IndiGo crisis: Rift between promoters Rakesh Gangwal and Rahul Bhatia makes airline miss out on opportunities

The IndiGo CEO, Ronojoy Datta, in the meanwhile has neither addressed not declined that problems exist, which might be a tacit admission in disguise.

Ajay Awtaney May 17, 2019 13:27:24 IST
IndiGo crisis: Rift between promoters Rakesh Gangwal and Rahul Bhatia makes airline miss out on opportunities
  • For IndiGo, this is a critical time as the international rights of Jet Airways will, sooner than later, come into the market

  • All the key management positions can be appointed by InterGlobe Enterprises, which is Rahul Bhatia’s holding company

  • If the promoters are able to level it out amongst themselves, there is nothing better than that

IndiGo, India’s largest airline by marketshare, seems to be having some sort of trouble right at the top. The two promoters of the airline, Rakesh Gangwal and Rahul Bhatia, both of whom hold an almost equal amount of equity in the airline, seem to be in disagreement about the future of the organisation.

Rakesh Gangwal, a veteran in aviation, having worked across United, Air France and others before heading US Airways as Chairman and CEO for a few years, was the brain behind the mammoth aircraft orders for the airline, getting them sweet terms from Airbus (Aircraft are almost always sold at discounts from their list prices). Rahul Bhatia on the other hand, meticulously executed the vision and brought the airline to its leading position it is in today.

ET Now first reported the simmering issues earlier this week, which was followed by the rest of the media picking it up. The bone of contention, it seems, is the overarching influence one promoter has had over the strategy and execution as compared to the other. As per various reports, the Articles of Association hand over more rights to the Rahul Bhatia faction as compared to Rakesh Gangwal. All the key management positions and most of the directors can be appointed by InterGlobe Enterprises, which is Rahul Bhatia’s holding company.

Friction between management and promoters is good, in a way. Unchecked power in the hands on one promoter could be either a situation of responsibility or sometimes a license to bring the company down. Just like Housing.com or Jet Airways. But in this case, it seems to be making the airline miss out on opportunities because it does not have its house in order to benefit from the withdrawal of Jet Airways from the market.

IndiGo has, for many years, flown a single-cabin aircraft, the A320. Over the last few years, however, it has ordered other aircraft for various markets, such as the ATRs for smaller markets and the A321neos for dense markets, and longer range. Over the past two years, however, they have been going back and forth on how they want to take on some of the marquee travel routes, such as a connection to London.

IndiGo crisis Rift between promoters Rakesh Gangwal and Rahul Bhatia makes airline miss out on opportunities

IndiGo Airlines aircraft. Reuters

While Bhatia is of the view to take on double aisle aircraft, which can fly non-stop for about 10 hours and provide a more comfortable passenger experience, Gangwal wants to stick to the playbook where he would not like to bring on widebodies and get the job done one-stop with the existing fleet. He would rather have code-shares than widebody aircraft, given the track record of any no-frills carrier with widebodies has been at best, patchy. Just earlier this year, WOW Air came to a grinding halt and Norwegian Air is in financial trouble too, proving his point.

Gangwal, who is the one with larger experience in aviation, was indeed the one tasked with the job of charting out the five-year strategic plan for the airline, and so far, with the ordering of the A321neos and the launch of flights to Istanbul and the codeshare with Turkish Airlines indicates his playbook is being followed.

The IndiGo CEO, Ronojoy Datta, in the meanwhile has neither addressed not declined that problems exist, which might be a tacit admission in disguise. In a statement to employees, Datta said, "I want to assure you that the growth strategy of the airline remains unchanged and firmly in place, and the management is fully charged by the Board to implement it.” Nowhere did he touch on a yes or a no answer. Also, IndiGo has been slow in adding domestic capacity, given they feel it is already saturated in terms of existing markets.

But for IndiGo, this is a critical time for everyone to see in the same direction, as the international rights of Jet Airways will, sooner than later, come into the market. Given the loss of flights to Paris, Amsterdam, London, Singapore, Dubai, Abu Dhabi and Hong Kong amongst many other markets, it means there is a lot that can be taken away right now, and it will be the fastest finger first which will rake it in.

International opportunities are limited by bilateral, and airlines sometimes wait for a long while in preparation, hoping for their competitors to make a mistake and then they can swoop in. In this case, the mistakes have been made. So does the airline and its promoters want to miss out on the opportunities ahead or want to conquer the skies of Europe is what we need to wait and watch.

If the promoters are able to level it out amongst themselves, there is nothing better than that. If they invoke going to the NCLT, as many media reports have discussed, it may be a chicken and egg situation, where who wins and who loses may determine how the strategy of the firm will proceed further. The results announcements in the next ten days will be the first signs of how the promoters will address the issue if they don’t do so before it already!

(Ajay Awtaney is a business travel & aviation journalist based in Mumbai, and the founder of the Indian frequent-traveller website Live From A Lounge)

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