Southwest Airlines recently made headlines by appointing Rakesh Gangwal, a co-founder of India’s largest carrier IndiGo, to its board of directors. This decision was seen as a response to pressure from the activist investor group Elliott Management, who had been critical of Southwest’s lack of board members with extensive airline experience outside of the company.
Elliott Management, which owns an 11% stake in Southwest, had also called for the removal of CEO Bob Jordan and chairman Gary Kelly. While Jordan has stated that he will not resign, the Southwest board has expressed support for the current management team. In an effort to protect against further intervention from Elliott, the board implemented a one-year rights plan, commonly known as a poison pill, which allows other shareholders to purchase stock at a discounted rate if Elliott or any other entity acquires 12.5% or more of Southwest’s outstanding stock.
Southwest defended its decision to appoint Gangwal by highlighting the ongoing efforts to diversify the board’s composition and bring in members with a diverse range of business skills. Gangwal’s background in founding IndiGo, as well as his experience as CEO of US Airways and Worldspan GDS, was seen as valuable for Southwest’s strategic initiatives. Chairman Gary Kelly emphasized Gangwal’s expertise in travel technology and the potential benefits it could bring to the company.
One of the key criticisms leveled at Southwest by Elliott Management is the airline’s lagging technology compared to other major U.S. carriers. This criticism highlights a potential area of improvement for Southwest as it continues to navigate the challenges of the airline industry, including evolving customer expectations and increasing competition.
Southwest’s recent board appointments reflect an effort to address investor concerns and position the company for future success. By bringing in individuals with diverse business backgrounds and expertise, Southwest aims to strengthen its strategic vision and competitive position in the market. As the airline industry continues to evolve, Southwest will need to remain agile and responsive to changing dynamics to stay ahead of the competition.