The IndiGo crisis is a great opportunity for instructors in management schools for the lessons it offers on many facets of management: on brand management, communicating in the middle of a crisis, competitive strategy, anti-competitive behaviour, ethics. Not the least among them is the one on corporate governance.

Star studded board

InterGlobe Aviation (InterGlobe), the company that operates the IndiGo Airline has a star studded board. It has Vikram Singh Mehta, Pallavi Shardul Shroff, Rahul Bhatia, former Air Chief Marshal Dhanoa, Anil Parashar, professionals connected with the industry Gregg Saretsky and Michael Whitaker.

Particularly noteworthy for our discussion are Amitabh Kant, till recently the G 20 Sherpa, and M. Damodaran, both distinguished bureaucrats who have been writing extensively on governance. After superannuating as chairman Sebi, Damodaran has been founder chairman of Excellence Enablers, a corporate governance advisory firm.

The issue on hand

To set the context based on a now well publicised set of news stories, during the week of December 1, IndiGo Airlines had to cancel a number of flights running into a few thousands, cumulatively over the period. Over three lakh passengers were stranded, nine lakh PNRs cancelled and nine thousand pieces of baggage piled up as a result of the dislocation. The suffering of individual passengers was worse than what the aggregate statistics might suggest.

The proximate reason for these cancellations is the coming into effect of the second and final phase of the rules relating to flight duty time limitation (FDTL). These rules have been set to come into force for close to two years now with the first social media post from the minister of civil aviation dated January 3, 2024.

The most recent ultimatum for implementing these regulations is reported to have been issued on July 1, with several attempts having been made by IndiGo during the intervening period to lighten these requirements which are meant to ensure that pilots are rested enough and fit to ensure passenger safety. These norms appear to be in line with international standards.

The role of the board

The nature of the issues summarised above suggests that the board of directors of InterGlobe should have been cognisant of these developments. The ramifications of the relevant civil aviation requirement (CAR), its importance for passenger safety, hence the criticality of compliance, and needless to state, its financial implications should have been discussed at the board.

One would further expect the board to extract an assurance from the operational management that it would be fully prepared in terms of rostering of pilots, deployment of other members of the crew and so on to comply with these super-important regulatory requirements, to ensure a safe and smooth travel experience for passengers. That would be entirely consistent with the role of the Board in strategic oversight and stewardship, in line with the canons of sound corporate governance.

Did the board play its part?

Events from December 1 till date make us want to ask the question: Did the board play its part? The outcomes suggest that no matter what the board did, the airline seems to have failed all its stakeholders – passengers, employees, shareholders and the country at large. The consequences of that week have been felt across the entire air travel industry.

Around these events, several allegations, however unsubstantiated, have also been made, about the company’s approach to competing in the industry and how it may have garnered a 65% share of the market. Even if there were to be a modicum of substance to these allegations it makes one wonder if the board was aware of those tactics. And if yes, did it approve them?

Two approaches to examine the board’s stance

There are two possible approaches to examining the role of the board. One could be an extremely technical approach examining the role of the director of a company under Indian law, especially the expectations falling under provisions like S 166 which lays down the duty of directors. These provisions are particularly interesting because the 2013 law tries to capture the duties of the director in a structured manner through this section. Interesting questions no doubt and will probably get discussed threadbare by scholars of corporate law.

Also read: Why Not Teaching IndiGo a Lesson is the Bad Karma

Equally important, if not more so, in this instance, is the role of the independent directors as provided for under the Code of Conduct in Schedule IV under Section 149(8) of the Companies Act, 2013. Did the independent directors consider the implications of the FDTL and the importance of complying with the same even as the company appears to have vigorously contested them in the courts, until January 2025, when the court seems to have declared that there would be no further extension?

The other approach is to take a broader view, based on the idea of good and responsible corporate governance, which goes beyond jurisprudential minutiae. That is epitomised in the salient opinion attributed to the Institutional Investor Advisory Services (IIAS), a proxy advisory firm: “(The Board) has failed not only in managing the crisis but also in taking responsibility for a problem largely of its own making.” It goes on to state, “Given the relevant experience and quality of the board, stakeholders must seek answers for IndiGo’s apathy.”

Given its role in the corporate governance universe, the opinion of IIAS is particularly noteworthy. More than to the Board as a whole, it especially applies to the independent directors.

Time to look beyond the letter of the law?

Given their eminence and scholarship it is reasonable to assume that the independent directors have applied their minds adequately to the implications of the choices that the company was making with regard to the FDTL and other aspects of business strategy that are being called out in the media. Further one presumes they were fully seized of their role as a “bridge between the company and its various stakeholders.”

However, looking at the highly regrettable developments of the first week of December it is perhaps time for the independent directors to go beyond the letter of what the provisions of the law require. It is time perhaps to step back and ask themselves: Did they really play the part that the spirit of the independent director required them to? Would they be able to answer that question in the affirmative, to their individual and collective consciences?

G. Sabarinathan retired as an associate professor at the Indian Institute of Management, Bangalore.

This piece was first published on The India Cable – a premium newsletter from The Wire – and has been updated and republished here. To subscribe to The India Cable, click here.

This article went live on December twelfth, two thousand twenty five, at fifteen minutes past eleven in the morning.

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