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Rahul Bhatia | Non-core areas poised for diversification

Rahul Bhatia | Non-core areas poised for diversification
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First Published: Tue, Apr 19 2011. 12 33 AM IST

Expansion plans: Rahul Bhatia. Ramesh Pathania/Mint
Expansion plans: Rahul Bhatia. Ramesh Pathania/Mint
Updated: Tue, Apr 19 2011. 12 33 AM IST
New Delhi: Indian low-cost carrier IndiGo (part of InterGlobe Enterprises Ltd) hit the headlines when it ordered 180 Airbus A320 aircraft in January. By then, the company had already established itself in the Indian airline market with its distinctive and on-time low-cost service. Its managing director Rahul Bhatia, however continues to remain low-profile. In an all-too-rare media interaction on the sidelines of InterGlobe’s brand relaunch, Bhatia, who also runs restaurants, talked about the group’s future, IndiGo’s expansion, business failures and how he overcame stiff resistance from his father, a veteran in the travel business, to set up the airline. Edited excerpts:
What would you define as the cornerstones of your expansion after you returned to join your family business of travel in InterGlobe from studies at University of Waterloo?
Expansion plans: Rahul Bhatia. Ramesh Pathania/Mint
If you go back to when I came home, which was in mid-1984, at that time I had an arrangement with a company, which is known as Nortel (Networks Inc.) to actually set up a manufacturing plant here to manufacture digital telephone switches. Then the late Mrs (Indira) Gandhi took a view that India was going to develop indigenous technology and use CDoT (Centre for Development of Telematics) as vehicle to do that. So that whole project did not see the light of the day. And I was disheartened and sort of languished for two-three years. At one time, I thought I should go back and maybe do a PhD and teach. Part of the attraction was that when you teach you are kind of your own man, find your own life, you get time off.... Then my father became unwell, I think in 1988, and that was a sort of turning point and that’s where the journey started.
What will InterGlobe look like, 10 years from now?
Going forward, there are three businesses which we think are going to grow significantly. InterGlobe Hotels, a relationship with Accor (Hotels); we believe this will assume a leadership role in lodging business in the country.
IndiGo—everybody knows where we are today and where we are going to be in few years and we recently announced a new order which I think has visibility for the airline till 2020.
And then we have InterGlobe Technologies which is really an IT service and BPO (business process outsourcing) operation and we think is a business which will continue to offer a fairly attractive cost arbitrage for the same period of time. We certainly want to grow that business. Of course there would be organic growth and one or two (cases of) inorganic growth to take us to a different scale.
And there are some other things on the drawing board; for reasons of confidentiality I will not say much. These will unfold as they do.
What domain will these be in?
They probably will end up being in a domain that is not core to us today.
From running a 20-aircraft airline to now 39 and then 50 is an entirely different ball game in terms of complexity and scale. How are you planning to manage the transition?
If IndiGo were to grow from the current fleet (of) 39 (aircraft) to a very different number in the future, the airline’s mission will be to continue to deliver just three things—fly on time, keep planes neat and clean and deliver a certain level of service that people have come to recognize us for. Without adding any complexities to those deliverables, just hanging on to those deliverables, but delivering them at a different scale—that in itself is an exponential challenge. But we cannot absolutely afford to miss a heartbeat on those core deliverables.
With all things being same, and the three things you said, what is the competitive advantage IndiGo will have?
It will always be our people and the three things.
How do you see the airline industry shaping up over the next few years in India?
I think that at a macro level India is going to continue to grow and there is enough room for many of us to survive, and survive well. I think we are just at the front end of huge growth that you will see in aviation in India over the next 20 years.
The low-cost airlines and full service airlines are both here to stay. How do you see their share of the pie evolving?
I think it’s very important for us to just keep our head down and just keep flying away and implementing what we have set out to achieve. Who is to say how the industry will look like in five years? I mean, could any one of us have thought of industry being what it is today 10 years ago? Absolutely not. We all recognize there is enormous growth out there. And some of us will embrace that growth profitably, others will not. Time will tell.
Do you see IndiGo growing to be like Southwest Airlines, with a focus on one particular region?
The heart of IndiGo will always remain India. There is so much growth here. We will always be a company that is enormously focused on India and possibly the neighbouring regions.
What about going Europe or US or touching points in Europe where your A320s can fly to?
I don’t think so.
Jet Airways’ Naresh Goyal and your father (and you too) were good friends and both started from travel agencies. You moved on from there to a place where you are now rivals. How did the relationship change?
I don’t think we are rivals. I mean Naresh runs an extraordinary airline. It’s a full service airline, it’s meant (for) a certain segment of the market; he flies long haul, he has a different mode. We are the guys who scrape the (bottom of the) barrel. We are trying to move people from rail and road transport on to planes. So it’s a very different model. So there is no rivalry at all.
Would you say it was a big help to have known how to the run the chain from the ground up unlike many who have no understanding of the business?
Quite clearly, when you look at Rakesh (Gangwal) as the co-founder, I think his understanding of airlines and operating airlines and working with manufactures is a enormous value ad we have. Now, I got to know Rakesh because we were in the airline services business. InterGlobe had a relationship with US Airways Inc. (of which Gangwal was CEO) and we managed his GSA (general sales agent) for many years. So there are some benefits.
IndiGo has hired bankers for a possible initial public offering; will it be the first listed firm in the privately run group?
I wish I could give you a clear answer. I just don’t know. There are so many moving thoughts. We look at this thing on a quarterly basis and see what we want to do, what we don’t want to do. It’s like anything else. You look at all sorts of things. Recently we took a cluster of four hotels that were co-owned by us and Accor and we brought in a third party from the US as a equity partner.
You are not looking at any funding for the group this fiscal?
I don’t think so.
Do you think the government should continue to bail out airlines and will you also seek a bailout yourself?
That’s the government’s prerogative. I don’t think we have reached out to do anything like this. We don’t foresee that sort of a situation.
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First Published: Tue, Apr 19 2011. 12 33 AM IST
More Topics: Rahul Bhatia | InterGlobe | IndiGo | Airbus | Aviation |