IndiGo run by board; if there’s anyone I talk to, it’s Chairman: Ronojoy Dutta

Ronojoy Dutta, CEO, Interglobe Aviation, said there’s no overcapacity in the market and squarely blamed the low fares on new airlines which have pushed the entire sector to losses. In an interview with ET’s Mihir Mishra, Dutta said the management is insulated from the promoters and is professionally run by the board. “I go to the chairman (M Damodaran) for everything,” he said, adding half the total capacity will be deployed in international routes. Edited excerpts:

IndiGo’s Q2 numbers were really bad — is overcapacity the reason?

I do not think overcapacity is a problem. We have so many ideas on how better to connect cities, but we don’t have enough planes. So it’s not overcapacity. Don’t forget, our unit revenues (in Q2) this year are up 5%.

The second quarter was good in terms of unit revenue but there was a problem on the cost side also due to the new accounting standards. If you’re losing Rs 200-300 crore in a quarter due to new accounting norms, that’s a big number, and it’s all based on rupee depreciation. It has no cash impact, but it will affect airlines in the long run, especially things like dividends payout ratio. Also, our numbers will improve once two costs —maintenance costs of old aircraft which will go away by 2021-end and pilot training costs which will decline by June next year – are gone.

Last-minute fares between Mumbai and Delhi were about Rs 5,000 on Wednesday. How are these fares sustainable? IndiGo’s competitors also blame you for low fares, what do you have to say?

On routes between two metro cities, the competition was mature till Jet Airways was flying and we all co-existed. But after Jet left, slots went to new entrants and low-cost competitors which are still trying to find their feet.

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On routes connecting non-metro cities, fares are still doing fine. So, we’re not pessimistic on revenue.

What can I say about us being blamed for fares? Clearly, we used to have higher fares and we didn’t do anything.

New entrants have come in and fares have dropped.

Now, blaming the incumbent for this is kind of ironic. I think the new entrants are causing this problem (of lower fares). We are in a very price-sensitive industry, more so than anyone. So, it is the invisible hand (of the flier) that controls pricing.

The economy does not seem to be doing well. How big a concern is that for IndiGo?

No one is saying that it’s less than 5% growth, right? If it is around 5%, we are fine. We’d love to have a higher percentage of growth.

The revenue picture doesn’t worry me at this point; we aren’t predicting a decline in unit revenues. IndiGo is in no mood to talk about capacity reduction; we want to grow… and grow fast.

IndiGo has been in the news more for the differences between its promoters. How difficult it is for you at the helm in getting approvals from the board? How have promoters’ involvement changed after their public spat?

Not at all. At the board meeting, there’s no discussion on the subject. There was an issue with the related-party transactions (RPT).

We were obviously part of it in terms of how do we make the purchase, who decides on the purchase and others, but the RPT issue has been resolved.

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We have a new process which has been approved by all the board members, and we are following that. In terms of aircraft purchase, we have an equipment manufacturer purchasing arm and that does all the negotiations and makes a purchase with the approval of the board.

Those proposals are discussed by the board, including Rahul (Bhatia), Rakesh (Gangwal). The airline is run by a board and M Damodaran is the chairman. If there’s anyone I talk to, it is the chairman.

What is IndiGo’s big plan to grow internationally?
Right now, we have 25% of our total capacity in the international sector, which has grown by 115% over the past year. Our future plans, tentatively, are to put half the total capacity, which we are inducting, in the international sector. We have a lot more new stations in mind and flying on international routes is going to be our big focus. We plan to connect Amsterdam, Madrid and Seoul with Airbus 321XLRs, which join the fleet after a few years. XLRs, however, cannot connect London and we will need a dual-aisle aircraft.

We are looking at it and would want to go to London at some point, but I would say, it’s a five-year plan, not one year.



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