Southwest’s Poison Pill, Jobless Claims, China EV Sales, and More!
Editor’s Note: I hope you had a great July 4 and didn’t blow any of your fingers off with fireworks, dear reader.
Let’s get to it.
Southwest May Swallow a Poison Pill
Southwest Airlines (NYSE: LUV) announced this week that it has adopted a “poison pill” plan in an effort to prevent activist investor Elliott Management from targeting the airline.
Last month, Elliott disclosed that it owns nearly $2 billion worth of Southwest shares, or roughly 11% of the company’s stock.
According to Southwest, it will activate the poison pill is Elliott or any other investor acquire 12.5% or more of the company’s shares. However, the carrier said that Elliott has made filings that indicate the firm intends to purchase a larger stake in the company.
Once that threshold has been crossed, all other Southwest shareholders will be allowed to purchase one extra LUV share for each that they currently own at a 50% discount.
By doing so, Southwest could dilute Elliott’s stake in the company, and thus decrease the influence of its shareholder vote.
Elliott has called out Southwest for lagging behind other carriers.
A large part of Southwest’s problem is that it exclusively flies 737 Max jets made by Boeing (NYSE: BA) — the same jets involved in the plane maker’s quality-control disaster. Delayed deliveries of 737 jets put the squeeze on Southwest. In the first quarter of 2024, the carrier reported a net loss of $231 million despite record-high revenue of $6.3 billion.
But Elliott believes that Southwest’s management must be replaced for the carrier to recover. In particular, it has called for the ouster of Board Chair Gary Kelly and CEO Bob Jordan.
“[Southwest’s] current executive chairman and CEO are rigidly committed to the status quo,” Elliott Management said in a presentation. “Southwest must bring in new leadership from outside of the company for Southwest’s strategy to evolve.”
For its part, Southwest has said that it is already considering making big changes to its current business model, to include adding premium seating tiers.
“Southwest Airlines has made a good faith effort to engage constructively with Elliott Investment Management since its initial investment and remains open to any ideas for lasting value creation,” Executive Chair Kelly said in a statement this week.
Until recently, Southwest was a leader in its industry due to its consumer-friendly image. However, in the last 12 months, Southwest’s stock has lost more than 20% of its value.
Elliott Management, meanwhile, has a significantly successful track record of investor activism. Led by billionaire Paul Singer, the hedge fund has more than $65 billion in assets under management. In the second quarter, the fund launched 11 activist campaigns.
China EV Makers Post Record Results
Chinese electric vehicle (EV) rivals Nio (NYSE: NIO), BYD (OTCMKTS: BYDDY), and Zeekr (NYSE: ZK) reported record deliveries for June this week.
Nio delivered 21,209 EVs in June, bringing its first-half-of-the-year total to 87,426. That’s roughly 96% more vehicles than it delivered in June 2023 and topped Nio’s previous monthly sales record (May 2024’s 20,544 EV deliveries).
Nio’s June deliveries also marked a year-over-year increase of more than 60%.
The EV maker’s sales were boosted by an updated lineup of vehicles, as well as price adjustments.
In the second half of 2024, Nio expects to begin deliveries of its “budget” Onvo L60 SUV. Priced at roughly $30,500, the Onvo L60 is intended to rival the Tesla (NSDQ: TLSA) Model Y.
Of course, tariffs on Chinese EVs in the U.S. and Europe threaten the company’s expansion efforts.
As for Zeekr, it reported delivering 20,106 vehicles in June, bringing its year-to-date total to 87,870 EVs delivered. The company has Russia to thank for this sales boost.
Ever since Russia’s war on Ukraine began in February 2022, Western carmakers have pulled out from the market, leaving Chinese firms in a dominant position.
Meanwhile, BYD reported that it sold 341,658 NEVs (new energy vehicles) last month — again, a new record. That reflected a 35% increase in sales on a year-over-year basis.
According to BYD, it delivered 145,179 all-electric vehicles last month and 195,032 plug-in hybrids. BYD’s hybrid business saw a 58% improvement year-over-year, while EV sales reflected an 18% increase.
All told, BYD delivered 1.6 million NEVs in the first half of 2024. That’s a 29% increase on a year-over-year basis.
Labor Dept.: Jobs Market Showing Signs of Slowing
This week, news from the Labor Department makes it look more likely that the Federal Reserve will trim interest rates before too long.
According to the department, jobless claims rose last week as more Americans were laid off and others were unable to find work.
In fact, the number of people on jobless rolls rose to a high not seen since November 2021.
The number of people filing unemployment claims rose by 4,000, to 238,000. And continuing claims rose by 26,000, to 1.858 million.
These results are consistent with a cooling labor market. About a year ago, the jobs market had remained red-hot, with unemployment levels not seen in roughly 50 years.
However, it appears that the Fed’s best efforts at quelling inflation by raising interest rates and thus dampening the economy.
This week, Fed Head Jerome Powell conceded that the U.S. has returned to a “disinflationary path.” But as we’ve come to expect from him, he stressed that the Fed needs to see more data before lowering its benchmark interest rate.
“We just want to understand that the levels that we’re seeing are a true reading on what is actually happening with underlying inflation,” Powell said at a European Central Bank-sponsored conference in Portugal.
“We want to be more confident that inflation is moving sustainably down toward 2%… before we start… loosening policy.”
How Much Do Travel and Tourism Contribute to the U.S. Economy?
There’s been a lot of talk about how this weekend is shaping up to be one of the busiest for the U.S. travel industry ever.
Most of the trips made this weekend will be related to the July 4 holiday.
But what about travel and tourism in general? How much does this sector contribute to the U.S. economy every year?
According to forecasts from the World Travel and Tourism Council (WTTC), the travel and tourism sector is expected to have an increased contribution to the U.S. gross domestic product (GDP) over the next 10 years.
This year, the sector is expected to account for 9% of GDP, with revenue of $2.51 trillion.
By 2034, the contributing share is forecast to increase to 9.5% of GDP, with $3.1 trillion in revenue.
Take a look:
You will find more infographics at Statista
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