Rahul Bhatia: charting Indigo's rapid ascent

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Rahul Bhatia is no stranger to the airline business but his June 2005 order for 100 Airbus A320s for an airline no one had heard of certainly raised a lot of eyebrows.  Exactly two years later Bhatia’s low-cost Indian airline, Indigo, is exactly where he said it would be and Bhatia has every intention of taking all 100 A320s he ordered despite fierce competition in India.

“We’re bringing in airplanes bang on target. In fact we’d like to accelerate them and bring them in even faster,” says Bhatia, Indigo’s founder and co-owner.

  Bhatia is recognised by Hawker Beechcraft at the 2007 Paris Air Show 

Indigo launched domestic services last August and now operates 10 of the 100 A320s it ordered at the Paris Air Show two years ago. There has been a lot of speculation in recent months that Indigo may defer some of its deliveries or sell some of its A320 slots because of stiff losses. But Bhatia, while acknowledging the carrier is unprofitable, says it will continue to take a new A320 every five weeks and operate 18 A320s by March 2008.

“We’ve made a conscious decision to bear the short-term pain for long-term gain,” explains Bhatia, adding Indigo’s original business did not envision profitability until the fiscal year ending March 2009. So far “there have been no big surprises” compared with the original business plan and Bhatia still thinks it is realistic that Indigo will be profitable from fiscal 2008/09. “I think consolidation will help matters,” he says.

There are currently four low-cost carriers in India – Indigo, Air Deccan, Go Air and Spicejet – all of which are unprofitable and are suffering from unsustainable low yields. But the recent sale of a large stake in India’s first and largest low-cost carrier, Air Deccan, to full-service domestic carrier Kingfisher Airlines is expected to begin a period of consolidation.

Bhatia expects there will be more consolidation in the dynamic Indian market but insists Indigo has no plans to acquire or be sold to another Indian carrier. “We want to stick with what we’re doing, don’t get confused and keep things as clean as we can” he says.

Bhatia says Indigo also has no plans to launch international services should the current ban prohibiting carriers that are less than five years old from operating international services be lifted. The Indian government is expected to lift the ban at the end of this year and authorise new carriers to launch international services, including Kingfisher and Spicejet.

Bhatia’s other business
Bhatia, through his aviation IT company Indigo Enterprises, co-owns Indigo with former US Airways chief executive Rakesh Gangwal. Another former US Airways executive, Bruce Ashby, is Indigo’s chief executive.

Bhatia spends most of his time overseeing InterGlobe, which his family founded in 1989 and he now leads as managing director. InterGlobe has grown rapidly and now has several units across the airline and travel industry with almost 2,000 employees. It has been Galileo’s Indian agent since 1994 and has contracts with several overseas carriers providing a mix of passenger, cargo and route management services in India. InterGlobe also has an aircraft charter division and a tour company.

So Bhatia was no stranger to the airline business when he decided to launch Indigo in early 2005. In fact, some complained he was too close. InterGlobe was and still is a supplier for several Indian carriers, including some Indigo low-cost competitors which Bhatia helped launch. But Bhatia claims there is no conflict of interest between InterGlobe and Indigo.

“There is a wall between the airline and InterGlobe,” he says. Bhatia jokes that if the Indigo start-up team had looked at the data InterGlobe had compiled for some of its clients it would have decided not to launch an airline.

InterGlobe is profitable and Bhatia says some of InterGlobe’s profits are now used to offset losses at Indigo. While Bhatia has bold plans for Indigo, he also continues to expand InterGlobe’s diverse portfolio of businesses. At the Paris Air Show last week, InterGlobe announced a new partnership with business aircraft manufacturer Hawker Beechcraft in which new subsidiary InterGlobe General Aviation will become the Indian sales agent and service centre for Hawker Beechcraft. Bhatia is pictured above following a signing ceremony at the Hawker Beechcraft chalet.

The deal with Hawker Beechcraft will bring InterGlobe into the maintenance business, but Bhatia says while Indigo will continue to do line maintenance on its own fleet up to b-checks it will continue to outsource heavy maintenance.

He says InterGlobe also has no plans to operate business aircraft or even offer a business class. But it will use its contacts in the Indian travel industry to point premium customers in the direction of some of its clients. “If a customer is looking for a business jet we can help because we have the right contacts,” he says. “Now we’ll support the entire travel business in India.

“The business jet market is growing very rapidly in India and we want to participate in it. But [at Indigo] we want to focus on mass transportation.”

 

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