The budget carrier has also filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT), Delhi.
Wadia Group-controlled Go First has filed for insolvency proceedings with the National Company Law Tribunal (NCLT), blaming US-based Pratt & Whitney (P&W) engines for the grounding of about half its 50-strong fleet.
The insolvency filing marks the first major airline collapse in the country since Jet Airways filed for bankruptcy in 2019.
Earlier in the day, the troubled low-cost airline suspended all flights for May 3 and May 4 amid a severe fund crunch. The move invited a show-cause notice from the Director General of Civil Aviation as to why actioncivil should not be initiated for violation of Aircraft Rules 1937.
The government seems to have taken a sympathetic view of the airline’s woes. Civil aviation minister Jyotiraditya Scindia said it was unfortunate that the “operational bottleneck issue has dealt a blow to the airline’s financial position” and that it was “prudent to wait for the judicial process to run its course”.
Scindia said the government has been assisting the airline in every possible manner and the matter has been taken up with the stakeholders involved. He advised Go First to make alternative travel arrangements for passengers, so that inconvenience was minimal.
Go First’s lenders were unaware of the airline’s plan to file for voluntary insolvency, two bankers told news agency Reuters.
In its statement, Go First said non-supply of engines from P&W resulted in an income loss of ₹10,800 crore and expenses totalling ₹1,600 crore towards lease rent for non-operational grounded aircraft.
Go First also sued P&W in a Delaware court on Tuesday. The emergency petition seeks enforcement of two arbitral awards that require P&W to immediately supply the engines for its Airbus 320 aircraft to help it continue operations.
“It is an unfortunate decision but had to be done to protect the interest of the company,” news agency PTI quoted the airline’s CEO Kaushik Khona as saying.
Go First claimed that it had been forced to apply to the NCLT after P&W refused to comply with an award issued by an emergency arbitrator. The order directed P&W to dispatch at least 10 serviceable spare leased engines by April 27 and a further 10 spare leased engines per month until December, Go First said.
To recover these and other losses, Go First has sought compensation of around ₹8,000 crore in the arbitration. If the company is successful in the arbitration, it is hoped that it will be able to address the liabilities of all its creditors.
“The additional consequence of P&W’s actions has also driven some lessors to repossess aircraft, draw down letters of credit and notify further withdrawal of aircraft. The culmination of these actions will result in a severe depletion in the number of aircraft available for Go First to operate going forward, thereby making it further unfeasible for the company to continue its operation and meet its financial obligations,” the company further added.
The percentage of Go First’s grounded aircraft due to faulty engines has grown from 7% in December 2019 to 31% in December 2020 and 50% in December 2022.
Sabina Chopra, COO, corporate travel and head Industry relations, Yatra.com, said, “Go First flights for 3rd and 4th May are unavailable, while flights from 5th May onwards are available. We are continuously following up with the airline and are awaiting an update from their end on rescheduling and refunds.”