Budget carrier Go Airlines (India) Ltd, which operates flights under the Go First brand, has filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal. It has also temporarily suspended its flights scheduled for May 3 and May 4. The move by the Wadia Group company comes amid a severe fund crunch and the grounding of several aircraft due to issues related to non-supply of engines by manufacturer Pratt & Whitney.
"Go First has had to take this step due to the ever-increasing number of failing engines supplied by Pratt & Whitney’s International Aero Engines, LLC, which has resulted in Go First having to ground 25 aircraft (equivalent to approximately 50 per cent of its Airbus A320 neo aircraft fleet) as of 1 May 2023," the airline said in a statement.
Go First has been facing engine-related issues for some time now, and these have only increased over the last year. The percentage of grounded aircraft due to Pratt & Whitney’s faulty engines has grown from 7 per cent in December 2019 to 31 per cent in December 2020 to 50 per cent in December 2022, the airline noted. This is despite Pratt & Whitney making several on-going assurances over the years, which it has repeatedly failed to meet, it said.
Go First further said it has been forced to approach the NCLT after Pratt & Whitney refused to comply with an order issued by the Singapore International Arbitration Centre (SIAC).
That order directed Pratt & Whitney to take all reasonable steps to release and dispatch without delay to Go First at least 10 serviceable spare leased engines by April 27, 2023 and a further 10 spare leased engines per month until December 2023, with the objective of the airline returning to full operations and achieving Go First’s financial rehabilitation and survival.
If Pratt & Whitney were to comply with the orders in the emergency arbitrator’s award, Go First said it would be able to return to full operations by August/September 2023. However, the engine maker has failed to provide any serviceable spare leased engines and stated that there are no spare leased engines available for it to comply with the arbitrator's award, Go First, added.
Go First is part of the diversified Wadia Group, which also owns companies like Britannia, Bombay Dyeing and Bombay Burmah Trading. The promoters had invested Rs 3,200 crore in the airline in the last three years. Since the inception of the airline, the promoters have invested Rs 6,500 crore. This has clearly not been able to prevent the damage caused by Pratt & Whitney's defective and failing engines, it argued.
"The grounding of close to 50 per cent of its A320 neo fleet due to the serial failure of Pratt & Whitney’s engines, while it continued to incur 100 per cent of its operational costs, has set Go First back by Rs 10,800 crore in lost revenues and additional expenses," said the airline.
The additional consequence of Pratt & Whitney’s actions has also driven some lessors to repossess aircraft, draw down letters of credit and notify further withdrawal of aircraft. These actions will result in a "severe depletion in the number of aircraft available for Go First to operate going forward," and this will make it further unfeasible to continue its operation and meet its financial obligations, the airline said.
Go First has sought compensation of about Rs 8,000 crore in the SIAC arbitration. If the airline is successful in the arbitration, it is hoped that it will be able to address the liabilities of its creditors, small and large, the airline said.
Meanwhile, several people took to social media to vent their anger against the airline over the abrupt suspension of services for May 3 and May 4.
"Go First airways extremely pathetic and disappointing customer service. We had an urgent flight booked for 3rd May from Mumbai to Lucknow which they have cancelled at the last minute and neither have they provided any alternative tickets nor are they picking any calls," one flyer wrote on Twitter.
Another flyer complained on Twitter that the airline had cancelled the flight just a day before departure and since it didn't have any alternate flights, the amount will be refunded, but he will have to book another flight, which will cost two times the amount he had paid.
Go First said today's step was taken in order to protect the interests of all stakeholders.
"Go First deeply regrets the disruption and inconvenience that this will cause to its customers, travel partners, creditors, and suppliers and, in particular, to its own employees who have remained loyal to and grown with Go First over the years," it said.
Go First was already operating on "cash and carry" mode, that is, it was paying oil marketing companies on a daily basis for fuel, pointed out Jinesh Joshi, analyst at Prabhudas Lilladher.
"The airline was planning to raise money in recent weeks, which apparently seems to have failed," said Joshi.
According to the analyst, Go First had a market share of 8.9 per cent in 2022 and sudden disruption in operations is likely to benefit other players and raise airfares due to supply constraints.
Once the NCLT processes tie airline's application under section 10 of IBC, an interim resolution professional (IRP) will take over and operate Go First. The airline has said its board and management will cooperate fully with the IRP.