Winning Bizness Desk

Mumbai. There is bad news for the entire aviation industry as well as lakhs of air travellers of India. Cash-strapped airline GoFirst may go bankrupt as this budget airliner has suspended the flight for the next 3 days i.e. 3, 4 and 5 May. Airlines have taken this decision due to not being able to pay the dues of the oil companies. GoFirst operates its flights in cash and carry mode. That is, airlines have to pay for fuel according to the number of flights they have to fly every day. Following this decision of GoFirst airline, DGCA has issued a show cause notice and sought the airlines reply within 24 hours. At the same time, Aviation Minister Jyotiraditya Scindia has said that the government is helping the airline in every possible way and has also spoken to the stakeholders.

What Go First has said ?

The airline has also filed an application for voluntary insolvency resolution proceedings with the National Company Law Tribunal (NCLT) Delhi. Airline Chief Kaushik Khona said that due to non-supply of engines, the airline grounded 28 aircraft. This resulted in shortage of funds and had to go for bankruptcy proceedings. It is an unfortunate decision, but necessary to protect the interests of the company. The airline has informed the government about the development and will also submit a detailed report to the Directorate General of Civil Aviation (DGCA). The airline has reached this position due to engine supply issues. Aircraft engine manufacturer Pratt & Whitney (PW) was supposed to supply engines to GoFirst, but did not deliver on time. As a result, GoFirst had to ground more than half of its fleet of aircraft. Due to the non-flying of the flight, he was short of cash and there was no money left even to fill the fuel. These engines are used in the airline's A20 Neo aircraft. The airline has also filed a petition in the Delaware court of America pleading that it will go bankrupt if the engines are not supplied soon.

Breach in terms and conditions led this scenario

There were three major conditions in PW's contract with GoFirst. Firstly, if the engine of the aircraft fails, the spare engine has to be provided within 48 hours. Second, the faulty engines will have to be repaired free of cost as all engines are under warranty and third, compensation will have to be given for the damage caused by the grounded aircraft. According to a report till March 2020, PW provided spare engines on time, repaired them free of cost and also paid compensation. However, after that the airline did not get anything. According to Cerium data, the airline operated 2,084 flights in a week in March last year. With the planes being grounded, this figure came down to 1,642 by March this year.

Will have a big impact on the aviation sector

Go-First's share in the domestic market is around 7% and at present, the total number of air passengers per day is 4 lakh. In such a situation, the burden of 28 to 30 thousand passengers will go on other airlines. Handling them will prove to be a challenge. However, when the demand for pilots is rising, the sudden bankruptcy of a company will increase the availability of the workforce. SpiceJet ran into trouble in December after the BJP government came to power in May 2014, however, somehow it could survive. Similarly, in April 2019, the condition of Jet Airways turned sour, but the government kept avoiding direct help. This time also the chances of direct intervention are less. Experts say that the government will now have to actively handle the situation. Apart from ensuring accountability of Pratt & Whitney, the DGCA will have to make emergency preparations to develop new capacity in other airlines.

The search for a strategic investor continues

The company said that it is looking for a strategic investor. Talks are on with several investors. The airline plans to operate 1,538 flights per week this summer, 40 fewer than last year. This season started from 26 March, and will run till 28 October. The airline's dire condition came to the fore on March 31 itself when it was unable to pay the lease rent of its 10 aircraft for two months. Its complaint had also reached the DGCA.

First flown in 2005 between Mumbai to Ahmedabad

GoFirst is a budget airline of the Wadia Group. According to the company's website, GoFirst was launched on 29 April 2004. Operated the first flight from Mumbai to Ahmedabad in November 2005. The airline's fleet comprises 59 aircraft. Of these, 54 aircraft are A320 NEO and 5 aircraft are A320 CEO. GoFirst operates flights to 35 destinations. Out of this, 27 domestic and 8 international destinations are included. The airline changed its brand name from GoAir to GoFirst in the year 2021.