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Indian Low-Cost Carrier Go First Files for Bankruptcy
Go Airlines of India, branded as “GO FIRST” has voluntarily filed for resolution and protections with the National Company Law Tribunal in New Delhi.
The low-cost carrier has filed for the same under Section 10 of the Insolvency Bankruptcy Code (IBC).
The 55-aircraft-strong carrier had to take the step owing to financial and operational problems being faced due to the increasing number of failing engines supplied by Pratt & Whitney. The engine manufacturer is the sole supplier of engines for the airline’s Airbus A320NEO fleet.
The airline was planning on going public last year. The airline, originally called GoAir, rebranded itself as “Go First” for the IPO.
The Indian airline has a fleet of 55 A320 NEOs, all powered by P&W engines. Since 2018, the same has been facing glitches, hampering operations, and causing delays and monetary losses to Go First as well as IndiGo. The difference between IndiGo and Go First is that the former has a huge fleet of A320s with both CFM and P&W engines. Hence, IndiGo is not facing similar complications as Go First.
P&W non-compliant with arbitration ruling
As of May 1, 25 out of 55 A320NEOs of the aircraft are grounded owing to engine issues. After a round of arbitration under the Singapore International Arbitration Centre (SIAC) dated Mar 30, 2023, the airline was awarded a verdict wherein P&W where required to supply at least 10 serviceable leased engines by April 2023 and a further 10 engines per month until December.
The same award was confirmed again on Apr. 15.
Pratt & Whitney failed to provide any serviceable leased engines to the troubled airline, further maintaining that no such engines are available to comply with the arbitration award.
The losses sustained by the single aircraft type operator in monetary terms are enough to make any airline operator sweat. In order to keep the airline in the air, the promoters have already infused nearly $391 million. Since the airline commenced operations in 2005, the promoters have invested approximately $800 million.
The engine-issue-plagued airline has received support from the Indian government via its Emergency Credit Line Guarantee Scheme.
The airline claims that the grounding of 50% of its fleet owing to P&W engine glitches, while still paying 100% operating costs has set the company back by a whopping $1.3 billion in lost revenues and additional expenses.
The Indian airline has been paying lessors amounts due even for the non-operational, grounded aircraft.
At its very essence, and as observed by the SIAC, the financial issues faced by the airline can also be laid with the ongoing issues with Pratt & Whitney.
If an engine manufacturer of faulty engines does not repair, supply new engines, or provide compensation for losses faced when the same issue manages to cripple 50% of the available capacity, any airline no matter how big or small will face similar problems.
In the past 24 hours, the airline halted flight bookings on May 3 and 4. Third-party booking websites removed the listing of the same. Additionally, the airline has also sued Pratt & Whitney.
The filing for resolution and protection has made Go First the first airline to file for bankruptcy since Jet Airways in 2018.
Aviation in India was following a commendable upward growth with the industry witnessing the best April in terms of domestic traffic, with the highest traffic and loads. The sector was able to cross the average daily traffic of February 2020, the last month of regular operations before the pandemic.
All the above simply points to all that Go First is losing in terms of revenue, traffic, and market share.
Regardless of whether or not the airline is able to recuperate from this speedbump, it will end up missing what looks to be a very fruitful and promising summer season in India.
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- Indian Low-Cost Carrier Go First Files for Bankruptcy - May 2, 2023
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