Go First cancels flights for three days from May 3; files for voluntary insolvency resolution proceedings

Amid uncertainties over its future course, Go First said it would provide a full refund of tickets

Go Airlines (India) Ltd, on Tuesday, filed for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT), Delhi. The airline’s website informed that all "flights scheduled on May 3, 4 and 5 have been cancelled".

A press statement issued by the budget carrier, which had rebranded itself as Go First, not so long ago, squarely blamed its plight at the doorstep of the global aircraft engine manufacturer Pratt & Whitney. “...Pratt & Whitney not providing the required number of spare leased engines by the order issued by the emergency arbitrator, Go First is no longer in a position to continue to meet its financial obligations," it stated. The emergency arbitrator had directed the supply of 10 engines by April 27 and 10 more per month till end-2023.

The move marks the first major airline collapse in India since Jet Airways filed for bankruptcy in 2019.

“Go First has been faced with critical supply chain issues with regard to their engines. The government has been assisting the airline in every possible manner. The issue has also been taken up with the stakeholders involved,” said civil aviation minister Jyotiraditya Scindia, when asked on the issue.

Read | Go First: Scindia says 'prudent to wait for judicial process to run its course'

According to the company, the percentage of grounded aircraft due to Pratt & Whitney’s faulty engines has grown from 7 per cent in December 2019 to 50 per cent in December 2022.

“Go First’s dependence on the Pratt and Whitney neo engines is the highest in the market, though Neo engines have also affected Air India and Indigo, but the impact has been negligible because of a low revenue fleet exposure,” said Mark Martin, chief executive of aviation consultancy Martin Consulting LLC.

“Had Pratt & Whitney complied with the emergency arbitrator’s award, all of Go First’s aircraft would have been operational by August/September 2023, ensuring profitable operations in the fast-growing Indian aviation market,” the Go Airline’s statement added.

“This is a one-sided narrative, and Go First hasn't shared its side of financial obligations to PW (Pratt & Whitney) which may not have been met. PW is always compliant with its contacts, and it's public info there is compensation being paid to Indigo. Why wouldn't PW do that for Go, if the issue wasn't larger,” said a source close to the matter who did not wish to be named.

The cash-strapped airline has been struggling to raise funds since posting its biggest annual loss in fiscal 2022. The airline today said 'substantial funds to the tune of Rs 3,200 crore had been made available over the past 36 months; Rs 2,400 crore was injected in the last 24 and Rs 290 crore in April alone.

The groundings cost Go First Rs 10,800 crores in lost revenues and additional expenses, it said. This has also resulted in an erosion in Go First's market share to 6.9 per cent in March from 8.4 per cent in January, the latest data from the Indian aviation regulator showed.

“India cannot afford to have airlines in this situation, lease rates of aircraft for Indian carriers will shoot up,” said Rishi Jain, CEO, Jain Aviation Consultants. “In the long-term, less competition could result in fare hikes for consumers should Go First not make it.”

Others are optimistic that the airline will pull through. “Airlines who have voluntarily gone into insolvency have actually emerged stronger, we have seen this with United Airlines in the past,” Martin said. Tuesday also saw a lot of speculation among aviation watchers about the likelihood of one of the Gulf carriers swooping in to buy out Go First.