The bourses did not take the news of a change in the corner office at IndiGo — KLM chief Pieter Elbers replacing Ronojoy Dutta as CEO — positively. Shares nosedived in the morning even as the stock markets opened in the red. The last time there was a change in the corner office, when the announcement of Aditya Ghosh’s resignation came in, the shares ended the day at INR 1407.
The news comes in the same week as the appointment of Campbell Wilson as the CEO and MD of Air India. In these two choices, the oldest and the largest airlines have looked for two things in common: age and longevity.
While Dutta’s tenure has been all about stabilising the ship amid turbulent times, which saw the co-founder tussle and ceasefire, that of Elbers is likely to be focused on growth and taking IndiGo to the next level. The fleet renewal is already well planned out, but with the A321XLRs expected in 2024, there is largely a thought that the pandemic will be fully behind by then and breakneck expansion can be supported again — this time on foreign shores. The airline already operates 75 percent of operational airports in the country with little scope to expand to new places and the focus being more on adjusting frequency and capacity and connecting new points within the network.
KLM has expanded rapidly, including a return to India under Elbers. There are three critical things that Elbers will have to look for with IndiGo.
International expansion and amenities
IndiGo’s fleet strength is more than that of KLM. But as it grows from here, it will be more on the international side. It has its advantages — like ability to earn in foreign currency (which partially offsets dollar-denominated costs), higher yield to offset the intense competition in the domestic market and grabbing a share of the market, which is currently on a platter for foreign carriers.
This will involve launching flights in the 5-7 hour window, longer than any domestic flight right now. Can it attract sufficient traffic to its current product? If not, what is the right product mix? The answers are needed soon to ensure that the right LOPA (Layout Of Passenger Amenities) is planned in time for production and subsequent fitment.
Airport challenges
Destinations to expand is one but the real challenge lies in connectivity at home. Delhi, its largest base, is split into three terminals right now from where the airline operates. The three terminals are not integrated, making it a complex puzzle to solve, not only for Domestic to International and vice versa connections but also for Domestic to Domestic connections. Mumbai is no different and how Bengaluru will split its operations when the second terminal is up and running is anybody’s guess. Coming from Amsterdam, which has a single terminal with multiple piers, this is an unfathomable challenge.
While the battle traditionally has been for slots and check-in counters to improve experience and add flights, all of this takes a backseat after there is a seizable presence and one is moving from a point-to-point carrier to a network carrier.
Human Resources
While Go FIRST has been referred to as an airline with a rotating top, IndiGo has lately started facing that issue. The airline now has its fourth CFO in six years, the pilot community isn’t very happy and a few other airlines are starting or getting capitalised, which means that talent will be poached. To retain people could mean promotions and higher salaries, making the organisation top heavy in addition to increasing expenditure or having overlapping roles without a clear path of responsibility or succession. Jet Airways has been through this in the past and the outcome wasn’t pleasant. How IndiGo handles it only time will tell. Will this experience be utilised to groom candidates for multiple CXO roles in future from the current strength or will the company always rely on expats?
Tail Note
IndiGo has become an airline of choice for codeshares and interlines and Elbers’ experience in alliances will be of great help to the airline. The trump card could be a potential sale or strategic investment from another airline for equity. While Qatar Airways has been publicly talking about it in the past, the decision of co-founder Rakesh Gangwal to sell his stake over the next couple of years opens up this and many other possibilities.
Like Wilson, who takes over as Air India CEO and MD in June, Elbers comes with vast experience in one company and one culture with assignments across the world, except India. That makes adjusting to the Indian environment, regulations and culture a challenge — especially when it is one of the most brutal markets in the world.
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