Differences over strategy among co-founders could slow the growth of IndiGo that became India's largest carrier in a little over a decade, media reports have said. The airline owned by InterGlobe Aviation has set a searing pace of growth by a price-conscious approach and maintaining a homogenous fleet and a lean organisation.
Shares of InterGlobe Aviation, the owner of IndiGo, lost 6.5 per cent in the morning hours in National Stock Exchange (NSE) on Thursday to trade around Rs 1,480 after opening at Rs 1,580. The scrip had closed at Rs 1,610 on Wednesday.
Serious differences have emerged between the two founders of IndiGo that could affect the airline's functioning if left unresolved, a report on the Economic Times website said citing unidentified people close to the developments. The airline, however, has sought to dismiss the reports as media speculation. Among the issues that have caused a souring of relations between Rahul Bhatia and Rakesh Gangwal are some clauses in the shareholders' agreement and strategies and ambitions for the airline.
The co-founders are, however, trying to ensure that the differences do not interfere with the functioning of the airline, the report says. "The dispute may have escalated in the last few weeks, but things are at a very nascent stage with regard to any formal legal dispute and both parties are weighing other options as well," a source told the newspaper.
Legal firms Khaitan & Co and J Sagar Associates are helping the founders to resolve the issues. "The promoters, Gangwal and Bhatia, are old clients of Khaitan & Co and J Sagar Associates, respectively, and hence the leadership teams from both the firms are actively overseeing the entire situation," the source said. The person in the know said neither promoter has raised the possibility of buying the other out or exiting the airline.
Gangwal, a United Airlines and US Airways veteran, has been the driving force behind IndiGo's emergence as one of the world's fastest-growing carriers, according to industry observers. Gangwal is credited with IndiGo's record-breaking plane orders for capacity expansion, its aggressive market strategies, and the ambitious global foray resulting in vast changes in senior management, the report says.
Gangwal, a US citizen, worked from the shadows while Bhatia ran the show in India, negotiating regulatory hurdles. Gangwal was also reluctant to take up a board seat in IndiGo, saying instead that he wanted to push its growth and expansion. Differences apparently cropped up on several occasions in the last two years, with Gangwal supporting fast growth to harness the potential of India's aviation market and some of the airline's management and on occasion, Bhatia, opting for a more cautious approach.
The airline has a fleet of 225 aircraft flying to 66 destinations with orders for another 400. The budget airline cut into the market share of full-service carriers like Air India and Jet Airways during the oil price surge. The carrier's operational efficiency has helped it to grow during a decade of great churn in India's aviation market by winning over much of the market share of defunct Kingfisher and now-grounded Jet. IndiGo's market strategy has been evident in maintaining a homogenous fleet of narrow-bodied aircraft of Airbus A320 family. The airline has been aggressively taking over the routes vacated by Jet Airways.
While Gangwal's opposition to acquiring wide-bodied aircraft has curtailed the airline's capacity to operate long-haul international flights, Bhatia has been open to buying such aircraft. Gangwal is said to be pushing for code-share ties for international operations.