GoFirst's bankruptcy filing is not unexpected given the airline's ongoing financial struggles. However, the real question is whether the airline can recover from this situation, especially as the country is still awaiting the resurrection of Jet Airways.
Indian low-cost carrier GoFirst filed for bankruptcy with the National Company Law Tribunal on Tuesday, citing mounting losses due to the grounding of almost half of its aircraft.
The airline, previously known as Go Air, attributed the grounding of its aircraft to engine delivery delays by Pratt & Whitney and said the delay has resulted in losses amounting to $1.32 billion.
The bankruptcy filing was announced shortly after the airline said it will temporarily suspend flight operations on May 3-5 due to a “severe fund crunch.” GoFirst CEO Kaushik Khona said the flights would restart once the tribunal admits the application.
Since 2019, GoFirst is the second Indian airline to file for bankruptcy after Jet Airways.
GoFirst was the fifth largest airline in India by scheduled departures this month, according to aviation analytics firm Cirium.
GoFirst had plans to operate to 34 destinations in Asia in May, with its primary operations taking place at Delhi and Mumbai Airport. The airline’s schedule for this month included 6,225 flights, which would have provided more than 1.1 million seats.
Pratt & Whitney Woes
Cirium pointed out that the airline had an all A320 fleet, with an average fleet age of only 5.6 years.
The percentage of grounded aircraft due to Pratt & Whitney’s faulty engines has grown from 7 percent in December 2019 to 31 percent in December 2020 and now 50 percent in December 2022, GoFirst said in a statement.
“This is despite Pratt & Whitney making several ongoing assurances over the years, which it has repeatedly failed to meet,” the statement read.
In March, GoFirst’s market share slid from 8 percent to 6.9 percent and its passenger load factor also fell from 93.1 percent to 90.2 percent. The airline’s market share had peaked in May last year when it stood at 11.1 percent.
“Pratt & Whitney continues to struggle to support its worldwide fleet of neo aircraft as maintenance, repair and operations capacity remains constrained and turnaround times for engines in the shop have been nearly three times longer than the historical averages,” Spirit Airlines CEO Ted Christie had said in February.
GoFirst said Pratt & Whitney has refused to comply with an award issued by the Singapore International Arbitration Centre. It claims the arbitration could yield a payment of around $1 billion, which could help pay off the company’s debts to creditors.
“If Pratt & Whitney were to comply with the orders in the emergency arbitrator’s award, Go First would be able to return to full operations by August/September 2023,” a statement from the airline read.
An Unfortunate Decision
Calling the filing for voluntary insolvency resolution proceedings an unfortunate decision, the airline’s CEO said it had to be done to protect the interests of the company.
The airline said it had been forced to take this step despite the infusion of substantial funds to the tune of $425 million by promoters into the airline in the last three years, $319 of which was injected in the last 24 months, and $38 million in April 2023 alone.
“This brings the total promoter investment in the airline since its inception to approximately $862 million,” the airline said.
In addition, GoFirst has also received significant backing from the Indian government’s Emergency Credit Line Guarantee Scheme.
However, the airline said, “Even this collective and significant support has not sufficed to prevent the enormous damage caused by Pratt & Whitney’s defective and failing engines.”
Indigo, which is the only other Indian carrier whose Airbus 320neo aircraft are also powered by Pratt & Whitney’s geared turbo fan engines, has grounded 34 aircraft as a result of the maintenance problems with Pratt & Whitney.
More Problems for GoFirst
Meanwhile, GoFirst has received a show cause notice from Indian aviation watchdog Directorate General of Civil Aviation regarding the airline’s decision to cancel flights for two days.
The notice points out that the airline did not inform the aviation regulator in advance about the cancellations and asks for a detailed report on the measures taken to address the inconvenience caused to passengers booked for the next two days.
Reacting to GoFirst applying to the National Company Law Tribunal, Jyotiraditya Scindia, India’s aviation minister, acknowledged that the airline has been facing critical supply chain issues with regard to their engines.
Scindia said the government had been assisting the airline and added, “It is unfortunate that this operational bottleneck has dealt a blow to the airline’s financial position.”
Despite receiving regulatory approval in August 2021, Go First has been unable to proceed with its initial public offering (IPO) plans, which were originally intended to raise $482 million.
It planned to raise another $202 million through a pre-IPO placement.
The low-cost carrier, which recorded its highest ever annual financial loss in the 2022 fiscal year, has also been unsuccessful in raising additional funds.
The story was updated to include insights from Cirium.
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Photo credit: GoFirst filed for bankruptcy with the National Company Law Tribunal. Source: Anna Zvereva/Wikimedia Commons https://commons.wikimedia.org/wiki/File:GoAir,_VT-WJF,_Airbus_A320-271N_%2833789251028%29.jpg Anna Zvereva / Wikimedia Commons