On February 19, India's largest private airline IndiGo announced the resignation of one of the two founders, Rakesh Gangwal, from the airline's board and his intentions of offloading his stake in the carrier over the next five years.
In March, the airline appointed Gaurav Negi as its new chief financial officer, the fourth to hold the post in a short span of three years, an unusual amount of churn in a usually steady ship. This was followed by the resignation of William Boulter, the chief commercial officer, who had been there since 2018. Prior to this, in 2021, the airline had also bid farewell to two other senior employees, its legal counsel Priya Mehra and Ankur Goel who was head of the company's investor relations.
MayDay In April And May
April proved to be a particularly trying month for the carrier. As the commanders and crew of the airline became fully aware of the details of the employee stock options (ESOPs) handed to senior management during a year when they coped with deep pay cuts and the prolonged pain of the pandemic, an uproar broke out. For some of these pilots - especially those who joined IndiGo from Jet Airways - they had been through a far longer period of pain starting a couple of years before their erstwhile carrier downed its shutters.
IndiGo reacted to the pilot's protests by offering a salary increment of 8%, an action that added fuel to fire. The management looked at the hike as an increment, viewing the present salaries and contracts as the "new normal" with the post-Covid world a changed reality from the pre-Covid one. The pilots and crew, however, dismissed the 8% restoration of their old pay packages.
As pilots voiced their ire over various internal and external platforms, the management cracked down. Five pilots were suspended and they have since resigned, awaiting their no objection certificates before applying elsewhere. DGCA began a probe on seven pilots found using abusive language against the airline and its handling of the situation over an emergency frequency, further angering the pilots who see this as intimidation. Many pilots contacted Airline Pilots Association of India (ALPA) to seek their support and the association in turn has written to the civil aviation minister Jyotiraditya Scindia highlighting the high handed manner the HR department of the airline has acted in and sought his intervention.
Sources say that IndiGo top management has been in a huddle discussing the snowballing developments. The airline is keen to kill any possible attempts to form a union by pilots, as that has many implications for the future. There have been enough global and domestic instances of the kind of problems union activity can result in for airline managements to be very wary. A bit like the capital, the air at the carrier turned very toxic post this fiasco. Through April, a strong rumour of the CEO Rono Dutta's departure was doing the rounds, much to the delight of the pilot and crew who held him and their immediate boss Ashim Mitra primarily responsible for their predicament. The airline spokesperson, however, denied the rumour when asked by this writer although other senior management sources said that this was the "corridor talk" although nobody had a firm confirmation. As events played out in May, it proved correct.
Even as the dust of the April debacle was yet to settle, the airline found itself embroiled in a public relations crisis over its staff's mis-handling of a situation involving a special child at Ranchi airport, which brought it plenty of negative publicity and snowballed resulting in a sharp rap on the knuckles from DGCA and the aviation minister. On May 18, the airline confirmed the rumour that had been festering for a while of the departure of the CEO by the end of September and announced a new man for the job Pieter Elbers, former president and CEO of KLM.
Mounting Losses, Uncertainties Abound, Increased Competition And Risks
All the changes in the airline come at a time when IndiGo is set to face real competition for the very first time. Although Tatas may not immediately be a "formidable rival", almost everyone in the industry expects them to be a "credible" one. Many other macro factors have ensured that the environment all airlines are operating in is far far more challenging: a depreciating rupee, rising fuel prices, new entrants and uncertainties due to the pandemic and its never-ending threat.
Rivals argue that while they all have problems in today's environment, the bigger the fleet, the more the problems since the competitive and economic landscape remains identical for everyone. "IndiGo may be on a stronger wicket overall but when the tide turns, the losses are bigger than others too as are gains", points out a SpiceJet source. He adds that the larger the airline, the higher is the need for rationalisation in the present economic environment. The two-year combined losses for the airline since March 2020 amount to ₹5,800 crore for the year ended March 2021 and ₹6,200 crore for the year ended March 2022.
The latest quarter has been not much better than the previous ones, barring the third. The airline's latest consolidated loss widened to ₹1,682 crore for the quarter ended March 31, 2022 as higher fuel costs more than offset a rebound in demand for air travel. It reported a consolidated loss of ₹1,147 crore in the year-ago period when a raging pandemic kept people at home. Fuel prices in Q4 of 2021-22 increased by 61% compared to the same period last year. The resurgence in air travel demand helped the company's consolidated revenue from operations jump 29% to ₹8,021 crore in Q4FY22 as against ₹6,223 crore in Q4FY21.
The Makeover : Tightening The Reins, Injecting young blood And New Tensions
Even as all these events took place and changes were announced, IndiGo insiders say that a big change that has been taking place within the airline is the amount of time and involvement of IndiGo's remaining founder Rahul Bhatia, who has now been designated as managing director. Bhatia is playing a far more active role than almost ever before, in the day-to-day running of matters, making the atmosphere more tense than before. Although Elbers has been brought, sources are of the view that the reins of the airline for now will remain firmly in Bhatia's hands. A detailed email sent by Fortune seeking responses on these and other matters including the airline's plans to overcome its losses, the industrial relations trouble and other matters remained unanswered till going to press.
Changes in the airline have taken place at both the board level and the team in charge. One reason for the exits is that for some time now, the airline has been wanting to inject younger blood, introduce fresh thinking and reduce the average age of the top team. Both Dutta and Willy Boulter, who have been in the top team, were already "past their prime" and were considered compromise candidates by many, according to company insiders. With their departures, the airline's COO, Wolfgang Prock Schauer is now the only member of the top management who is over 65. In general, the team that will take on the new Tata airline will be "leaner and meaner", said sources.
Roles with the airline too have been redefined with Sanjay Kumar, the airline's chief of strategy and revenue taking charge of international operations including network planning, revenue management, sales and distribution. Boulter's responsibilities have been split among the existing top management team, barring a new CCO Mahesh Malik brought in to handle cargo. At the board level, besides the exit of Gangwal, Venkataramani Sumantran is the new chairman, replacing former SEBI chairman M. Damodaran. The new team that faces the increased competition as the Tatas and other players gear up will be practically new, no matter how one looks at it. Those familiar with both Rahul Bhatia and Rakesh Gangwal's style of operating say they expect the "character of the airline to alter fundamentally" to reflect the personality of Bhatia more intensely although the jury is out on whether this will make for a stronger business or not. Whether the new altered entity will enable the market leader to forge ahead undeterred by all kinds of turbulence, it is too early to predict.
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