LUV

Southwest Airlines($LUV) Director Pushes Back Against Elliott With Massive $100 Million Stock Purchase

05/01/2025 21:36

Southwest Airlines director Rakesh Gangwal has made a massive stock purchase of approximately $100 million, a move that comes amid intense pressure from activist investor Elliott Investment Management for leadership changes at the company. According to SEC filings disclosed on October 3, Gangwal purchased over 3.6 million shares of $LUV worth approximately $107 million over two days (September 30 and October 1). The purchase prices ranged from $29.15 to $29.97 per share. During the same period, Southwest officer Gary Kelly also bought 33,921 shares for about $1 million. Gangwal's substantial investment sends a strong message to the market that he believes "additional changes in the executive suite would be counterproductive to shareholder interests." This appears to be a direct opposition to Elliott Investment Management's demands for extensive leadership changes and board reconstitution. Southwest Airlines has been undergoing significant transformations in recent months. The airline recently announced it would start charging for checked bags for the first time in its history and is cutting approximately 15% of its corporate workforce (about 1,750 jobs). These changes are part of efforts to improve profitability, particularly under pressure from Elliott Investment Management. Elliott has been investing in Southwest since July and now holds approximately 10% of the company's shares. The activist investor has been pushing for the replacement of CEO Bob Jordan and numerous board members, criticizing Southwest for underperforming compared to competitors and for its slow recovery following the COVID-19 pandemic. Gangwal's investment comes at an interesting time. The U.S. airline industry is currently facing challenges due to economic uncertainty stemming from President Donald Trump's trade war. Most U.S. airlines, including Southwest, have withdrawn their 2025 financial forecasts. On April 23, Southwest withdrew its 2025 guidance, citing concerns about the impact of the trade war on travel demand. Gangwal, co-founder of IndiGo Airlines, brings significant experience and expertise in the airline industry. He joined Southwest's board in 2023, and this substantial purchase is interpreted as a strong vote of confidence in the company's long-term potential. Meanwhile, Southwest reported better-than-expected results for the first quarter of 2025, though still posting a loss. Q1 revenue was $6.43 billion, a 1.6% increase year-over-year, while the net loss per share was $0.13, better than the expected loss of $0.18. However, the company's stock has declined significantly this year. After trading around $34 in late March, the stock plummeted to $25 in early April and is currently trading in the $27-28 range. This decline is attributed to trade war concerns and projected decreases in travel demand. Aviation industry experts suggest that Gangwal's massive purchase may indicate he sees the current depressed share price as an attractive buying opportunity. Simultaneously, it's viewed as a strategic move to express support for current management and push back against Elliott's demands for radical changes. Investors may interpret this insider buying as a strong signal of confidence in the company's future, but they should remain cautious about the challenging environment for the airline industry and the internal conflicts at Southwest. Key factors to watch include whether Southwest's restructuring and business model changes will actually improve profitability and how the conflict with Elliott will be resolved.

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