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Last Updated : Jul 31, 2019 01:05 PM IST | Source: Moneycontrol.com

The 'Taylor story': How differences between IndiGo's Rahul Bhatia & Rakesh Gangwal boiled over a CEO appointment

In less than a year, Gregory Taylor had re-joined IndiGo, only to have an unceremonious exit. What happened?

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File photo from 2006: Reuters
File photo from 2006: Reuters
 
 
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Return of Gregory Taylor to IndiGo, and his unceremonious exit -- all within a year -- also spanned the deteriorating relation between the airline's founders: Rahul Bhatia and Rakesh Gangwal.

This was to be second stint at IndiGo for Taylor, a veteran of the US aviation industry. Earlier, he had a near-two year stint starting from 2016, when he headed revenue management for IndiGo.

Now in early 2018, Taylor was returning to play an even bigger role. But then what happened for the tables to turn suddenly, and for Ronojoy Dutta, who was Taylor's senior at United Airlines, to fly into IndiGo and take the CEO seat? Was it because of the tussle for power between Bhatia and Gangwal?

Close

Probably. The insiders, now call it the 'Taylor story.'

The search

Even as Aditya Ghosh, who had led the operations of the country's largest airline for nearly a decade, put in his papers in April 2018, hunt was on for his replacement. For a company that was adding an aircraft a week, and was looking at aggressive splash in the international market, IndiGo was looking for a 'big perspective' CEO.

The new person would have to prepare an organisation that would be operating over 400 aircraft in a few years time. There were few candidates available in India, which despite being the fastest growing aviation market in the world, hadn't yet reached the scale of the US and Chinese aviation industries. IndiGo has nearly doubled its fleet of its closest Indian competitor.

It was then that Bhatia and Gangwal held discussions over the CEO choices, and decided to dial Taylor. But whose idea was it to contact Taylor, Bhatia's or Gangwal's?

Versions vary. Many call Taylor, a Gangwal favourite. The two had worked in United Airlines, and insiders recall Gangwal being effusive in his praise for the American professional.

Despite the two's proximity, some say, it was Bhatia's idea to contact Taylor, who is said to have impressed everyone during his earlier stint in IndiGo. "He was well regarded by the senior leadership," says an executive.

Irrespective of who made the first move, it was Gangwal who convinced Taylor, a little hesitant to again leave his family, to return to the dust and grime of India. It looked like IndiGo had managed to secure a replacement for Ghosh, and the transition was expected to be smooth.

In April 2018, even as IndiGo announced the resignation of Ghosh, the company also added that its Board will also be considering the appointment of Taylor as President and CEO. Bhatia, in fact said:

“We are delighted at Greg’s decision to rejoin the IndiGo team and welcome him back to the company. His enormous and varied experience and understanding of the complexities of the airline industry will be invaluable to our future plans."

Then, what happened within a few months? By December last year, Taylor had quit IndiGo, had packed his bags and was on his way back home in the US. Why?

An engine deal and simmering differences

In the months following Taylor's re-entry into IndiGo, differences between Bhatia and Gangwal simmered and threatened to boil over, especially over an engine deal.

When IndiGo was founded in 2005, it was clear that Gangwal was bringing in his expertise in negotiating with manufacturers. Bhatia on the other hand would bring in investments and run the operations.

The arrangement worked beautifully and the industry hailed the deal terms under which IndiGo received the aircraft from Airbus.

Fast forward to 2018. Gangwal was beginning to question the 2005 shareholders agreement he had signed with Bhatia, whose InterGlobe Enterprises had more powers than the former's RG Group when it came to appointments of directors and senior leadership in IndiGo. Gangwal was also unhappy about the related-party transactions between IndiGo and Bhatia's IGE.

This difference now clouded over an engine deal that IndiGo had to conclude to start mounting engines on the next batch of aircraft. As usual, Gangwal was leading the negotiations, assisted by Riyaz Peer Mohamed, Chief Aircraft Acquisition and Financing Officer for IndiGo.

But somehow the deal was taking time, "to the point the company was at the risk of breach of its contract," says an executive.

It is not clear what caused the delay. Versions, again vary. Insiders say Gangwal wanted assurances from Bhatia on the related-party transactions issue, and also wanted IGE to dilute its rights. The rights were enshrined in the company's Articles of Association. IGE had the right to nominate three  of the non-independent directors to the IndiGo Board and the senior leadership. On the other hand, Gangwal's RG Group could nominate just one.

But the assurances were not coming. And Bhatia, who was the interim CEO, instead brought in Kiran Rao - who was earlier heading Airbus in India - as a consultant to negotiate the engine deal.

Insiders say that Bhatia sent a letter to employees in the first week of October, informing them about Rao's appointment. Less than a week later, say sources, Gangwal sent a notice to the IndiGo board, raising issues regarding related-party transactions between IndiGo and IGE.

"The deal was the turning point in the relationship between Gangwal and Bhatia. The two had now reached a point of no return," says a source.

In June this year, IndiGo announced the $20 billion deal with CFM.

But how did this impact Taylor?

The exit

The differences between the founders had now boiled over. And that meant that there was also a rethink on the CEO candidate.

It was no secret that Taylor was close to Gangwal. And along with the co-founder, Taylor also, say sources, started questioning the related-party transactions between IndiGo and Bhatia's private firm.

The stalemate meant that Taylor's appointment had still not been presented to the Board, which needed to approve it for the new CEO to take charge. Interestingly, Taylor's appointment needed a security clearance from the government. But that was not coming.

"It's weird why his security clearance didn't come, especially when there was no problem when Taylor first worked with IndiGo," says an executive.

And without a security clearance, the IndiGo board couldn't take up his appointment for discussion. Was the clearance withheld intentionally?

Around the same time, there was also a rethink among some of the senior leadership on Taylor's appointment. "Even though he was excellent in revenue management, one part of the management wondered if Taylor had enough breadth to handle the operations of an airline," says a source.

Questions were also raised on Taylor's increased compensation, which "saw a five times increase when compared to his pay during the first stint," says a senior industry executive.

A few in the leadership differed. "Taylor was an excellent professional," they argued.

But the damage was done. The last straw was Dutta's appointment, which was announced by IndiGo on December 5. Dutta ostensibly came in as principal consultant to put together a five-year business plan for IndiGo. But there was no denying which way the wind was blowing.

Though Dutta and Gangwal had been colleagues at United Airlines, the two shared an uneasy relationship. Some even say there was an 'intellectual tension' between the two.

It was now clear that Bhatia had brought in Dutta to replace Taylor. And there was no way that Gangwal could prevent Dutta's appointment, given the power vested in the hands of Bhatia's IGE when it came to appointments.
Taylor quit IndiGo in December, and Dutta made a smooth transition from his advisory role to take the CEO seat, which was made official a month later, in January.


In December last year, Moneycontrol was the first to bring to light the differences between IndiGo's founders over the CEO appointment.


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First Published on Jul 31, 2019 01:05 pm
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