IndiGo CEO assures staff as promoters head for dogfight

After Jet Airways, it's the turn of India's top airline IndiGo to fly into turmoil.

Differences between its two promoters – Rahul Bhatia and Rakesh Gangwal – have erupted to the point of both readying for a legal battle.

On Thursday, CEO Ronojoy Dutta dashed an email to employees assuring that growth strategy of the airline remains unchanged and the management has the full backing of the company's Board of directors. The differences between the duo have erupted apparently over the shareholders' agreement and executive control, sources said.

"I am sure you are all aware of the press reports regarding alleged disagreements between our two promoters Rahul Bhatia and Rakesh Gangwal," Dutta said in the email. "I want to assure you that the growth strategy of the airline remains unchanged and firmly in place, and the management is fully charged by the Board to implement it," he said. The CEO said the company would continue its focus on creating value for all shareholders, customers, employees and the communities it serves.

In a regulatory filing, IndiGo said the company is not in a position to comment on such news as it relates to the promoters. Despite the firefight, the scrip of the company's parent InterGlobe Aviation tanked 9% on the development.

The differences between Gangwal and Bhatia are believed to have arisen over control in managing the airline and also over the shareholders' agreements. The duo has approached two separate law firms in order to deal with the issue. The development comes at a time when the Indian aviation sector is going through a tumultuous period with the grounding of Jet Airways and slowing domestic growth. While an IndiGo spokesperson declined to comment, emails sent to Bhatia and Gangwal did not elicit any response till the time of going to press. JSA Law, the legal firm representing Bhatia refused to comment citing client confidentiality. Bhatia is the director of the company and Gangwal, a US citizen is a non-executive director. While Gangwal owns around 37% stake in InterGlobe Aviation, Bhatia holds around 38%. With its fleet of over 200 aircraft, the airline offers around 1,400 daily flights and connects 54 domestic destinations and 17 international destinations.

Meanwhile, there is a talk in the company of return of certain former executives to the airline. IndiGo's then-president Aditya Ghosh and some other executives had to move out last year and several expats were brought in their place, as part of a five-year plan to turn the airline into a global player. Sources said the differences have also been over the aggressive manner of capacity expansion. While Gangwal wanted a robust increase in capacity, others in the Board favoured a more measured expansion.

Mark Martin, founder & CEO of Dubai-based Martin Consulting, said both the promoters should have resolved the issues amicably, preferably with the help from the Board or a mediator. The fact that they approached two different law firms, indicates that there is something more to it, he said. "They should be sensitive to the fact that this kind of feud, which has now become public, does not augur well for the airline, as the entire industry, including bankers, lessors, vendors and equity holders, is watching."