Cash-strapped Go First, an Indian airline, has filed for bankruptcy proceedings on Tuesday, citing “faulty” Pratt & Whitney engines as the reason for grounding nearly half of its fleet.
India witnesses its first significant airline collapse since Jet Airways’ bankruptcy in 2019. The development highlights the intense competition in the aviation industry, which is majorly dominated by IndiGo and the recent merger of Air India and Vistara under the Tata conglomerate.
According to a bankruptcy filing viewed by Reuters, First’s overall debt to financial creditors stands at 65.21 billion rupees ($797m) as of April 28.
According to a recent filing, the company has not defaulted on its dues as of April 30. However, it has failed to make payments to its operational creditors, including vendors and aircraft lessors, amounting to 12.02 billion rupees ($146.9m) and 26.60 billion rupees ($325m), respectively.
In a recent statement, Go First has announced its filing with the National Company Law Tribunal. The move comes after Pratt & Whitney, the sole engine supplier for the airline’s Airbus A320neo aircraft fleet, declined to adhere to an arbitration order. The order required the release of spare leased engines to the airline, which would have enabled it to resume full operations.
Reuters’ attempts to reach Pratt & Whitney for comment were unsuccessful at the time of publishing. Raytheon Technologies’ parent company was unavailable for comment at the time of publication.
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Pratt & Whitney, a leading aircraft engine manufacturer, has reportedly acknowledged being impacted by the prevailing supply chain challenges in the industry. However, the company has expressed optimism that the situation is likely to improve in the latter half of this year, which would enable it to ramp up production of both new and refurbished engines. These comments were made in response to queries from Indian media outlets.
According to analysts, IndiGo, a bigger competitor, has been able to weather the impact more effectively due to its larger fleet and deeper pockets.
Go First, previously known as GoAir and owned by the Wadia Group, has announced the cancellation of flights from May 3 to May 5 due to operational reasons, according to a statement on its website.
India’s Civil Aviation Minister Jyotiraditya Scindia stated that the government of India has been providing all possible assistance to the airline. The stakeholders involved have also been engaged in the matter.
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According to Jinesh Joshi, a research analyst with Prabhudas Lilladher, the unexpected disturbance in operations is expected to have a positive impact on other players and lead to a rise in airfares due to supply constraints.
Go First’s lenders were reportedly caught off guard by the move, according to two bankers familiar with the situation who spoke to Reuters.
According to a banker, Go First’s management recently met with lenders, but no notification was provided. According to sources, lenders are set to convene a meeting in the near future to evaluate the current circumstances and determine the next steps to be taken.
According to a report by Acuite Ratings in January, Go First holds rated Indian bank debt worth 56 billion rupees ($685m). Central Bank of India and Bank of Baroda hold the biggest share.
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Go First, an Indian airline, has reported a significant increase in the number of grounded aircraft due to issues with Pratt & Whitney’s engines. The airline stated that the percentage of grounded aircraft rose from 7% in December 2019 to 50% in December 2022. This has resulted in a loss of 108 billion rupees ($1.32bn) in revenue and additional expenses for the company.
Go First, an Indian airline, has experienced a decline in its market share from 8.4 percent in January to 6.9 percent in March, according to the latest data from the Indian aviation regulator. This decline comes as a result of problems that caused the airline to postpone its intended $440m IPO in 2021.
Airline Seeks Funds, Wadia Group in Talks to Sell Majority Stake or Exit Shareholding. Wadia Group remained silent when contacted by Reuters for comment via email.
Groundings Prompt Aircraft Repossessions and Lease Withdrawals, Says Go First
Local media sources reported that employees were caught off guard upon learning about the cessation of daily operations, as per three anonymous pilots. Pilots have reported experiencing salary delays for the past few months.
Go First, an airline company, expressed their empathy towards their employees in an email viewed by Reuters. The company acknowledged that the news may cause distress and assured their commitment to providing support during this challenging period.