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Updated on: Thursday, October 21, 2021, 04:22 PM IST

Teji Mandi Explains: Will IndiGo clip its own wings?

Teji Mandi Explains: Will IndiGo clip its own wings?  | Photo: Pixabay

Teji Mandi Explains: Will IndiGo clip its own wings? | Photo: Pixabay

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They say winds change in the skies quickly; a similar scenario seems to be unfolding in the Indian aviation space. Post Jet Airways downfall, only two renowned low-cost air carriers in India operated- IndiGo and SpiceJet. This made both happy about their continued dominance in the sector, but the happy ending lasted only for two years. Tata’s ‘Maharajah’ re-entry in the airline biz has invited a challenging fight for IndiGo. With IndiGo’s strenuous promoter relationship in the board rooms, will it continue to fly high or get its wings clipped?

Promoters Partition

The entire stock market is aware of the promoter war at IndiGo. A bitter feud between Rahul Bhatia and Rakesh Gangwal, founders of InterGlobe Aviation, is saddening. One time Bhatia took a dig at Gangwal by asking the company’s restaurant to deliver paan alongside food in the boardroom. Gangwal later returned it to Bhatia by publicly saying that he is running the airline like a paan ki dukaan.

Well, all of this began in 2018 when both promoters landed in a disagreement over hiring a CEO. Since then, there have only been ego clashes and legal battles between the both. In fact, it’s getting dirtier day-by-day. Currently, they are fighting a case in the Delhi High Court over an arbitration award.

Tata v/s IndiGo v/s Akasa

Excluding Air India, Tatas have majority positions in Vistara (about 50% to Singapore Airlines), AirAsia (81%) and Air India Express (100%). Soon after the rebuilding of Air India, it will emerge as the largest airline of India. This reality itself is a bone-chilling threat for IndiGo, given that Tatas have unlimited money to weather the volatility of the aviation space.

Another competition waiting for IndiGo in a few years is ‘Akasa Airline’. Backed by big bull Rakesh Jhunjhunwala and run by former IndiGo CEO Aditya Ghosh, it would take a few years for Akasa to fly high, but once it does, IndiGo and SpiceJet will have to be on a lookout for their survival. While IndiGo holds a formidable lead in the industry now, it looks evitable that things will change by next year.

Is IndiGo’s Departure On the Cards?

The ego clash and stony silence between the promoters remains the biggest problem for IndiGo today, and if it continues then Air India has the capacity to singlehandedly takeover IndiGo’s yields and market share. Furthermore, IndiGo’s high valuation remains another issue. Another shocker is that few media reports have highlighted that Gangwal is looking to sell his stake, and that’s why he is having a court fight with Bhatia. If that’s the case, then a fight like this will affect the airline’s morale deeply. Until and unless Bhatia and Gangwal are back on the same page, IndiGo doesn’t seem to rule the skies, like before.

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Published on: Thursday, October 21, 2021, 04:22 PM IST
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