Bhatia vs Gangwal: Promoter tussle may delay IndiGo's overseas expansion

The differences between the promoters of India’s largest airline company InterGlobe Aviation (IndiGo) could impact the carrier's international expansion plans. 

The company’s promoters Rahul Bhatia and Rakesh Gangwal who together own three-quarters of the airline’s shares are reportedly not on the same page regarding the strategic direction of the airline. The stock has shed about 10 per cent over the last two trading days.

Analysts say while day-to-day operations won’t get impacted, strategic decisions related to the pace of domestic and international expansion, hiring of top management personnel, buying or leasing of planes and type of aircraft acquisition could get delayed. This will impact the medium-term performance of the carrier. InterGlobe is India’s largest domestic player with a market share of under 47 per cent.

Experts indicate that while Rakesh Gangwal who has worked with United Airlines and US Airways wants to expand internationally, Rahul Bhatia wants to consolidate in the domestic market. Says an analyst at a domestic brokerage, “The pace of expansion especially on the international routes has implications on long haul operations, the requirement of wide-bodied aircraft and whether the company will offer additional services as is the case with some international airlines and thus deviate from its no-frills model.” IndiGo flies to 17 destinations and has a market share of 6.5 per cent. However, most of the international routes are short-haul destinations. The company currently has a code share arrangement with Turkish Airlines.

The other impact could be the reshuffling of top management as several senior employees with international experience have been brought in by Rakesh Gangwal. The fallout and exit of former CEO Aditya Ghosh was largely due to the differences between the promoters, say analysts adding that the issues were on the boil for some time now.

However, the differences have so far not impacted the company’s competitive position. The issues at Jet Airways and lack of capacity has helped players such as InterGlobe gain both in load factors as well as pricing. InterGlobe’s market share has improved by 450 basis points since January 2019. 

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