1 .Up, up and away :
A decade ago, they were just another bunch of travel agents in a sea of similar commission brokers. But Rahul Bhatia apparently knew how to make sense of the decades that his family-run business, InterGlobe Enterprises had put in, doing the stuff and turning it into something bigger. Barely
five years after it started off as a humble budget airline that people hardly noticed, Gurgaon-based IndiGo Airlines has emerged as a big challenger in India’s aviation industry, taking on deep-pocketed industry leaders Jet Airways and Kingfisher Airlines.
Its strategy to focus on some routes and maximise the impact of its limited fleet seems to have laid the ground for an ambitious takeoff. Earlier this week, IndiGo moved European stock markets when it announced the biggest commercial aviation deal in history.
Topping up an earlier plan to buy 100 planes with another 180 in the decade from 2015, IndiGo unveiled a shopping bag for $15.6 billion (around R 70,000 crore) to buy Airbus aircraft that would power its ambition to become an international airline.
Much remains to be seen in an industry which has seen many ups and downs, but one thing that could give Bhatia, 48 – an electrical engineer from the University of Ontario, Canada – an edge, is the intimate knowledge of dealing with passengers day in and day out, unlike aviation entrepreneurs who came from unrelated backgrounds.
His father Kapil Bhatia was an early entrant in the travel industry. He began his career as a sales manager and in 1964 founded Delhi Express Travels, which gradually developed into a group of travel-related organisations.
IndiGo’s growth story has many admirers. Kapil Kaul, South Asia chief executive officer of Centre for Asia Pacific Aviation’s rates the IndiGo success story higher than that of Jet Airways. “The competition faced by Jet wasn’t as high as IndiGo, which faced a more competitive environment when it started operations. To make a profit of R 550 crore last year when others were struggling is huge. They will make massive profits this fiscal,” Kaul said.
Headquartered in Gurgaon, InterGlobe has grown from a single enterprise to a formidable travel corporation and has a network of 52 offices across 23 cities in India and abroad and has a significant presence in the fields of aviation management, travel-related services, travel technology, travel distribution services and hotel development and management services.
Airlines have come and gone ever since the skies were opened up nearly two decades ago to private carriers. While East West Airlines and ModiLuft had glamourous starts that gave way to rickety landings, Jet seemed to be only one going steadily forward until Kingfisher arrived.
As it happened, the budget airline that fired the country’s imagination, Air Deccan had bitten off more than it could chew and ended up as an appendage of Bangalore rival Kingfisher, while Jet gobbled up Air Sahara.
IndiGo, the country’s largest low-cost carrier, in contrast, has behaved more like the tortoise in the proverbial race with the hare. From day one, it has behaved as nothing but a no-frills airline, and has focused more on walking than talking its way through the industry. The efforts seemed to make a big mark last month when it edged past the decades-long state monopoly, Air India, to the third spot with a market share of 17.3% in the domestic industry. Jet has a domestic market-share of 26.2 per cent and Kingfisher 19.1 per cent, while Air India stands at 17.1 per cent.
When most airlines were in the red, Indigo announced a R 550 crore profit in 2009-10 on a turnover of R 2,664 crore. With a fleet of 34 Airbus A320 aircraft, it offers 221 daily flights connecting 24 destinations. It has an all-Airbus fleet comprising the 180-seater Airbus A320-200.
Secrets of success
Industry veterans who’ve seen Bhatia’s dizzy rise say he has had a concrete plan from the very beginning. Bhatia, the Group Managing Director for InterGlobe, who has had a two-year stint with IBM, got the Kolkata-born, former CEO of US Airways, Rakesh Gangwal, as a partner. An engineer from IIT Kanpur, Gangwal had previously worked with Air France. “They had a well-structured business plan and got the right team. The first CEO, Bruce Ashby built the right systems, processes and competitive cost structures. Gangwal has vast experience of global aircraft financing acquisition while Bhatia has over 30-years experience of the sector. The ‘game-changing order’ of 100 aircraft in 2005 gave a tremendous leverage to the company in pricing terms,” said Kaul. “We’ve been concentrating on what the customer wants: on-time departures, clean aircraft and good and clean flying experience. We plan to stick to these and not try anything funny,” Aditya Ghosh, President, IndiGo told HT.
The airline has an impressive on-time performance record (80.6% for November 2010).
Indigo and its promoters are known to keep a very low profile – again something that makes them very different from their high-profile media savvy competitors – with marginal spending on advertising and marketing. They have instead relied on word of mouth publicity to build a dedicated client base.
“He doesn’t open up easily,” says Rajji Rai, Bhatia’s senior at Modern School, Barakhamba Road.
However, the airline is known to make news with its smart business moves. In 2005, at the Paris air show, the yet-to-be-launched airline placed a $6 billion (R 26,000 crore) order for 100 Airbus planes laying the ground for its grand entry into the aviation sector. Of these, 34 are in service.
“Rahul can identify the best talent in the market and convince people,” said Rai, who is President of the Travel Agents Association of India.
“The office of Delhi Express Travels was right next mine in Connaught Place. From there, the father-son duo launched InterGlobe and in 20 years, Rahul has completely transformed the company. In travel agency business there have been two crazy success stories – InterGlobe and Naresh Goyal of Jet Airways,” he said.
Many believe that behind the success story is a network built over the years. “Indigo managed to get the prestigious hanger number 1 at the Delhi airport, which had for long been with the national carrier. It shows the tremendous clout of the airline,” said Captain Mohan Ranganathan, a Chennai-based aviation expert.
IndiGo completes five years of local operations in August, a key requirement for local airlines to fly overseas. It has already submitted a proposal to the aviation ministry and shortlisted 15 international sectors including Dubai, Bangkok, Singapore, Kathmandu and Jeddah. Kaul believes IndiGo could be one of the leading low-cost carriers of South Asia. “Over the next 10-15 years, they will have 245 new aircraft, which indicates large domestic expansion plans, robust business plans for international operations to South Asia, South-East Asia and West Asia,” said Kaul. “The range of the aircraft is perfect for operations in India, Middle East and other places,” added Ghosh.
With the beginning of international operations, the budget carrier would take on rivals Jet Airways (fleet size 97 aircraft), Kingfisher (66) and Air India, which has over hundred aircraft in its fleet.
What’s the big deal?
IndiGo’s 180 aircraft deal with Airbus has shifted the world's focus on India. “The historic order is a very strong comment on India's overall economic growth, the growth potential of country’s aviation sector and the confidence of IndiGo’s business plan, its ability to execute such a large order and to raise funds for it,” Kaul said.
Ghosh said the deal is a “symbol” of their rising confidence. "This order for industry leading fuel efficient aircraft will allow IndiGo to continue to offer low fares,” Bhatia had said after signing the deal.
How the airline funds the deal would be keenly watched. Sources said it was planning an initial public offer of shares to fund the purchase. “The airline has been profitable for the last two years and is expected to make massive profits this fiscal. In this three-year period, including this fiscal, they should have a cash reserve of $300 million (R 1,300 crore). The economic crisis taught companies to have cash on their books and IndiGo would like to maintain the cash reserve to deal with any unforeseen incident,” said Kaul. “As far as funding for this deal is concerned they still have 4-5 years.
Among the instruments available before them is to raise money through an IPO, which looks like a possibility. They can also go for a private equity investor,” he said.
“We have various financial options available and anyway six years is a long time,” Ghosh said.But some advise the airline to be cautious. “How long can you sustain operations at such high rates is the question. Another crisis in the financial market or a rise in oil prices and the whole thing will fall flat. It will be very difficult for the airline to sustain this kind of growth it has seen in the last few years. The Indian market can, at the most, have 3-4 big players,” Ranganathan said.
Sceptics have their fingers crossed but in the game of big tycoons, Bhatia — who is a keen golfer — has fought a handicap to emerge like a true professional. Last year, Bhatia was chairman of the Delhi Golf Club. If, like a good golfer, he manages to understand the terrain and weather conditions, his airline may keep its place in the list of elite carriers.
2. Air India review meet today to find formula for wage rationalisation
Within a week of conducting a comprehensive review of Air India, civil aviation minister Praful Patel will be in Mumbai again today for yet another review.
According to sources, the minister is likely to take up the issue of working out a new formula to rationalise wages.
Patel is believed to have presented a formula for wage rationalisation in his meeting with heavy industries minister Vilasrao Deshmukh last month, but Deshmukh wanted information from “a back date.”
“Deshmukh wanted details of how the wage rationalisation would be done, what formula would be used for the plan to freeze promotions and arrear payments for three years and how will performance linked bonuses be slashed. The heavy industries ministry wants Air India to work out a formula on back dates also… the minister is expected to discuss this with the AI management,” a source said.
Patel’s other request — of not dragging AI’s case to the Board for Reconstruction of Public Sector Enterprises (BRPSE) — is also being reviewed by Deshmukh’s ministry.
Patel’s emphasis on working out a new wage rationalisation formula for Air India assumes significance since there is also talk of the national carrier setting up an HR committee to prepare a document covering compensation, ranks and work profile for its 30,000 odd employees.
All this while, glaring disparities between wages, productivity norms, work hours, etc between employees of the erstwhile Air India and Indian Airlines have remained despite several attempts to forge a uniform HR policy.
Now, the airline plans to implement a single union agreement for all employees. At present, the airline’s employees are governed by multiple pacts through 14 unions. These agreements have different wage structures and career progression paths, which the airline wants to harmonise.
3.Cabinet reshuffle: Jaipal gets Petroleum; Kamal Nath moved to Urban Development
New Delhi: Sweeping changes to portfolios - a record 37 - but nobody was dropped in today's Cabinet reshuffle - a point stressed by a sniggering BJP soon after the announcements. After the speculation about whether there'd be dramatic changes, what the Prime Minister seems to have implemented is a game of musical chairs.
The big impact has been on economic and infrastructure ministries like Petroleum, Roads, and Rural and Urban Development, but ministers have traded places - so it's the same old faces now brandishing new portfolios.
Manmohan Singh described today's reshuffle as minor, stressing, "There will be a more expansive reshuffle after the Budget." Government sources say that the reassignment of portfolios could be interpreted as a message from the PM against "crony Capitalism". Ministers in charge of economic portfolios who were observed to be close to select corporates have been transferred. Government sources also say that ministers seen as poor performers are now on notice and the next round of changes will apply the "perform or perish principle".
After petrol prices were raised six times in the last year, Murli Deora moved from the Oil Ministry to handle Corporate Affairs. "I couldn't have held onto Oil forever," he said, denying that he was disappointed with his transfer. Jaipal Reddy takes on Oil now, and Kamal Nath gives up Roads and Surface Transport to replace Reddy in the Urban Development Ministry. CP Joshi, who was Minister for Rural Development, will replace Kamal Nath to handle Roads. (In Pictures: Know your ministers)
Praful Patel has been promoted to Cabinet rank but instead of Civil Aviation, he has been assigned to Heavy Industries and Public Enterprises, a ministry that some say may be too low-key for the high-profile NCP leader. Not true, said Patel. "I am very happy that I am a Cabinet minister. In any person's political career, it is important to rise in the political hierarchy and after 20 years in Parliament if I did not become a Cabinet minister and my juniors were moving ahead, it was, certainly very important, both personally and politically for me to become a Cabinet minister." (Watch: Praful Patel on his promotion)
Vayalar Ravi, the minister for Overseas Indian Affairs will hold additional charge of Civil Aviation. (Read: Ministers now promoted)
Kerala, UP handled with care
The four crucial ministries - Home, Finance, External Affairs and Defence - remained untouched. Despite the PM's interest in a younger Cabinet, no young MPs were inducted.
Also left out - key allies DMK and Mamata Banerjee's TMC. Sources say the elections in Tamil Nadu and West Bengal will decide how the political equation at the Centre is recalibrated.
However, UP and Kerala, both politically crucial for the Congress have got important additions in the Council of Ministers.
Two ministers from UP - Salman Khursheed and Sriprakash Jaiswal - have been given promotion and Cabinet rank. Beni Prasad Verma, also an important leader from UP, joins the Cabinet as Minister of State (MoS) with Independent charge. (Watch: Beni Prasad Verma in, thanks Rahul)
The Cabinet already has three ministers of state from UP.
Kerala benefited likewise. KC Venugopal was made Minister of State (MoS), Power.
KV Thomas, a prominent Christian leader in Kerala, now has independent charge of Consumer Affairs, Food and Public Distribution.
Vayalar Ravi, already handling Overseas Indian Affairs gets additional charge of Civil Aviation and E Ahamed takes over as Minister of State for External Affairs, a post vacated by Shashi Tharoor last year.
Other key changes
In other key changes, Sharad Pawar will be Agriculture and Food Processing Minister. He will not have charge of Food and Civil Supplies anymore. Kumari Selja will be Cabinet Minister, with additional charge of Culture and Subodh Kant Sahay has been moved from Food Processing to Tourism.
The Congress' Kapil Sibal who took over from A Raja after the 2G spectrum scam controversy forced the latter to step down, will stay on as Telecom Minister. He will also retain his Human Resources Development portfolio. He has been relieved of the Science and Technology portfolio which was given to him after Prithviraj Chavan was moved to Maharashtra as Chief Minister late last year. Veerappa Moily stays on as Law Minister, despite reports that the PM was not happy with his handling of the 2G controversy in court. Jairam Ramesh stays Environment Minister.
Promotions, losses and new faces
Among those taking their place in the ranks of Cabinet ministers are Salman Khursheed and Sriprakash Jaiswal. Khursheed gets his promotion and moves to Water Resources, with additional charge of Minority Affairs. And Shriprakash Jaiswal keeps Coal and is elevated. (Cabinet reshuffle: New Faces)
Ajay Maken has been given independent charge as Minister of State of Sports, a ministry that MS Gill has lost after the CWG mess. Gill will be Minister for Statistics and Programme Implementation.
Virbhadra Singh has lost the important Steel portfolio and got the Micro, Small and Medium Enterprises portfolio.
KC Venugopal from Kerala and Ashwani Kumar from Punjab are new Ministers of State. Ashwani Kumar will be junior minister for Planning and Parliamentary Affairs, Science and Technology and Earth Sciences. Ashwani Kumar is known to enjoy the Prime Minister's confidence and was a minister in the UPA 1 government. KC Venugopal will be in the Power Ministry. (Read: Complete list of changes)
No political message, says BJP
The BJP was quick to react saying the Government had failed to send out a political message. BJP spokesman Shahnawaz Hussain pointed that the "government has failed to act against the corrupt" and that it had merely moved those ministers from one bhavan to another. (Watch)
Cabinet ministers:
Sharad Pawar: Agriculture and Food Processing Industries
Virbhadra Singh: Micro, Small and Medium Enterprises
Vilasrao Deshmukh: Rural Development and additional charge of Panchayati Raj
Jaipal Reddy: Petroleum and Natural Gas
Kamal Nath: Urban Development
Vayalar Ravi: Overseas Indian Affairs and additional charge of Civil Aviation
Murli Deora: Corporate Affairs
Kapil Sibal: Human Resource Development and additional charge of Communications and Information Technology
B.K. Handique: Development of North-Eastern Region
C.P. Joshi: Road Transport and Highways
Kumari Selja: Housing and Urban Poverty Alleviation and additional charge of Culture
Subodh Kant Sahay : Tourism
M.S. Gill: Statistics and Programme Implementation
Pawan Kumar Bansal : Parliamentary Affairs and additional charge of Science and Technology and Earth Sciences
Minister of State (Independent Charge):
Dinsha Patel: Mines
Ministers of State:
E. Ahamed: External Affairs
Harish Rawat: Agriculture and Food Processing Industries
V. Narayanasamy: Parliamentary Affairs and Personnel, Public Grievances and Pensions and Prime Minister's Office
Gurudas Kamat: Home Affairs
A. Sai Prathap: Heavy Industries and Public Enterprises
Bharatsinh Solanki: Railways
Jitin Prasada: Road Transport and Highways
Mahadev S Khandela: Tribal Affairs
R.P.N. Singh: Petroleum and Natural Gas and Corporate Affairs
Tusharbhai Chaudhary: Road Transport and Highways
Shri Arun Yadav: Agriculture and Food Processing Industries
Shri Pratik Prakashbapu Patil: Coal
Shri Vincent Pala: Water Resources and Minority Affairs
4.Usman will pursue aviation career only after his playing days
BIPIN DANI
PUNE (India) - Usman Khawaja, the first Pakistani-born player to represent Australia will pursue his aviation career only after his playing days are over, insisted his manager Daniel Zammit.
Speaking to this scribe immediately after the inclusion of Usman Khawaja in the Australian Test squad to play in the Sydney's Ashes Test against England, the manager said, "Usman Khawaja is a pilot and like his father, Tariq Khawaja (a computer engineer working for IBM), he too went to university for degree. He has a degree in aviation and as a commercial pilot often flies aeroplanes but will make his career in aviation only after retirement from cricket. He is presently focussing only on the game".
Usman Khawaja needed to score 85 in his school finals to qualify for the pilot course at university and he scored 90 (the result had come on his birthday).
Usman Khawaja, however, may not be the first cricketer to pursue his career in aviation. The former West Indian fast bowler, Colin Croft, in his private life, having been an Air Traffic Controller from 1973 to 1981, while also playing cricket for the West Indies cricket team, he has also obtained a Commercial Airline Pilot's licence in the USA, with endorsements for the UK, and worked as a Commercial Pilot in the Caribbean.
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