GoFirst files for insolvency, blames P&W for financial woes

NEW DELHI:  In a major setback for the country’s aviation sector, low-cost carrier GoFirst (formerly known as GoAir) has filed for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT), Delhi.

A severe financial crunch because of the non-supply of engines by Pratt & Whitney (P&W) forced the airline to take this extreme step, said GoFirst CEO Kaushik Khona. The Wadia family-promoted airline has suspended all operations from May 3-5, impacting the movement of thousands of passengers.

GoFirst claims that failing and faulty engines supplied by P&W have resulted in the grounding of 25 aircraft, which is 50 per cent of its fleet as of May 1, 2023. P&W is the exclusive engine supplier for its Airbus A320neo aircraft fleet.

GoFirst said the filing does not mark the end of the airline. “Once the application under section 10 of IBC is admitted, the appointed Interim Resolution Professional will sustain Go First’s operations, allowing it to serve many more passengers in the years to come,” it added.

Despite this assurance, there is pessimism that GoFirst may end up like Jet Airways or Kingfisher Airline, the two big airlines, which collapsed in the last 11 years. Air India would have met a Simi fate if not rescued by the Tata Group. 

Civil aviation minister Jyotiraditya Scindia said it is unfortunate that this operational bottleneck at GoFirst has dealt a blow to the airline’s financial position. “It has come to our knowledge that the airline has applied to the NCLT. It is prudent to wait for the judicial process to run its course…It is incumbent upon the airline to make alternative travel arrangements for passengers, so that inconvenience is minimal,” said Scindia.

Aviation regulator Directorate General of Civil Aviation (DGCA) has issued a show cause notice to GoFirst after it found that the airline has failed to adhere to the approved flight schedule, resulting in 
inconvenience to passengers.

Founded in 2005 by billionaire Jehangir Wadia, whose family has a controlling stake in firms such as Bombay Dyeing and Britannia, and GoFirst, has always remained a smaller player in the Indian aviation space even as IndiGo, which was founded a year later, has grown to capture 55 per cent of domestic skies.

GoFirst’s market share has seen a slump in recent months and the same came down to 7.8 per cent in the January-March quarter. The airline’s financial woes were known to many as it was facing difficulty in paying salaries on time to its large employee base of 5,000. It had incurred a loss of Rs 1,804 crore on revenues of Rs 4,183 crore in FY22. It recently pulled out for an initial public offering to raise Rs 3,600 crore and efforts to rope in strategic investors also did not bore any fruit.

GoFirst claims that its promoters have infused Rs 3,200 crore in the last three years, Rs 2400 crore of which were injected in the last 24 months, and Rs 290 crore in April 2023 alone. This brings the total promoter’s investment in the airline since its inception to about Rs 6,500 crore. The grounding of close to 50 per cent of its A320neo fleet has led to Rs 10,800 crore in lost revenues and additional expenses for the airline, said GoFirst.

The airline has already filed an emergency petition in Delaware court, USA, against P&W seeking enforcement of an order issued by the Singapore International Arbitration Commission (SIAC).

Pratt & Whitney in a statement late Monday night said that it is committed to the success of their airline customers, and they continue to prioritize delivery schedules for all customers. “P&W is complying with the March 2023 arbitration ruling related to Go First. As this is now a matter of litigation, we will not comment further,” the aircraft engine maker said.

It added that GoFirst has a lengthy history of missing its financial obligations to Pratt.

Down in the dumps

• Fleet size 59 aircraft, including 54 A320neo
• Half of the fleet grounded due to non-supply of engines by Pratt & Whitney
• Employee strength: Over 5000
• Market share down to 7.8 per cent in Jan-March quarter
• Connects 27 domestic destinations and 7 international cities

  

NEW DELHI:  In a major setback for the country’s aviation sector, low-cost carrier GoFirst (formerly known as GoAir) has filed for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT), Delhi. A severe financial crunch because of the non-supply of engines by Pratt & Whitney (P&W) forced the airline to take this extreme step, said GoFirst CEO Kaushik Khona. The Wadia family-promoted airline has suspended all operations from May 3-5, impacting the movement of thousands of passengers. GoFirst claims that failing and faulty engines supplied by P&W have resulted in the grounding of 25 aircraft, which is 50 per cent of its fleet as of May 1, 2023. P&W is the exclusive engine supplier for its Airbus A320neo aircraft fleet.googletag.cmd.push(function() {googletag.display('div-gpt-ad-8052921-2'); }); GoFirst said the filing does not mark the end of the airline. “Once the application under section 10 of IBC is admitted, the appointed Interim Resolution Professional will sustain Go First’s operations, allowing it to serve many more passengers in the years to come,” it added. Despite this assurance, there is pessimism that GoFirst may end up like Jet Airways or Kingfisher Airline, the two big airlines, which collapsed in the last 11 years. Air India would have met a Simi fate if not rescued by the Tata Group.  Civil aviation minister Jyotiraditya Scindia said it is unfortunate that this operational bottleneck at GoFirst has dealt a blow to the airline’s financial position. “It has come to our knowledge that the airline has applied to the NCLT. It is prudent to wait for the judicial process to run its course…It is incumbent upon the airline to make alternative travel arrangements for passengers, so that inconvenience is minimal,” said Scindia. Aviation regulator Directorate General of Civil Aviation (DGCA) has issued a show cause notice to GoFirst after it found that the airline has failed to adhere to the approved flight schedule, resulting in  inconvenience to passengers. Founded in 2005 by billionaire Jehangir Wadia, whose family has a controlling stake in firms such as Bombay Dyeing and Britannia, and GoFirst, has always remained a smaller player in the Indian aviation space even as IndiGo, which was founded a year later, has grown to capture 55 per cent of domestic skies. GoFirst’s market share has seen a slump in recent months and the same came down to 7.8 per cent in the January-March quarter. The airline’s financial woes were known to many as it was facing difficulty in paying salaries on time to its large employee base of 5,000. It had incurred a loss of Rs 1,804 crore on revenues of Rs 4,183 crore in FY22. It recently pulled out for an initial public offering to raise Rs 3,600 crore and efforts to rope in strategic investors also did not bore any fruit. GoFirst claims that its promoters have infused Rs 3,200 crore in the last three years, Rs 2400 crore of which were injected in the last 24 months, and Rs 290 crore in April 2023 alone. This brings the total promoter’s investment in the airline since its inception to about Rs 6,500 crore. The grounding of close to 50 per cent of its A320neo fleet has led to Rs 10,800 crore in lost revenues and additional expenses for the airline, said GoFirst. The airline has already filed an emergency petition in Delaware court, USA, against P&W seeking enforcement of an order issued by the Singapore International Arbitration Commission (SIAC). Pratt & Whitney in a statement late Monday night said that it is committed to the success of their airline customers, and they continue to prioritize delivery schedules for all customers. “P&W is complying with the March 2023 arbitration ruling related to Go First. As this is now a matter of litigation, we will not comment further,” the aircraft engine maker said. It added that GoFirst has a lengthy history of missing its financial obligations to Pratt. Down in the dumps Fleet size 59 aircraft, including 54 A320neo Half of the fleet grounded due to non-supply of engines by Pratt & Whitney Employee strength: Over 5000 Market share down to 7.8 per cent in Jan-March quarter Connects 27 domestic destinations and 7 international cities