board is to come together to work closely with Bob Jordan and the rest of the management team to return the carrier to superior financial performance.”
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So what does all of this mean?
The airline does have its work cut out for it, although it is riding a wave of positive momentum coming off of a surprise profit from the third financial quarter. The bigger challenge Gangwal may have to face, however, is restoring Southwest’s path toward profitability while also attempting to remedy the discord created by the company’s standoff with Elliott Management.
At the end of the day, Elliott Management may have gotten exactly what it wanted. Southwest is now led by an independent board chair with exemplary industry experience, and the global spotlight is now on the carrier to perform.