Go First declares bankruptcy as engine failures beset operations
03 May 2023
Another Indian low-budget carrier – Go Air, which has be rebranded as Go First – is exiting the skies and has opted for voluntary insolvency as it does not have sufficient cash to keep the fuel running its engines that are also not air worthy.
Nusli Wadia owned Go First is bedevilled by the ‘ever-increasing’ number of failing engines supplied by Pratt & Whitney. The airline has said it will not carry any flights across India and outside from 3 May to 5 May and this may extend for many more days to come as the airline does not have sufficient cash.
A Go First website release cited "operational reasons" as the cause for flight cancellations. "Go First flights scheduled for 3rd, 4th and 5th May 2023 have been cancelled. We apologise for the inconvenience caused by the flight cancellations,” reads the release.
While the airline said it will be making full refunds to passengers who have booked for travel during these days shortly, Go First also filed for an insolvency resolution process before the Delhi bench of the National Company Law Tribunal (NCLT).
The real problem in Go First is the "ever-increasing" number of failing engines supplied by Pratt & Whitney. This has led to heavy losses in Go First's financial books and hence a cash crunch to run the operations.
As per the airline's statement, Go First has grounded 50 per cent of its A320neo fleet, due mainly to the serial failure of Pratt & Whitney’s engines. While the airline continued to incur 100 per cent of its operational costs, Go First lost a chunk of Rs10,800 crore in revenues and additional expenses.
The percentage of aircraft grounded due to faulty Pratt & Whitney engines shot up to 50 per cent as of December 2022 from 31 per cent as of December 2020 and 7 per cent as of December 2019.
In fact, the Singapore emergency arbitration has noted that the financial losses faced by GoFirst have been mostly because of the contractual failure of Pratt & Whitney. It has, in its award in favour of GoFirst, asked Pratt & Whitney on an emergency basis to supply at least 10 usable engines by 27 April and more in December this year. The emergency requirement has not been met, forcing the airline to take a drastic measure and declare a cutback of operations.
GoFirst has demanded Rs8,000 crore as compensation from Pratt & Whitney. It has stated that progressively the dysfunction on the part of Pratt & Whitney has caused a slowdown of operations.
Go First has now defaulted in the payment of lease rentals to lessors. And the lessors have started to take action against the airline.
The airline has received notices from lessors for termination of aircraft lease agreements, while some of them have also reportedly invoked letters of credit.
Go First had more market share than Air Asia and another listed airline SpiceJet with a market share of 7.3 per cent and 6.9 per cent with PAX carried to the tune of 2.75 million and 2.60 million, respectively, as of March 2023.
Go First operated 200 flights daily. In the year 2022, the market share of Go First stood at 8.9 per cent.
Several aircrafts including SpiceJet, IndiGo, Air India, Go First etc, witnessed technical glitches recently, with the flights landing to other cities as precautionary measure.
Go First's bankruptcy filing would be the second in five years in the Indian aviation industry after Jet Airways failure in April 2019. Although Jet Airways has been bought over by Murari Lal Jalan and asset management firm Kalrock, the airline is yet to commence its operations.