Class Action Claims Southwest Airlines Investors, SEC Misled on Operations ‘Plagued’ by Compliance Issues

New to ClassAction.org? Read our Newswire Disclaimer

A proposed class action lawsuit has been filed over a number of dips in the price of Southwest Airlines stock that an investor claims are linked to an April 2018 explosion that killed one passenger and injured several others. The case looks to represent those who bought or otherwise acquired Southwest Airlines securities between February 7, 2017 and June 25, 2019, a period during which the plaintiff claims the company and its CEO and CFO issued to investors “materially false and misleading statements” concerning the airline’s maintenance and federal aviation compliance efforts.

“Despite continued headlines regarding these issues,” the complaint reads, “Southwest has continually denied any wrongdoing, while asserting it has remained compliant with applicable government maintenance and safety regulations." 

Cited in the lawsuit are four instances in which Southwest’s stock price took a hit upon the release of unfavorable news concerning the company, the first of which occurred in April 2018. That month, the case says, reports swirled that a Southwest plane had blown an engine, causing shrapnel to strike the fuselage. According to the suit, the explosion killed one passenger, who was “partially pulled through a large hole” in the cabin, and injured seven others. The complaint says the incident was described by the Chairman of the National Transportation Safety Board (NTSB) as “the first passenger fatality in a U.S. airline accident since 2009.” 

The news of the explosion saw Southwest’s stock price fall 1.13 percent, the lawsuit says.

Two days after Southwest’s stock price sank, prices fell again, this time by 1.83 percent, when the FAA announced during pre-market hours that it had ordered inspections of at least 220 aircraft engines, focusing on “a broken fan blade that exploded,” the suit says. In June 2018, the case goes on, news sources reported that eight passengers were suing Southwest in connection with the engine explosion, a revelation that caused the company’s stock to fall 2.33 percent per share. 

Lastly, the lawsuit says that the Wall Street Journal reported in June 2019 that the FAA had removed three senior managers in the office overseeing Southwest Airlines “amid allegations of lax safety enforcement raised by agency whistleblowers and various resulting governmental inquiries.” With the release of the WSJ’s write-up came another dip in Southwest stock price, this time by 0.59 percent, the complaint says.

The plaintiff alleges that Southwest has for more than a decade misled investors by continually denying that its flight services have been “plagued by non-compliance and maintenance issues” while insisting that the airline has “remained compliant with applicable government maintenance and safety regulations.” The lawsuit alleges Southwest’s apparent non-compliance with federal maintenance and safety regulations was exacerbated by the airline’s “undue influence over FAA officials and, consequently, lax regulatory oversight” over its own operations.

What’s resulted, the plaintiff argues, are significantly heightened safety risks for passengers, as well as amplified governmental scrutiny over the airline. Southwest investors, the lawsuit alleges, have suffered “significant losses and damages” as a result of the “precipitous decline in the market value” of the airline’s securities.