Serial Engine Troubles Clip Go First’s Wings

May 3—NEW DELHI — The Wadia group on Tuesday referred its budget airline Go First to a bankruptcy court in Delhi, citing "ever-increasing" issues with aircraft engines made by Pratt & Whitney, a move that may mark the group's exit from the airline business.

Consequently, the airline has suspended operations for the next three days, leaving it to National Company Law Tribunal (NCLT), Delhi, to decide its future course of action. Earlier in the day, Go First informed its travel partners of the three-day shutdown, followed by a statement confirming the filing of an insolvency resolution process.

"Go First has had to take this step due to the ever-increasing number of failing engines supplied by Pratt & Whitney's International Aero Engines, LLC, which has resulted in Go First having to ground 25 aircraft as of 1 May 2023," the airline said. These engine issues led to the grounding of approximately 50% of its Airbus A320neo aircraft fleet of 54 planes.

Meanwhile, the civil aviation regulator Directorate General of Civil Aviation has issued a show cause notice to the airline as it abruptly cancelled flights for 3 May and 4 May. The regulator has sought a response from the airline within 24 hours on the matter.

Aviation minister Jyotiraditya Scindia said the government has been working with Go First to address the supply chain issues and will now help minimize the impact of the grounding on passengers.

"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," Scindia said in a statement. "The DGCA has issued a notice to the airline on the sudden suspension of flights. It's incumbent upon the airline to make alternative travel arrangements for passengers so that inconvenience is minimal."

Lenders are not entirely shocked by Go First's move to approach the insolvency tribunal, a banker said on the condition of anonymity. "While their loan repayments have so far been on time, the problem with aircraft engines has taken a toll," the banker said.

The decision to file for insolvency will grant them a moratorium on payments to lenders, aircraft lessors, fuel suppliers, and ground handlers, among others.

Despite this, uncertainty looms over whether Go First will be able to resume operations. A resolution professional, who declined to be identified, said that restarting operations would be a daunting task, although he did not rule out the possibility. "Technically, they can continue provided suppliers provide services," he said.

According to Go First, the percentage of grounded aircraft due to issues with Pratt & Whitney's engines rose from 7% in December 2019 to 31% in December 2020 and reached 50% in December 2022.

The desperate move by the Wadia group, the promoter of Britannia and Bombay Dyeing, came after several failed attempts to raise funds, initially through an IPO and later from strategic investors.

"The grounding of close to 50% of its A320neo fleet due to the serial failure of Pratt & Whitney's engines, while it continued to incur 100% of its operational costs, has set Go First back by INR10,800 crore in lost revenues and additional expenses," the airline said adding it had paid INR5,657 crore to lessors in the last two years of which approximately INR1,600 crore was paid towards lease rent for non-operational grounded aircraft "from the funds infused by the promoters and government of India's Emergency Credit Line Guarantee Scheme".

The airline said it had filed an arbitration in a Singapore court and sought compensation of approximately INR8,000 crore.

The airline added that some lessors have repossessed aircraft, drew down letters of credit, and notified further aircraft withdrawal. The airline has also filed an emergency petition in Delaware Federal court seeking enforcement of two arbitral awards that have ordered engine manufacturer Pratt & Whitney to deliver serviceable engines to Go First immediately.

Go First is the second airline in the last five years to file for insolvency in India after Jet Airways. Full-service carrier Jet Airways, which ceased operations in April 2019, is yet to return to the skies despite exiting insolvency proceedings.

Go First's exit could lead to a surge in fares and impact growth in the domestic aviation market, which has returned strongly post-covid and clocked a record number of 456,000 passengers on Sunday—the pre-covid high was at 420,000 passengers a day.

During March, the airline carried 6.9% of the total passengers, and its exit has created a vacuum that other airlines may be unable to bridge immediately due to supply chain issues.

During the peak summer season, industry analysts expect high fares to impact demand. "️Go First commanded a market share of 8.9% in CY22, and sudden disruption in operations is likely to benefit other players and raise airfares due to supply constraints," said Jinesh Joshi, an analyst at Prabhudas Lilladher Pvt. Ltd.

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