Monday, April 30, 2018

The brutal final months of Aditya Ghosh’s tenure at IndiGo

Last week, Aditya Ghosh decided to quit Indigo, India’s largest airline, after heading it for a decade.

InterGlobe Aviation, which owns and operates IndiGo Airlines, informed the stock exchanges on April 27 that Ghosh, the company’s president and whole-time director, was stepping down. Rahul Bhatia, its co-founder, has taken over as interim CEO.

Ghosh’s unusual journey with IndiGo began as its lawyer in 2004. A law graduate from Delhi University, he worked for J Sagar Associates where InterGlobe Enterprise was his client. Impressed by his work, Bhatia inducted him in 2007 and promoted him as CEO the very next year following the exit of the then chief Bruce Ashby.

Under his leadership, IndiGo became the most successful Indian airline, commanding a market share of 39.5%, as of March 2018. In the October-December quarter, it reported a net profit of Rs762 crore ($114.8 million), up by 56% from the same period last year.

IndiGo has consistently performed well over the years. It was the only Indian airline to report a profit even in 2013 when high global fuel prices and a weakening rupee had wreaked havoc on the industry.

The airline was awarded for its best on-time performance and for being the best place to work for 10 years in a row. Besides, it also won the Skytrax world airline award eight consecutive times in the low-cost airline in central Asia and India category.

Buoyed by the success, it is looking at expanding its wings to fly long-haul international flights. In January, it reportedly sought the aviation ministry’s nod to fly to Frankfurt, Paris, Gatwick, Manchester, and Birmingham beginning October 2018 and to Brussels, Rome, Milan, and Zurich from 2019.

Yet, in the last six-months, the company has run into rough weather, lurching from one problem to another. Here is a look at the tumultuous phase just before Ghosh’s exit.

Safety concerns

In February and March, the aviation regulator directed IndiGo to ground eight of its flights due to safety concerns.

IndiGo’s plan to sustain and improve its profitability was pinned on its new fleet of A320 Neo planes from Airbus. IndiGo had ordered 530 of those aircraft from Airbus since 2011 as it consumes between 15% and 20% less fuel than its predecessor.

However, the plans came undone, even if temporarily, after some of the aircraft which ran on the Pratt & Whitney engines were grounded due to cooling and durability issues since 2016.

These aircraft can accommodate about 15,000 passengers and have resulted in huge losses for the IndiGo. Mark Martin, CEO of aviation consultancy firm Martin Consulting, had told Quartz earlier that the airline may be losing up to Rs7.2 lakh in revenue per aircraft per day. With eight of its aircraft down, IndiGo had to cancel several flights over many days, resulting in bad reviews.

Brand image

Over the years, IndiGo had emerged as the top pick for Indian flyers but its image took a beating in recent months. On Nov. 07, 2017 a video of IndiGo ground staff manhandling a passenger on the tarmac went viral. The incident took an ugly turn when the company decided to sack the whistle-blower on the pretext that he had instigated the assault. In January 2018, a parliamentary panel report pulled up the airline after several incidents of discourteous and rude behaviour by its staff were reported, according to a Hindu Businessline report.

“…a particular airline has grown exponentially, (it) should deploy a proportionate amount to the training of (its) staff instead of misbehaving and manhandling the passengers or blaming the youngsters from tier-II and III cities and government schools,” the report said.

Earlier, this month, another passenger was asked to get off a flight because he complained of mosquitoes.

Questionable on-time strategy

IndiGo is believed to be the fourth most punctual airline, globally. However, the parliamentary panel asked if this impressive record is because it may have been gaming the system, the Hindu Businessline report said. The issue was earlier also raised by the directorate general of civil aviation, India’s aviation regulator.

“It was brought to the notice of the committee that the flying time of IndiGo from Indore to Delhi is two hours whereas in other airlines, it is only one hour and 35 minutes. IndiGo is adopting a longer flying time in various sectors of their flights just to bolster their on-time performance,” report added.

Legal battle

The airline was embroiled in a legal battle with the Delhi International Airport (DIAL) since November. Authorities there had directed airlines operating from Terminal-1 to partially shift their flights to Terminal-2 for sometime to make way for some construction activity. Instead of following the orders, IndiGo decided to take DIAL to court as it was concerned it would spark confusion among its customers.

The carrier lost the case.
30/04/18 Nupur Anand/Quartz India