'Ordering 100 planes in India was just nonsense': When Airbus did not take IndiGo's first order seriously
'Ordering 100 planes in India was just nonsense': When Airbus did not take IndiGo's first order seriously
When IndiGo was raring to go off the tarmac, there were very few buyers, and even fewer interested investors and stakeholders. But IndiGo founders Rakesh Gangwal and Rahul Bhatia braved all odds, red tape and headwinds, and brought in their business acumen to start off one of the biggest airlines in the country.
IndiGo’s success did not happen over a single night. Years of work, planning, negotiations and deal-making went into its eventual entry into Indian aviation in 2006, as revealed by Tarun Shukla’s new book ‘Sky High: The Untold Story of IndiGo’, published by Harper Business, an imprint of HarperCollins Publishers.
Around the time talks for IndiGo were on, the dominance of Boeing in India had declined, and Airbus was gathering momentum. Airbus’s vice president for India, Nigel Harwood, recalled that they were excited to meet anyone who showed any slight interest in buying a plane. But buying a plane is no easy business. By the time the cheque had to be signed, many potential buyers stepped back. “It was difficult to evaluate who was real and who was not, and quite often Airbus found they (the potential clients) were not real,” said Harwood.
So, when InterGlobe Enterprises’ Rahul Bhatia requested a meeting, Harwood obliged. Harwood was taken by the imposing presence of Bhatia, clad in a white kurta-pyjama. Harwood, after the meeting, informed the headquarters of Airbus in Toulouse that there was an interested party called InterGlobe who was yet to specify the number of planes they wanted to buy, but the background of the party seemed ‘okay’
Bhatia had suggested that Airbus meet Rakesh Gangwal too, but the company was not in the mood to take them seriously. Airbus COO John Leahy, Gangwal’s friend, thought he didn’t have an “angle” in India as he was settled in the US. Also Airbus was not keen on IndiGo as they were yet to be at the level of the Tatas.
“There was no credibility. Someone ordering 100 planes in India was just nonsense. At the end of the day, it was a company that had never experienced anything like this before. It was so low-key an organization that nobody had ever considered it [would start an airline],” says Harwood.
The meeting happened eventually, and Gangwal handed a wish list to Harwood to take to Toulouse. Gangwal and Bhatia were meanwhile, thinking of 20-30 aircraft, and spoke of buying 40-50 aircraft. What they didn’t tell Airbus initially was that the final number was of 100 aircraft, a deal of $6 billion. The number was kept a secret till they could gauge how things changed according to the size of the order.
Harwood said that Gangwal was a tough negotiator and made them eventually concede. He said Gangwal had the option of taking the order to Boeing in his arsenal. But whether Boeing was actually ever in the game is uncertain.
As per the book, Gangwal had correctly anticipated that vendors would bend over backwards to do anything for an order the size of 100 aircraft. This meant business for over 10 years, for the planemakers and other stakeholders.
Finally, Gangwal, Bhatia, and Harwood went to Toulouse to meet Airbus’ top brass. The contract was eventually signed. In the Paris Air Show that year, of the 155 aircraft orders from India in 2005, 135 were for Airbus and 20 for Boeing.
Even so, many believe that Airbus sold the planes to IndiGo for dirt cheap as they did not see many orders coming in from India for many years. The planes reportedly cost IndiGo $25 million each, when even the most loyal customers got them for $35 million.
“If it was a bad deal, they (Airbus) wouldn’t have done it. There are controls in place, like there are in any company. An individual can only go so far. I had the ability to negotiate up to a point, then it had to go to John Leahy, then to Noël Forgeard. If Noël signed it, then it was within his approval process and that’s why it happened. It was an aggressive deal, but why shouldn’t it be for 100 aircraft?” Harwood said.
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