If India wants to compete with the world, it has to have one or two large airlines: IndiGo’s Rahul Bhatia

IndiGo co-founder Rahul Bhatia defends the airline's 66% market share, saying a third of its capacity serves routes no rival operates. He dismisses service criticism as noise, backs Willie Walsh as CEO and outlines a phased long-haul strategy built on partnerships. On December's meltdown, he says 19 years of clean operations cannot be undone by one event.

Rahul Bhatia has spent two decades building IndiGo into one of the world's largest airlines. As the carrier marks its 20th anniversary this month with a 66% domestic market share, a wide-body order on the books and Willie Walsh arriving as CEO next week, the managing director and co-founder sat down with ET to talk about market dominance, the December operational meltdown and IndiGo's carefully calibrated push into long-haul flying.

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Edited excerpts.

What has been the reason behind IndiGo's success in a country which has seen a string of bankruptcies?

From the very first day, we wanted to make sure that we have a cost structure which is not only industry leading in India, but on a global basis. That's been the endeavour of this organisation — to produce a product at a very cost-effective price, because what that does is allow us to offer affordable fares, create demand, fill up planes, order more planes.

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It's a constant journey where you need to keep looking out for what you can do to get the cost structure to be better and better. Our ability at different moments to embrace new technology, bring in more fuel-efficient aircraft — all of that played a role. But the fundamentals are cost leadership.

Policymakers say it's dangerous for a country like India to have a single entity with a plus 60% market share. What's your view?

34% of our capacity is deployed in unique markets where nobody else flies. It is not that other airlines cannot fly in these markets — they can, there's no limitation, but they choose not to. So when the world talks about our market share of 65-66%, there isn't an appreciation of the fact that within that, there's a large chunk of flying that is unique to IndiGo. That's our humble contribution to bringing this country together.

The other element is that if India truly wants to compete with the rest of the world, size will matter. Look at Emirates in Dubai, Singapore Airlines, Qantas in Australia. If you truly want India to compete with the rest of the world, you will have to build one or two or three large airlines that are able to compete with the heft of some of these large carriers.

There are complaints that IndiGo is too robotic and doesn't care about customers. How do you address that?

I would call it noise. Data shows that IndiGo has the lowest complaint rate amongst all airlines in India. What I'm personally clear about is this we want this airline to be seen as an entity where customers fly with us because they wish to, not because they have to. That's a subtle but significant difference.

Internally, the message is that you need employees who come to work every morning because they wish to and enjoy it. My personal view is that if you can create that culture, it gets translated into what customer experience.

How do you describe IndiGo — no frills, hybrid?

The very essence of this company will always remain low cost, flying within India and the near region. The core of the fleet will always remain that classical low-cost fleet. But beyond a certain length of haul, the customer wants a differentiated experience and we need to respond to that. International flying of six hours and beyond will become a hybrid model.

Investors remain jittery about IndiGo breaking its trusted model to foray into long haul. Why this adventure?

Over the last 20 years, we have built an extensive network in the country and the near region. The next logical step is to take Indians to the world and bring Indians who reside outside back home. We will do it in a thoughtful manner — fly the A321 XLRs first, learn from that, and when we go long-haul, rely on partnerships, which is a low-risk way to approach it. Partners do what they do on the other side of the route, we do what we do in India, and the risk is shared.

Will you be open to joining any of the global alliances?

I say this with utmost modesty — IndiGo is somewhat privileged that we can cherry-pick as opposed to being part of one single alliance. We'll do bilateral deals with different airlines rather than throwing ourselves into a basket of airlines that form whatever alliance it may be.

The December meltdown raised serious questions about operational reliability. Why did it happen?

You can't wash away 19 and a half years of spotlessly clean operating rhythm with one event. The event is regrettable and should never have happened, but it did. It was essentially a coming together of several things — new pilot rest rules that had come into play, cyclones in Chennai, a fleet-wide software upgrade, and volcanic ash activity out of Africa. Several things came together and caused this.

What are you doing to ensure it doesn't repeat?

That work has been underway ever since December. We've had an internal report, external review, and the DGCA has done its own review. We are working closely with Oliver Wyman and there is an entire team mandated to look at everything transformational we need to do operationally to make the company as robust as it possibly can be.

Pilots say any dilution of rest rules will impact safety. What is your view?

Our appeal to the government is that whatever be the final form of the rules, we should learn from best practices around the world. I know of no airline, whether a one-aircraft fleet or a thousand-aircraft fleet which wants to fly an unsafe operation. Safety is our utmost priority.

But if regulations are being put in place under the pretext of safety that actually reduce efficiency, that's a fundamental issue. If we want India to compete with the rest of the world on every measurable matrix, we cannot have operating constraints that make us less efficient.

If the rules are fully implemented, is IndiGo ready to maintain the same growth rate?

Our winter schedule has been built around the most stringent form of pilot rest rules. On that, our aircraft utilisation is north of 14 hours.

You appointed Willie Walsh as CEO. How do you choose leaders?

I'd rather go with personal references than headhunting firms. On most occasions it has turned out right, and Willy was introduced to me by someone I really value in the industry.

Willy is a Hall of Fame variety. He started as a pilot, brought Aer Lingus out of bankruptcy — competing against Ryanair, probably the finest low-cost airline globally — and went on to lead British Airways and put together IAG. For someone like Willy to say yes, I think it's a bigger reflection on what India proposes as an opportunity, less so IndiGo. Both of us agree that the heart of IndiGo will always remain low-cost, single-cabin. But we need to take thoughtful steps to go international, and Willy is well-positioned to do that. He's not here to score a point — he just wants to do something he fundamentally believes can be pulled together.

Why can't Indian airlines have an Indian CEO? Isn't two decades enough to have home grown leaders?

Clearly we will get there, and sooner than later. There are several examples around the world. Emirates is still headed by a non-foreigner.

It is not that we don't have an Indian because we don't believe in Indian talent. Aviation is still maturing in India, and through that maturity there will be individuals who come out and lead Indian airlines. We'd very much welcome being the first airline to do that.

Has the entry of cash-rich groups like the Tatas forced you to look at the business differently?

IndiGo has been built over 20 years, aircraft by aircraft, brick by brick. I see our own trajectory unchanged. We have outlined growth to our investors in the low double digits on an annualised basis for the next several years, and we don't see that changing. Executing well and to the needs of our customers will always remain paramount.

Many feel the duopoly is worsening ticket prices. What's your response?

Fares are something the industry hasn't done a good job explaining. Over the last three years, cumulative inflation has been 12%. In that environment, the part of the fare collected by airlines has gone up between 1-3%.

But other input costs like jet fuel, airport charges have gone up dramatically. If we truly want India to find a seat at the table of global aviation, the entire ecosystem must agree on building a cost structure that beats the best in the world.

Will you bring in a strategic partner?

Currently there's no thinking along those lines. You don't need a strategic partner to bring in expertise — we have competent leadership at the airline. And if you want to partner with airlines for commercial reasons, you don't need an investment.