IndiGo responds to reports of alleged rift between promoters

IndiGo plane.

Amid media reports of disagreements between its promoters, budget airlines IndiGo on Thursday sent an email to its employees assuring that the company's growth strategy would remain unchanged. It added that the airline's management has full backing of the company's board of directors to implement it.

Why the email?

Ronojoy Dutta, CEO, InterGlobe Aviation, sent an email to his employees on Thursday as there were various media reports morning regarding alleged disagreements between the airline's two promoters—Rahul Bhatia and Rakesh Gangwal. It is to be noted that the email did not deny the media reports, but merely termed these as "speculations."

"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," Dutta said in the email.

"I am sure you are all aware of the press reports regarding alleged disagreements between our two promoters Mr Rahul Bhatia and Mr Rakesh Gangwal," he added.

Trouble brewing at IndiGo?

According to media reports, trouble is brewing at one of the most successful budget airlines in India as IndiGo founders Rahul Bhatia and Rakesh Gangwal are at loggerheads. Differences have cropped up between Bhatia and Gangwal over strategies and ambitions for the airline, reported The Economic Times on Thursday.

The report said that while Gangwal wanted "growth at breakneck speed", Bhatia wanted to opt for a more cautious approach. "In February last year, Gangwal declared that FY19 would see Indi-Go increasing its capacity by 52 per cent, more than it had ever done, and taking its fleet size to 250 from 155. This was opposed by a majority of its management, including then president Aditya Ghosh, saying this would create problems of overcapacity and impact yields. Gangwal is said to have retorted that with India’s potential, nothing less than 500 aircraft was too many," the report said. IndiGo currently has a fleet of 225 planes.

Ghosh subsequently resigned from IndiGo in April 2018. "A chunk of expatriate executives at IndiGo were handpicked by Gangwal from his former employer — United Airlines. Announcing Ghosh’s resignation last year, IndiGo had earmarked Gregory Taylor to eventually become CEO, while Rahul Bhatia had taken charge as interim chief of the airline. However, in January this year, Rono Dutta, a former United president took over the executive reins of the budget carrier," reported The Indian Express.

Another reason for the current tension has been attributed to Rahul Bhatia's feeling that Rakesh Gangwal was trying to gain control of IndiGo by getting his own team in the events following Ghosh's resignation last year.

It is to be noted that Gangwal, an aviation veteran, with experience of working across firms, including United Airlines and US Airways, is widely credited with catapulting a fairly young IndiGo to one of the fastest growing carriers in the world.

The Economic Times report also added that the founders believe IndiGo is at an inflection point with both Jet Airways and Air India floundering. The two believe IndiGo can occupy the vacant slots left behind by the two legacy carriers but differ on how to grab this opportunity. While Bhatia reportedly is keen on wide-bodied aircraft to pursue its international dream, Gangwal believes in single aircraft model and code sharing agreements rather than servicing long-haul destinations itself.

Rahul Bhatia currently holds 38 per cent stake in Interglobe Aviation, the parent company of IndiGo, while Gangwal holds 37 per cent share in the company. The airline was founded by Bhatia and Gangwal in 2006.

Meanwhile, shares of InterGlobe Aviation Limited dropped nearly 8 per cent to Rs 1,487.10 on the BSE on Thursday amid reports of the alleged rift.

InterGlobe Aviation owns and manages IndiGo airline, which has around 44 per cent share in domestic passenger market.

(With PTI inputs)

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