Southwest has added Rakesh Gangwal, former US Airways CEO and IndiGo co-founder to its board. The move comes after Elliot Management has furthered its push to remove the current Southwest CEO from his role.

Bringing in outside experience

Southwest Airlines is a major airline in the United States, setting itself apart as an operator of only Boeing 737 aircraft, not offering seat selection before flights, and being the only airline in the US to offer two free checked bags on all flights. Following a major meltdown that took place between Christmas 2022 and the New Year in 2023, the airline’s leadership has come under heavy fire, specifically targeting its leadership. Now, there is an investment company looking to push the airline’s CEO, Bob Jordan, out.

Southwest Airlines Lone Star One livery

Photo: lorenzatx | Shutterstock

Earlier today, Southwest announced that Rakesh Gangwal, who led US Airways as CEO in the 1990s and early 2000s and helped co-found IndiGo, which has now become the largest carrier in India. The addition of Gangwal to the board is meant to counter Elliot Management’s push for a change in leadership. Elliot Management had also criticized Southwest for not having enough people on its board with eternal airline experience, which

“I am delighted to welcome Rakesh, who brings to our Board decades of valuable experience as an executive and entrepreneur at some of the world’s leading airlines. Having co-founded IndiGo and grown it into India’s largest airline, Rakesh knows the importance of building a business that has both a distinct culture and enduring profitability.” – Gary Kelly, Executive Chairman of the Board, Southwest Airlines

In addition to his roles at US Airways and IndiGo, Gangwal also worked at Air France and United Airlines, both in executive roles. According to Southwest’s announcement, Gangwal has previously served on the board of several major companies like CarMax, OfficeDepot, OfficeMax, and PetSmart.

Poison Pill

Elliot Management has acquired an 11% stake in Southwest, and because of its ambitious move, Southwest has created a plan to minimize the impact should Elliot want to expand its stake. The airline last week announced it had created a “poison pill”, which will be triggered if any one person or group acquires more than 12.5% of Southwest without the board’s approval. Should a person or group reach a 12.5% stake, they will be unable to exercise the shares, which include on voting on company matters.

N961WN Southwest Airlines Boeing 737-7H4

Photo: Vincenzo Pace | Simple Flying

If the poison pill is triggered, shareholders, except the one triggering the pill, will receive a right for each share owned. Then, existing stock owners will be able to purchase additional shares at a lower value, which could dilute the stake from the person or group that triggered the pill.

Related

Southwest Airlines’ New $2 Billion Investor Wants Big Changes

If it were to come to fruition, Elliot Investment Management would become the largest institutional shareholder in Southwest Airlines.

The investment firm has even gone as far as to publish a plan to form a new board, add new leadership, and management, and that it would form a new committee. Southwest responded by saying,

“We are focused on restoring our industry-leading financial performance, the successful execution of our multi-faceted Tactical Action Plan to improve operational performance announced in first quarter 2023, alongside recent technology investments and operational resiliency programs that led to the operation of 99% of scheduled flights in first quarter 2024.”

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