Southwest Airlines announced Monday that it is adding former US Airways CEO Rakesh Gangwal to its board of directors. The appointment comes as it seeks to fend off an activist push from Elliott Management. The latest defensive maneuver aims to blunt Elliott’s accusations that Southwest’s board is long-tenured and insular. The two sides have been in conversation since Elliott first announced it had an 11% economic interest in the airline in June. Gangwal was CEO of the now-defunct US Airways in the late 1990s and early 2000s, before founding Indian low-cost carrier IndiGo in 2006. IndiGo has since grown into the largest airline in Asia, carrying more than 106m passengers in fiscal 2024. Southwest announced the board expansion less than a week after it adopted a shareholder rights plan, limiting investors’ ability to grow their stakes beyond a 12.5% threshold. “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,” Southwest executive chairman Gary Kelly said in a release. Elliott is seeking the ouster of Kelly, Southwest’s CEO before becoming executive chair, and Bob Jordan, who has served as Southwest’s CEO since 2022. The activist investment firm has argued Southwest needs leadership change to revive a lost culture of innovation, and has blamed Kelly and Jordan for the company’s deteriorating margin and share price relative to peers. An Elliott spokesperson did not immediately respond to CNBC’s request for comment. Southwest will hold its investor day in September when it is expected to provide further updates.<br/>
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Activist investor Elliott Management said Monday it would mount a proxy fight to push for change at Southwest Airlines through a special shareholder vote unless management is willing to negotiate, citing a poison pill and board expansion that the investor views as “entrenchment maneuvers.” Elliott in its letter to Southwest’s board said it remained open to collaboration, but that the board had taken steps to box Elliott out. The activist is seeking the ouster of CEO Bob Jordan and executive chairman Gary Kelly, citing underperformance and a failing corporate culture. Barring a change in the board’s posture, Elliott partner John Pike and portfolio manager Bobby Xu said Elliott intended “to move expeditiously to give shareholders a direct say on the necessary leadership changes.” A proxy fight would be expensive and challenging for Elliott and Southwest Airlines. Southwest’s bylaws have a special provision that allows big shareholders like Elliott to call for an extraordinary shareholder meeting to vote on directors or other proposals. The high-stakes gambit comes on the same day that Southwest announced it’s adding billionaire airline entrepreneur Rakesh Gangwal to its board, just days after the company adopted a poison pill that limited shareholders from getting more than a 12.5% stake in the airline. Elliott said it has an 11% interest in Southwest, making it one of the largest beneficial owners. Elliott cited numerous conversations with investors and stakeholders that supported leadership change at the airline. “Elliott remains committed to providing them with a clear choice,” Pike and Xu wrote, between incumbent management and “new and proven airline industry executives capable of returning Southwest to its rightful place as an industry leader.” The activist described the poison pill as “a shield for failure and a sword for nothing except the fees of advisers” which highlighted a core tenet of its case for change. Elliott considers insular management culture averse to outside thinking. Southwest has described the poison pill as a fiduciary obligation, given Elliott has indicated that it plans to grow its stake, and called Gangwal’s addition to the board a step in a “deliberate” process of board refreshment.<br/>
The Labour Court is proposing that Aer Lingus boosts pilots’ pay by 17.75% in a recommendation that many observers believe is the last real opportunity to break the deadlock between the two sides and end a bitter labour dispute that has disrupted the summer travel plans of 82,000 passengers. Members of the Irish Air Line Pilots’ Association (Ialpa), part of trade union Fórsa, have been seeking a pay rise of 23.88%, or 27%, depending on whether it was the company or the workers doing the calculations, since they first lodged a claim with Aer Lingus in October 2022. The dispute simmered for two years but it took off two weeks ago when pilots began refusing out of hours work, overtime and roster changes in a work to rule that has continued since. They also downed tools for an eight-hour strike on Saturday, June 29th. Before that point, the two sides had already been once to the Workplace Relations Commission (WRC), part of the State’s system for resolving industrial disputes, and twice to the Labour Court. The Labour Court recommendation published on Monday goes a good deal further than an interim proposal the same body tabled in May. That called for a 9.25% hike for pilots while suggesting that the parties take issues on which they could not agree back to the WRC. The latest recommendation proposes that Aer Lingus increase pilots’ pay by 17.75% over more than three years, beginning with 2% backdated to January 2023 and concluding with a final 1% hike to kick in on July 1st, 2026.<br/>
A failure to act on performance alerts from the engine manufacturer contributed to the in-flight failure of a CFM International CFM56 powering an Air India Express Boeing 737-800. The incident occurred on 26 December 2022 after the aircraft, VT-AYC, took off from Tiruchirappalli on an overnight service to Singapore operating as flight IX-682, according to a probe from India’s Directorate General of Civil Aviation. While passing 23,000ft, the crew heard “a thud sound” followed by indications of a sharp reduction in N1 speed on the No.1 engine, falling from 98% to 65%. Subsequently, the fuel flow on that engine started dropping rapidly and the exhaust gas temperature shot up to 913°C (1,680°F). N2 speed also began to fall. Although other parameters remained within limits, vibration levels in the low-speed turbine and the fan increased, and the crew idled the engine in accordance with the non-normal checklist. The aircraft diverted to Chennai and landed safely, with no injuries to the 160 passengers and six crew. After landing, an inspection revealed damage to the third and fourth stage low-pressure turbine rotors and stators “with missing materials and a lot of broken pieces between the fourth stage stator and rotor.” Damage from foreign object debris was ruled out. In its analysis, the DGCA says that CFM had issued a customer notification report (CNR) on 20 December – six days before the incident flight – warning of degraded performance to VT-AYC’s No.1 engine. Work was planned to follow up on the CNR and other aircraft maintenance items, but owing to aircraft movement changes and a lack of ground time available these did not take place. The DGCA, however, believes that there were two periods when the aircraft was on the ground long enough for the work to have been conducted.<br/>
Asia Aviation Pcl, owner of Thailand’s biggest low-cost airline, expects record earnings from core operations this year as a surge in overseas visitors boosts seat demand and airfares. Thai AirAsia Co., the company’s 100%-owned budget airline unit, also intends to add more flights to China and India to capitalize on a boom in travel from its two biggest markets, Asia Aviation Chief Executive Officer Santisuk Klongchaiya said in a July 4 interview in Bangkok. “China and India will be the major driver for our earnings growth,” Santisuk said, noting that more Thais are visiting those countries. “Strong demand should continue to be a tailwind for our earnings for remainder of this year.” Thailand welcomed 17.5m foreign tourists in the first half, a 35% jump from a year earlier, with Chinese visitors making up almost a fifth of the total. Prime Minister Srettha Thavisin has made tourism a key part of his strategy to revive growth in Southeast Asia’s second-biggest economy, and the government is considering an end to a 52-year-old ban on afternoon alcohol sales and the legalization of casinos. It will also expand airport capacity. Asia Aviation, which is 40.7%-owned by Malaysia’s AirAsia Aviation Ltd., posted a net loss of 409m baht ($11.2m) in the March quarter, as the Thai currency’s weakness led to foreign exchange losses of 2.05b baht on aircraft leasing. But the company posted a core profit of 1.64b baht in the period, compared to a 203m baht loss a year earlier. Asia Aviation’s core profit peaked at 3.4b baht in 2016, according to the company’s investors relation department. The stock has risen just over 3% this year. <br/>