Why has Go First filed for bankruptcy? What happens to passengers who booked tickets?
Why has Go First filed for bankruptcy? What happens to passengers who booked tickets?
India’s aviation sector was hit with turbulence on Tuesday when Mumbai-based Go First, earlier known as Go Air, filed for voluntary insolvency and announced cancellation of flights for three days starting 3 May.
The Wadia group-owned carrier, which first took to the skies 17 years ago, will cancel flights for three days – 3, 4 and 5 May – and promised to make a full refund to the customers. The carrier operates around 185 flights daily, ferrying an estimated 30,000 passengers across the country.
The airline’s CEO Kaushik Khona in a statement said that they were grounding 28 planes, half of their fleet, due to the non-supply of engines by Pratt & Whitney (P&W), and that has resulted in a fund crunch. “It is an unfortunate decision (filing for voluntary insolvency resolution proceedings), but it had to be done to protect the interests of the company,” he was quoted as telling news agency PTI.
The move to cancel flights ‘without any prior intimation’, however, caused the aviation regulator Directorate General of Civil Aviation (DGCA) to issue a show cause notice to the embattled carrier.
But what is the connection between P&W engines and Go First opting for bankruptcy? Here’s what we know.
All about P&W engines
Pratt & Whitney is an American aerospace manufacturer with its headquarters in East Hartford, Connecticut. A subsidiary of Raytheon Technologies, P&W aircraft engines are widely used in both civil aviation and military aviation.
Founded in 1925 by Frederick B Rentschler, Pratt & Whitney today has more than 85,000 engines in service and more than 16,000 customers worldwide.
Notably, Connecticut-based Pratt & Whitney is the exclusive engine supplier for Go First’s Airbus A320 neo aircraft fleet.
In a tailspin
Go First’s decision to opt for insolvency stems from the ‘serial failure’ of Pratt & Whitney engines, said the airline. In a statement, the Wadia Group-owned no-frills airline said, “The percentage of grounded aircraft due to Pratt & Whitney’s faulty engines has grown from seven per cent in December 2019 to 31 per cent in December 2020 to 50 per cent in December 2022. This is despite Pratt & Whitney making several on-going assurances over the years, which it has repeatedly failed to meet.”
The airline says it has been forced to apply to the National Company Law Tribunal after engine supplier Pratt & Whitney refused to comply with an award issued by an emergency arbitrator appointed by the Singapore International Arbitration Centre (SIAC). That order directed Pratt & Whitney to release and dispatch without delay at least 10 serviceable spare leased engines to Go First by 27 April 2023, and a further 10 spare leased engines per month until December 2023.
“If Pratt & Whitney were to comply with the orders in the emergency arbitrator’s award, Go First would be able to return to full operations by August/September 2023. Despite the emergency arbitrator’s order, however, at the date of this press release, Pratt & Whitney has failed to provide any further serviceable spare leased engines at all, and has stated that there are no further spare leased engines available for it comply with the emergency arbitrator’s award,” the airline further stated.
Go First added that the grounding of nearly 50 per cent of its A320neo fleet while continuing to incur all the operational costs had set the airline back by Rs 10,800 crore in lost revenue.
The airline further had to pay Rs 5,657 crore to lessors in the last two years of which approximately Rs 1,600 crore was paid towards lease rent for non-operational grounded aircraft from the funds infused by the Promoters & Government of India’s Emergency CreditLine Guarantee Scheme.
Uncertain future
For the three days that it has cancelled operations, Go First has announced a full refund to passengers. However, it seems that non-operations could be extended for many more days to come.
The sudden announcement threw a wrench in people’s travel plans. A passenger named Harinder Singh told news agency ANI that he had booked his ticket with Go First Airlines for Wednesday early morning but came to know about flight cancellation when he reached Delhi. “I left Meerut around 3 am, but after reaching Delhi I got to know that my flight has been cancelled… no one is ready to say anything clearly.”
Another passenger who booked his ticket with Go First Airlines said, “With lot of difficulties we managed to plan a holiday to Leh and booked all the tickets and now they are saying, if you want to take a refund, you can, otherwise we don’t care.”
Reacting to the turbulence, Civil Aviation Minister Jyotiraditya Scindia said it was unfortunate that such a situation had arisen and that they would keep a close watch on the developments that will take place at the NCLT this week. “Unfortunate that this operational bottleneck 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,” he said.
Will Go Air be able to get wings again? Only time will tell. As of now, it becomes the second airline after Jet Airways to be grounded in India in the last four years.
With inputs from agencies
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