Tuesday, May 21, 2019

Is IndiGo headed the Jet Airways way? Another crisis hits aviation sector

After Jet Airways suspended its operations, the IndiGo crisis has hit the headlines, highlighting Indian aviation sector’s beleaguered state.

India’s largest airline by market share, IndiGo is facing internal managerial struggle as it continues to report losses. The airline’s two main promoters, Rahul Bhatia and Rakesh Gangwal, have hired lawyers to resolve a dispute between them on whether the airline should adopt double-aisled aircraft or code shares.

IndiGo also cancelled flights in March after it fell short of pilots to operate newly acquired carriers.

IndiGo is currently India’s largest airline, as it owns 46.9% of the market. But it has not been able to capitalise on Jet’s temporary shutdown because of its own issues.
Rakesh Gangwal and Rahul Bhatia co-founded IndiGo in 2006. Gangwal holds 37% and Bhatia has 38% of InterGlobe Aviation, the airline services company that runs IndiGo. The remaining equity is with the public, financial institutions, and other investors.
Gangwal has extensive experience in the aviation industry. He worked with United Airlines in 1984 and Air France before being appointed CEO and Chairman of US Airways Group. Forbes magazine also named him the 775th richest billionaire in 2019 and 70th richest in India in 2015.
In 2018, Bhatia took over as the airline’s interim CEO while new candidates were being vetted. This January, Ronojoy Dutta was named IndiGo’s new CEO. Like Gangwal, Bhatia is also featured on Forbes’ list of billionaires—he ranked 504th in the world and 41st in India in 2018.
What are Gangwal and Bhatia bickering over?
According to Firstpost, Gangwal has reportedly taken issue with Bhatia’s influence over the airline’s operations, because the latter has more control over the executives and management.
However, Dutta made a statement clarifying that Gangwal did not want to take control of the airline.
“To put to rest the messaging on the fact that the RG group is attempting to renegotiate the shareholders’ agreement (SHA), I am placing on record that the RG group stands by the current SHA, which in any case expires this October,” said Gangwal, according to Dutta’s statement.
21/05/19 Rhea Arora/Qrius
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