Domestic airlines that are strapped for cash According to Go First CEO Kaushik Khona, the airline has canceled all flights for May 3 and 4 and has been ‘forced’ to file for voluntary insolvency resolution proceedings before the National Company Law Tribunal in Delhi.
“It’s an unfortunate decision… but it had to be made to protect the company’s interests,” he said, adding that “Go First is facing a financial crisis due to Pratt & Whitney’s non-supply of engines, which has forced the company to ground 28 planes, which is more than half of its fleet.”
The airline, which employs over 3,000 people, has already informed the government and will submit a detailed report to the Directorate General of Civil Aviation, while suspended flights will resume only after its insolvency application is approved, according to Khona.
Go First said in a lengthy statement Tuesday afternoon that it ‘had to take this step due to the ever-increasing number of failing engines’ supplied by American manufacturer Pratt & Whitney. According to the airline, these failures have resulted in the grounding of 25 aircraft as of May 1.
Go First operates on a cash-and-carry model, which means it pays oil marketing companies daily for each flight it operates, and due to a lack of flights, it lacks funds to pay OMCs their dues.
According to the airline’s statement, it was ‘forced’ to file for insolvency because the engine manufacturer P&W’refused to comply with an award issued by an emergency arbitrator’, which directed the supply of 10 engines by April 27 and 10 more per month until the end of 2023.
Go First also stated that Pratt & Whitney has ‘failed to provide any further serviceable spare leased engines’ because no spare leased engines are currently available.
Since posting its largest annual loss in fiscal 2022, the cash-strapped airline has struggled to raise funds. According to Reuters, owners of Wadia Group are in talks with strategic partners to sell a majority stake or completely exit the loss-making company.
Later, Go First denied rumors that it would exit the aviation business, telling news agency ANI that there were ‘no plans to shed stake or exit the aviation business,’ and that the promoters were ‘committed to the business and are infusing additional funds…’
The airline announced today that substantial funds – 3,200 crore – had been made available over the previous 36 months, with 2,400 crore injected in the last 24 months and 290 crore in April alone. According to Reuters, the Wadia Group is hesitant to invest further until the P&W issue is resolved.
The airline claimed that the engine supply issue had cost it $10,800 crore in lost revenues and additional expenses and that it had requested compensation in the Singapore arbitration of about 8,000 crores “to recover these (and other) losses.”
To enforce the Singapore arbitration award in its favor, Go First filed a lawsuit against American engine manufacturers Pratt & Whitney in a US federal court.
In February, a P&W representative told ANI that “global supply chain challenges” are “restraining the supply of structural castings and other parts (necessary to manufacture the jet engines)”.
According to the national aviation regulator DGCA, the grounded flights—this is not the first time—caused Go First’s market share to decline to 6.9% in March from 8.4% in January.
