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Here’s why Rahul Bhatia has taken over IndiGo’s cockpit

Though Bhatia’s appointment as Managing Director has surprised industry watchers, many believe the airline is gearing up to take on upcoming challenges. Competition is set to heat up with Air India going to the Tatas and ultra-low cost airline Akasa set to enter the market this year. 

February 14, 2022 / 02:21 PM IST
IndiGo Airlines. | Representative image

IndiGo Airlines. | Representative image

On February 4, IndiGo, India’s largest domestic airline, with a market share of 53.5 per cent, announced a profit of Rs 129.80 crore for the quarter ending December 31, 2021, after seven successive quarters of losses. A short time later came the announcement that Rahul Bhatia,  one of the two co-promoters of the airline, was taking over as Managing Director with immediate effect, for five years.

The announcement comes just over a month and a half after shareholders of Indigo’s parent InterGlobe Aviation Ltd. approved a resolution to remove a contentious clause restricting transfer of shares by the promoters.

While unusual for a promoter, this is not the first time Bhatia has stepped in to take on a managerial position in the airline. He had also taken on the mantle of Chief Executive Officer when IndiGo’s second CEO Aditya Ghosh quit in July 2018. Bhatia’s tenure had lasted a few months then, with Gregory Taylor subsequently appointed as interim CEO.

This time, however, the appointment is for five years. So, it is clear he intends to be involved fully in handling IndiGo’s day-to-day operations.

“Now there is no ambiguity that Bhatia will be steering the airline because as MD he will have more powers than the CEO. However, the CEO is not going anywhere,” a person involved with the airline since its inception said.

The CEO himself appears to have welcomed the move by making the right noises. “We are now entering a new phase in our journey, with more international and long-haul flights. In this evolving and exciting environment, strengthening the thought leadership in the company is a timely and welcome move,” Ronojoy Dutta said in a bland statement. Dutta is also a Wholetime Director at IndiGo.

Myriad challenges ahead

Though many are surprised by Bhatia’s appointment, some industry watchers believe that his taking over as MD is perhaps part of the airline’s strategy to take on upcoming challenges. The aviation space in India is in for some major changes with Air India going to the Tatas and ultra-low cost airline Akasa set to enter the market this year. There is also talk of a revived and revamped Jet Airways taking to the skies soon. Rival SpiceJet meanwhile is fighting legal battles on multiple fronts and it is unclear if they will eventually lead to a void.

Akasa, the new kid on the block, promoted by billionaire investor Rakesh Jhunjhunwala and others, may start a price war to make headway in the industry once it launches operations.

“Bhatia has seen how ticket pricing affected Jet Airways and Kingfisher. IndiGo is sitting on huge amounts of cash and needs to be able to react quickly to competition from new airlines,” says a former employee. As of December 31, 2021, IndiGo had Rs 7,841.1 crore of free cash and Rs 9,504.8 crore of restricted cash.

An industry watcher noted that with the IndiGo model getting increasingly complex — domestic, international, regional ATR, international long-haul, code-shares, alliances — and with competition hotting up, Bhatia may have felt the need to be actively involved in running the airline.

Looking beyond Gangwal?

While some see Bhatia taking over as MD as a victory in his longdrawn and fractious feud with co-promoter Rakesh Gangwal, former top IndiGo executives and those involved with the airline since its inception say that is a simplistic view. They point out that Gangwal continues to be actively involved in the airline.

Nevertheless, says an industry veteran, “Now that Gangwal has the sanction to sell off his stake without any hindrance, Bhatia would like to stay in active management and have his ear close to the ground and at the same time keep an overview of the situation actively.”

According to Avanti T Chandele, Partner, Mind Legal, Bhatia is sure to exercise additional powers as MD but these will be determined by resolutions passed by the company. “Section 2(54) of the Companies Act, 2013 states that the managing director is entrusted with substantial powers of management over the affairs of the company.” Chandele points out that this has also been confirmed by the statement of M Damodaran, Non-Executive Independent Director and Chairman of the Board: “Bhatia would oversee all aspects of the airline, and actively lead the management team.”

Chandele says that as MD, Bhatia will lead the company’s management as opposed to Gangwal, who remains a director on the Board. “Gangwal will continue to have a say in management decisions as all such decisions are taken by the Board of the company through a majority vote,” he points out.
Ashwini Phadnis is a senior journalist based in New Delhi.
first published: Feb 14, 2022 02:21 pm