A wave of uncertainty swept across India’s already unstable aviation sector as Go First, a once thriving private airline owned by the Wadia Group, announced a halt to its operations, making it the 11th airline to cease its services in the last decade. The budget airline opted for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT), delivering a significant jolt to the industry.
The primary reason for this drastic move lies in the alleged failure of US-based jet engine manufacturer Pratt & Whitney (PW) to deliver engines and spare parts, leaving nearly 40 percent of Go First’s fleet grounded for months. The airline had to cease operations entirely in the first week of May 2023 due to this issue.
The Directorate General of Civil Aviation (DGCA) issued a show-cause notice to the carrier, whereas Civil Aviation Minister Jyotiraditya Scindia expressed empathy for the airline’s predicament. The Minister urged Go First to arrange alternative travel solutions for their passengers, affirming that the government is extending all possible aid.
Go First cites the “ever-increasing number of failing engines supplied by PW” as the catalyst for their IBC application. By April 30, 2023, approximately 40 percent of the airline’s 61-aircraft Airbus A-320neo fleet had been grounded. The airline claims that groundings due to faulty PW engines rose from 7 percent of its fleet in December 2019 to 31 percent in December 2020 and 50 percent in December 2022. Go First criticized PW for not fulfilling assurances made to the airline.
The fallout from this situation has been considerable. Go First reported a loss of nearly INR 10,800 crore and sought INR 8,000 crore as compensation from PW. It also spent INR 5,657 crore on its lessors, including INR 1,600 crore as lease rent for non-operational aircraft.
Adding to the issues, PW allegedly failed to abide by the Emergency Arbitrator’s award in Singapore in March 2023, which ordered PW to provide Go First with a minimum of 10 serviceable spare leased engines by April 2023 and 10 additional engines per month until December 2023.
As the next step, after the NCLT processes Go First’s application, an interim Resolution Professional could be appointed to reboot the airline’s operations. However, past experience suggests that such measures can be challenging to execute successfully.
Despite the airline’s promoters and the government’s emergency credit line injecting around INR 6,500 crore in the last three years, the operational cost burden proved insurmountable, resulting in a total loss of INR 10,800 crores.
Go First, which started as ‘GoAir’ in 2005, had steadily risen to become the fifth-largest private carrier, consistently profitable until the PW engine issue surfaced in December 2020, culminating in the grounding in May 2023.
The owners remain determined to revive the airline, despite the tumultuous landscape of the aviation sector, which saw the collapse of an average of one airline per annum over the past decade.
The Go First crisis arrives at a critical moment for Indian aviation, which was poised to return to pre-Covid 19 levels. The full impact of this crisis on the industry remains uncertain.
https://www.iadb.in/2023/05/23/go-first-grounded-decade-sees-11th-private-airline-exit-indian-skies/?utm_source=rss&utm_medium=rss&utm_campaign=go-first-grounded-decade-sees-11th-private-airline-exit-indian-skies&utm_source=rss&utm_medium=rss&utm_campaign=go-first-grounded-decade-sees-11th-private-airline-exit-indian-skies
- Any text modified or added by CorruptionLedger is highlighted in blue.
- [...] These characters indicate content was shortened. This is used for removing unnecessary/biased/flowery language. Example: The oppressive government imposed a curfew becomes: The [...] government imposed a curfew.