A market share of 50% in a highly competitive industry is a rarity. Of all the major Indian companies, only two, Asian Paints and IndiGo, have managed that consistently. While the first is an 82-year-old company, which makes its 53% market share and sustained leadership a magnificent achievement, IndiGo has been in business for less than 20 years.
Rahul Bhatia and Rakesh Gangwal, the two men who have guided IndiGo’s destiny over the years as its co-founders, are a part of Indian corporate folklore. While only Bhatia is left in the pilot’s seat, Gangwal is the more intriguing personality, not least because of his decision to exit the firm he helped build, at its peak.
The airline industry veteran attended Don Bosco School in Kolkata before studying engineering at the Indian Institute of Technology, Kanpur. Early jobs with Philips India, at a time when it was considered a blue-chip employer, and Ford in the US were his career launch pads.
A stint with Booz Allen Hamilton followed, where Eli Lilly was a client. Inspired by the pharmaceutical giant, Gangwal returned to India to establish a firm making capsules. But the Indian bureaucracy stymied his efforts.
Gangwal flew back to the US and built a reputation as an airline industry specialist based on his time at United Airlines and Air France. He then took over as the chief executive of US Airways, and subsequently led Worldspan Technologies, a travel technology and information services company, as its CEO from 2003 to 2007.
The stage was set for his return to India with an entrepreneurial idea that would change the face of Indian aviation. At that point, the airline market in India was dominated by gold-plated carriers like Kingfisher Airlines and Jet Airways, which figured out only too late that balance sheets are filled by hard numbers, not goody bags.
IndiGo, guided by the obsessively cost-conscious Gangwal, chose a different flight path marked by tight cost controls and no-frills operations while delivering on-time schedules to passengers. The approach was a runaway success, and the low-cost airline model took root in India, forcing even full-service airlines to compete on price and punctuality. The IndiGo co-founders went on to pioneer other cost-saving measures, such as placing bulk orders for planes with a single manufacturer on a wet lease basis.
Gangwal once likened the airline business to a candle lit at both ends, which meant that the window for opportunity to make money was limited. But he built on IndiGo’s early success, guiding the airline to its pre-eminent position in an Indian market where heavyweights like Jet, Kingfisher and Go First have gone into liquidation.
But just when IndiGo looked like it was soaring, the pandemic came, wreaking havoc on the airline business. Not surprisingly, IndiGo slumped into losses. Simultaneously, its only serious rival, the Tata group, added heft to its airline capability by buying the government-owned Air India, which had long turned into a white elephant.
But for IndiGo, the biggest setback came when Gangwal announced in February 2022 that he would leave the company he had helped set up and gradually sell off his stake. A difference of opinion over how the company was being managed appeared to be the immediate cause, though Gangwal had been voicing concern over corporate governance issues for a while. For a man known to refuse even concessional tickets to friends and family, that was a deal-breaker.
But while Gangwal may have left aviation, the sector was in no mood to leave him. Earlier this year, he joined the board of Southwest Airlines, the low-cost US carrier that was facing growing pressure from activist investor Elliott Investment Management over leadership and strategy changes.
Putting his money where his mouth is, a few months later Gangwal acquired 3.6 million shares of the American airline for $108 million. Southwest’s shares are up nearly 10% over the last six months since Gangwal joined the airline’s board.
Gangwal will be keeping a close watch on that number since it will be a guide to the airline’s performance.
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The money Gangwal makes from Southwest Airlines will be the last thing on his mind. His net worth as per Forbes may be $5.6 billion, but his attitude to wealth hasn’t changed in all these years.
Not averse to wearing old, hand-knit sweaters, Gangwal has very few indulgences, and his lifestyle remains that of a typical Jain family from Kolkata. So when in 2015 Gangwal and his wife Shobha bought an 80,000 sq.ft. Miami Beach home for $30 million from Charles Johnson, the retired founder of Franklin Templeton Funds, it came as a surprise to many.
Tarun Shukla in his fascinating book ‘Sky High: The IndiGo Story’, offers a great insight into the man’s attitude: “Gangwal felt that there was no need to pamper the customer with extras. ‘A piano on the plane may make it look fancy, but does it add to profitability? New ideas are a dime a dozen, but commercially worth little. It’s like a disease—get excited and introduce frills from lounges to frequent fliers to everything else—then never recover the costs incurred’.”
If only the likes of Vijay Mallya (Kingfisher Airlines) and Naresh Goyal (Jet Airways) had paid heed to those words.
