Explained: Will GO FIRST's BANKRUPTCY lead the Airline to Spicejet, Jet Airways and Kingfisher fate?

Описание: Go First, a budget airline owned by the Wadia Group, has filed for voluntary insolvency resolution proceedings with the National Company Law Tribunal (NCLT) after being forced to suspend all operations on May 3 and 4 due to Pratt & Whitney's inability to supply engines. Go First claims that 25 of its Airbus A320neo aircraft fleet, which is nearly 50% of its total fleet, has been grounded since May 1, 2023, due to faulty engines supplied by Pratt & Whitney. The airline also states that it has suffered a loss of Rs 10,800 crore and is seeking Rs 8,000 crore as compensation from the engine-maker.

The airline's troubles began in 2019 when 7% of its fleet was grounded due to faulty PW engines. By December 2020, the number had risen to 31%, and it has now reached 50%. Despite assurances from Pratt & Whitney, the engine-maker has repeatedly failed to meet its commitments. Go First claims that it has been left with no choice but to file for insolvency as it can no longer meet its financial obligations.

If the NCLT accepts Go First's application, an interim resolution professional may be appointed to take over and operate the airline. However, the resolution of Jet Airways, which was grounded in 2019, has been a non-starter so far.

The grounding of almost half of Go First's fleet has resulted in significant losses for the airline, despite the Wadia Group infusing Rs 3,200 crore into the company over the last three years. The group has invested approximately Rs 6,500 crore in the airline since its inception. Additionally, Go First has received support from the government's emergency credit line guarantee scheme, but this has not been enough to prevent the damage caused by the faulty PW engines.

In response to Go First's cancellation of all flights on May 3 and 4, the Directorate General of Civil Aviation (DGCA) has issued a show cause notice to the airline for violating the conditions for approval of schedule. The DGCA states that Go First did not provide prior intimation of the cancellations, failed to report the cancellations and reasons, and did not adhere to the approved schedule, which will cause passenger inconvenience.

The situation with Go First is reminiscent of other airlines that have shut down in recent years due to financial difficulties, including Kingfisher-Air Deccan and Jet-Sahara. Air India was able to avoid this fate after it was bought over by the Tatas. IndiGo has also faced similar issues with Pratt & Whitney's engines, with dozens of its planes grounded. However, the airline was able to avoid the worst of the situation by opting for engines from CFM, which has helped to hedge it from Pratt & Whitney's unending failures.

In conclusion, Go First's filing for insolvency is a consequence of Pratt & Whitney's failure to supply engines, resulting in the grounding of almost half of its fleet. Despite significant investments from the Wadia Group and support from the government, the airline has suffered significant losses and is unable to meet its financial obligations. The situation is a reminder of the challenges faced by airlines, and the importance of reliability and stability in the industry.


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