Why co-founder Rahul Bhatia took the cockpit at IndiGo
2 min read 11 Feb 2022, 11:02 AM ISTAs competition hots up, Bhatia as IndiGo’s public face signals to the industry that the airline is well-prepared for the changed market conditions
PremiumFebruary brought both good and surprising news from IndiGo. The largest airline in the country with a domestic market share of 53.5%, IndiGo, swung back to a profit in the December quarter, breaking a seven-quarter streak of losses. Then came the surprise, one of the two co-founders of the airline, Rahul Bhatia, took over as its managing director with immediate effect for a five-year term. Surprising because Bhatia’s stint as CEO in 2018 was a stop-gap one, and he’s not involved in the day-to-day running of the other companies that IndiGo’s parent InterGlobe Enterprises runs. The holding company has a presence in hospitality, travel commerce, airline management, aircraft maintenance and engineering, and advanced pilot training.
This isn’t the first time Bhatia held a managerial position in the airline that he founded with Rakesh Gangwal. He stepped in as IndiGo’s chief executive for a few months after president Aditya Ghosh quit in July 2018. Subsequently, Gregory Taylor was named as the new interim CEO.
Bhatia’s move is being seen in aviation circles as a victory for him in the very public and messy feud he and Gangwal have had over corporate governance in IndiGo. A compromise was hammered out last year between the two, which the shareholders approved in December. However, Gangwal continues to be actively involved in the airline. The duo together owns a majority of the airline’s shares.
But there are business reasons for Bhatia’s taking over as IndiGo’s managing director. First, the airline is gearing up for competition. Air India moving to the Tata group may not be a challenger immediately, as it is a full-service airline, while IndiGo is a low-cost one. Bhatia is rolling up his sleeves to prepare IndiGo for the new entrant, the ultra-low-cost airline Akasa, that is set to enter the market this year. That apart, the buzz about Jet Airways taking to the skies soon also refuses to fade away, although the likelihood of it happening any time soon seems negligible, given the scale of problems the airline that was grounded in April 2019 following a cash crunch.
Akasa is backed by the billionaire Rakesh Jhunjhunwala, who has deep pockets. IndiGo would naturally like to be in a position to respond quickly to its ticket pricing strategies. Air travel is price sensitive. IndiGo would like to avoid losing flyers to Akasa, should it start a price war. Price wars affected Kingfisher and Jet Airways adversely in the past, running both airlines to the ground because of huge losses.
IndiGo’s advantage is its healthy cash reserves, so it will be in a position to respond quickly on ticket pricing if the need arises. As of 31 December, IndiGo had ₹7841.1 crore of free cash and ₹9,504.8 crore of restricted cash.
Second, IndiGo’s business model has grown increasingly complex with its operations spanning diverse sectors: domestic, international, regional ATR, international long haul, code-shares and alliances. Bhatia, an industry veteran and co-promoter, is well-suited to manage these complexities. As competition hots up, Bhatia as IndiGo’s public face signals to the industry that the airline is well-prepared for the changed market conditions.
