Southwest Airlines on Monday said it would appoint Rakesh Gangwal, former CEO of US Airways, to its board of directors in a bid to respond to burgeoning pressure from activist investor Elliott Management.
The move comes at the right time as Southwest faces allegations by activist investor Elliott Management over its supposedly long-tenured and insular board. The two have been engaging in discussions since the June disclosure of Elliott’s 11% economic interest in Southwest Airlines.
Gangwal comes to the position with a great deal of experience, having headed US Airways during the late 1990s and early 2000s. Subsequently, in 2006, he founded IndiGo, an Indian low-cost carrier. Under his direction, IndiGo grew to be the largest in Asia, having moved over 106 million passengers in fiscal year 2024.
The board expansion comes days after Southwest adopted a shareholder rights plan, designed to prevent investors from increasing their stakes beyond the 12.5% level. This plan is more commonly known as a “poison pill.”.
Gary Kelly, executive chairman at Southwest, said in an excited tone while making the appointment announcement: “We are pleased to welcome Rakesh, who brings to our board decades of valuable experience as both an executive and entrepreneur at some of the world’s leading airlines.”
Elliott Management has been sending a hardball request that includes the ouster of Kelly and present CEO Bob Jordan, who took over in 2022. The activist firm contends that the airline needs new leadership to rejuvenate its innovative culture and turn around the company’s eroding margins and share price performance versus peers.
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Elliott Management did not return a request for comment for this story at press time. Southwest Airlines is holding its investor day in September, where it’s expected to provide further updates about its strategy and how it’s responding to the activist campaign.
The actions Southwest will take in such a situation will be of great interest to the airline industry, specifically how its moves might set precedents for others’ handling of similar activist pressures down the line.