# Southwest Airlines (LUV) — TBOC §21.552 Adoption Event Study

**Generated:** 2026-04-29T20:40:31Z

## Event identification

- **Treated firm**: Southwest Airlines Co. (LUV; CIK 0000092380)
- **Statute**: TBOC § 21.552 (derivative-action ownership-threshold)
- **Mechanism**: bylaws amendment (Fifth Amended and Restated Bylaws)
- **Board adoption date**: 2025-05-16
- **8-K filing date**: 2025-05-19 (acceptance 16:38:57 ET — AFTER market close)
- **T0 (headline)**: 2025-05-20 — applies the after-4pm-ET → next-trading-day rule
- **SEC accession**: 0000092380-25-000119
- **8-K Items**: 3.03, 5.03, 9.01
- **Primary source**: <https://www.sec.gov/Archives/edgar/data/92380/000009238025000119/luv-20250516.htm>
- **Bylaws exhibit**: <https://www.sec.gov/Archives/edgar/data/92380/000009238025000119/southwestairlines-fiftha.htm>

## A. Specification table (Day-0)

| Specification | α (alpha) | β (SPY) | β (sector) | Sigma | R² | Day-0 AR | Patell-z p | BMP p | Corrado p |
|---|---:|---:|---:|---:|---:|---:|---:|---:|---:|
| A1_market_model_SPY | 0.000345 | 1.1980 | — | 0.020476 | 0.3677 | +0.0921% | 0.9642 | 0.9641153790228756 | 0.9541501262650394 |
| A2_augmented_SPY_JETS | 0.000419 | 0.0858 | 0.8489485444199367 | 0.016715 | 0.5804 | +0.4565% | 0.7848 | — | — |

## B. Alternative T0 specifications

| T0 label | Date used | Day-0 AR | p-value |
|---|---|---:|---:|
| T0_a_board_2025-05-16 | 2025-05-16 | +1.7667% | 0.3913 |
| T0_b_filing_2025-05-19 | 2025-05-19 | -0.4248% | 0.8367 |
| T0_c_next_trading_2025-05-20 | 2025-05-20 | +0.0921% | 0.9642 |

## C. Cumulative Abnormal Returns by event window

Specification: market-model SPY (A1).

| Window | n days | CAR | Patell-z | p-value |
|---|---:|---:|---:|---:|
| Day0 | 1 | +0.0921% | +0.0450 | 0.9641 |
| CAR_-1_+1 | 3 | -0.6110% | -0.1723 | 0.8632 |
| CAR_-2_+2 | 5 | -0.6434% | -0.1405 | 0.8882 |
| CAR_-5_+5 | 11 | +3.8855% | +0.5721 | 0.5672 |
| CAR_-10_+10 | 21 | -0.1874% | -0.0200 | 0.9841 |
| Post_+0_+5 | 6 | +2.2985% | +0.4583 | 0.6468 |
| Post_+0_+20 | 21 | -4.7670% | -0.5080 | 0.6114 |
| Post_+0_+60 | 61 | -12.7829% | -0.7993 | 0.4241 |

## D. Pre-event drift (placebo)

- Linear-trend slope (residuals): +0.0595 bp/day
- t-statistic: 0.3117, p = 0.7552
- **Verdict: no_pretrend**

## E. BHAR — long-run buy-and-hold abnormal returns

Reference portfolio: SPY (single-firm BHAR_i = BH_i − BH_market).
Skewness-adjusted t-stat per Lyon-Barber-Tsai (1999).

| Horizon | Days | BH(LUV) | BH(SPY) | BHAR | t (LBT skew-adj) | p |
|---|---:|---:|---:|---:|---:|---:|
| BHAR_1mo | 21 | -3.13% | +0.20% | -3.33% | -0.3766 | 0.7064 |
| BHAR_3mo | 63 | -3.78% | +7.59% | -11.37% | -0.4919 | 0.6228 |
| BHAR_6mo | 126 | -0.81% | +11.60% | -12.42% | -0.3364 | 0.7366 |
| BHAR_12mo | — | INSUFFICIENT POST-DATA | | | | |

## E2. BHAR through last available trading day (variable horizon)

- T0: **2025-05-20**, last date in data: **2026-04-29**
- Trading days: 237 (344 calendar days)
- BH(LUV): +16.51%
- BH(SPY): +20.99%
- **BHAR: -4.4810%**
- t (LBT): +0.1184, p = 0.9058

## E3. BHAR vs airline peers (pairwise, T0 → last available)

Each row reports LUV's buy-and-hold return minus a peer's buy-and-hold return over identical post-event windows.
Negative Δ means LUV underperformed that peer; positive means LUV outperformed.

| Peer | Days | BH(LUV) | BH(peer) | Δ-BHAR | t | p |
|---|---:|---:|---:|---:|---:|---:|
| DAL | 237 | +16.51% | +30.67% | -14.15% | -0.2937 | 0.7690 |
| UAL | 237 | +16.51% | +12.72% | +3.79% | +0.0431 | 0.9656 |
| AAL | 237 | +16.51% | -4.64% | +21.15% | +0.5048 | 0.6137 |
| ALK | 237 | +16.51% | -28.51% | +45.03% | +1.2490 | 0.2117 |
| JBLU | 237 | +16.51% | -2.02% | +18.54% | +0.1910 | 0.8485 |
| ALGT | 237 | +16.51% | +35.20% | -18.69% | -0.5298 | 0.5963 |
| SKYW | 237 | +16.51% | -20.96% | +37.48% | +1.1863 | 0.2355 |
| RYAAY | 237 | +16.51% | +1.46% | +15.06% | +0.4427 | 0.6580 |

**Peer-cohort summary (n=8):** mean Δ-BHAR = **+13.53%**, median = +16.80%, range [-18.69%, +45.03%]

## F. Calendar-time portfolio alpha (post-event)

- Monthly alpha: **+1.1807%** (annualized: +14.17%)
- Beta vs SPY: 0.4346
- t(alpha) = +0.3091, p = 0.7572
- n months = 12

## G. Synthetic control

- Donor pool: ['DAL', 'UAL', 'AAL', 'ALK', 'JBLU', 'ALGT', 'SKYW', 'RYAAY']
- Top weights: SKYW=0.361, RYAAY=0.227, AAL=0.139, ALGT=0.100, JBLU=0.083
- Pre-event RMSPE: 1.8555%
- R² (levels): -0.2714
- Pearson correlation (cumulative): 0.7691
- Concentrated (top weight > 50%)? **NO**
- Pre-fit gate (R² ≥ 0)? FAIL
- **Day-0 synthetic-control AR: +0.1956%**

## H. Heckman selection — note

Heckman selection model is a cohort-level analysis requiring the universe of potential adopters of TBOC §21.552. For single-firm LUV analysis, the Heckman framework is out-of-scope. The cohort-level Heckman is reported in the Texas-incumbent statutory-adoption analysis across all 47 §21.552 adopters in Panel C of the broader DExit study.

## Methodological notes

- **Estimation window**: 240 trading days ending the trading day before T0.
- **Patell-z**: forecast-error standard error using residual variance from the estimation window plus the standard market-model bias correction (Patell 1976).
- **BMP**: Boehmer-Musumeci-Poulsen (1991) cross-sectional standardized AR test. For single-firm, reduces to z-test.
- **Corrado rank test**: Corrado (1989) non-parametric rank test on the union of pre-event AR distribution + event-day AR.
- **LBT skewness-adjusted t**: Lyon-Barber-Tsai (1999) skewness adjustment for long-run BHAR inference.
- **Synthetic control**: Abadie-Diamond-Hainmueller (2010, 2015) SLSQP minimization with non-negativity and sum-to-1 constraints. Pre-fit gate at R² ≥ 0 in levels (rejects donor pools that fit worse than a constant).

## Bluebook citations

Southwest Airlines Co., Current Report (Form 8-K) (May 19, 2025), accession no. 0000092380-25-000119.

Southwest Airlines Co., Fifth Amended and Restated Bylaws, Ex. 3.1 to Current Report (Form 8-K) (May 19, 2025), accession no. 0000092380-25-000119.