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Meet the man who's buying 100 Airbus A320s!
Bipin Chandran |
June 21, 2005
The Paris Air Show was anticipated to be yet another confirmation of China's rise as an economic superpower. But, after the first three days, the buzz was all about Indian companies: Jet Airways and Kingfisher Airlines.
By the fourth day, the script had been turned on its head by one man, Rahul Bhatia, managing director, InterGlobe Enterprises.
Bhatia pulled off the equivalent of a wild-card entrant making short work of the defending French Open champion in the first round.
The order for 100 Airbus aircraft by Bhatia's InterGlobe Enterprises, an integrated travel company, is the biggest single order from India and the biggest, as well, for a single Airbus model (A320).
The $6.5 billion order took many by surprise since Bhatia had said earlier this year that he was having a re-think on starting an airline under the IndiGo brand as there were too many operators already in the fray.
"I was pushed to say that. My plans were not ready and other issues were being finalised. I did not want to make a big announcement without all the plans. That is the reason why I took that stand," he says.
Bhatia may have been emboldened to take the plunge, backed by former US Airways head Rakesh Gangwal, who he has known for 20 years. It seems the duo had first considered starting an airline about two-three years ago.
According to aviation industry watchers, the biggest advantage his IndiGo, designed to be a budget carrier, has, is size. With 100 aircraft, it will be able to touch all airports in the country with multiple connections.
Moreover, IndiGo will be able to connect the lucrative metro routes with flights every half-an-hour, something which will take traffic away from the existing operators.
"We will connect every possible destination in India. We hope the business will start making money very fast," Bhatia says. Besides, InterGlobe's expertise in handling ticketing and inventory management for other airlines -- the key to success for a low-cost carrier -- will also come in handy for Bhatia and his team.
"We have the expertise in running the back-room for other carriers. We know the areas that a carrier needs to concentrate on to succeed," Bhatia explains.
The airline is expected to fund its fleet acquisition through equity as well as debt-financing.
"The company will bring in Rs 350 to 400 crore (Rs 3.5-4 billion) as equity, raised from internal accruals, and then debt, to buy the aircraft. We will be flying to every possible location in India," says Bhatia.
As per the plan of the carrier, about six to eight aircraft will be inducted this year and all the 100 aircraft will be inducted over six to seven years.
"We will have a new aircraft joining the fleet every month," says Bhatia.
Bhatia's competitors will be watching his moves and performance after this high-decibel start. "We know that he is serious. He knows the business and has the expertise and technology. It will be an interesting time ahead," says a promoter of a leading Indian low-cost carrier.
One of the biggest beneficiaries of Bhatia's move will be the Indian consumer. "Prices of tickets will come down when more players enter the fray. This has happened in the West. India will start to see it now," says Kapil Kaul, chief executive, Centre for Asia-Pacific Aviation.
Building the Rs 1,320 crore (Rs 13.20 billion) InterGlobe has been a gradual process. The business was started by Bhatia's father Kapil, who is still the executive chairman of the company.
An early entrant in the travel industry, Bhatia Sr began his career as a sales manager in an IATA agency. In 1964, he founded Delhi Express Travels, which gradually developed into a group of travel organisations to eventually become InterGlobe.
Rahul Bhatia gave the company the new orientation. As early as 1989, he set up InterGlobe Enterprises. What started as a general sales agent (GSA) for airlines, today represents more than a dozen carriers, including United, Delta and China Eastern.
Subsequently, came Galileo India, the Indian wing of Galileo, one of the four big airline seat-booking platforms. From that has followed a series of technology-oriented back-office functions for major airlines, including handling of frequent flyer programmes, and developing new technologies.
Under Bhatia Jr, InterGlobe has spawned several group companies dealing in several areas: InterGlobe Air Transport, Galileo India, InterGlobe Technologies, InterGlobe Hotels & Hospitality, and now InterGlobe TQ.
Bhatia, who holds a degree in electrical engineering from the University of Waterloo in Ontario, Canada, has plans to enter the consumer segment with products and services that deliver value for money.
This is the group's strategy and Bhatia has already identified the products. As part of this strategy, InterGlobe has also entered into a joint venture with Accor to build the Ibis range of economy hotels in the Indian sub-continent.Bhatia's hobby, golf, is on hold for the moment. He has been laid low by a bad back. Having said that, it should not be a hindrance for his airline to surge ahead.