 "Go First")
Wadia-owned Go First on Tuesday filed for insolvency, driven by a cash crunch that resulted from the grounding of nearly half its 57 aircraft.
The airline squarely blamed engine manufacturer Pratt & Whitney for the step and suspended all flights till Thursday.
Bankers to the company will hold a meeting on Wednesday for a review and discuss steps to be taken.
For the past few days, the airline has been flying around 200 flights daily, carrying 25,000-30,000 passengers a day.
The Directorate General of Civil Aviation has issued a show-cause notice to the airline for non-intimation about flights cancelled on May 3 and 4. However, the airline’s website says it has cancelled flights not just on May 3 and May 4, but also on May 5.
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Panic-stricken customers have begun cancelling their tickets for future dates too, according to travel industry sources. Even refunds were not being processed on Monday, an executive of an online travel agency said.
Meanwhile, fuel supplier Indian Oil has decided to put the airline on cash and carry mode for service resumption.
Go First said in a statement: “The percentage of grounded aircraft due to Pratt & Whitney’s faulty engines has grown from 7 per cent in December 2019 to 31 per cent in December 2020 to 50 per cent in December 2022.”
Consequently, the airline’s flights have reduced by about 50 per cent in the past one year.
Go First, which received Rs 3,200 crore of equity infusion in the past three years, said it was forced to move for insolvency after the engine manufacturer refused to comply with an award by an emergency arbitrator appointed in accordance with the 2016 Arbitration Rules of the Singapore International Arbitration Centre.
“The order directed Pratt & Whitney to take all reasonable steps to release and dispatch without delay to Go First at least 10 serviceable spare leased engines by April 27 and a further 10 spare leased engines per month until December, with the objective of Go First returning to full operations and achieving Go First’s financial rehabilitation and survival,” the airline said.
“Despite the emergency arbitrator’s order, however, 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 to comply with the emergency arbitrator’s award,” the airline added.
Go First has claimed Rs 8,000 crore in compensation for the grounding before the arbitral tribunal.
The grounding of the planes has resulted in revenue lost and additional expenses of Rs 10,800 crore, Go First said.
It added the airline had incurred expenses of Rs 1,600 crore as lease rent for the grounded planes.
Go First’s decision to move the bankruptcy court came as a surprise for lenders and suppliers.
The airline has been irregular in paying airports, ground handlers, and suppliers. Even staff salaries are being delayed. However, it has been regular in servicing bank debt.
“This has been caused by an external problem. It does not look to be a case of company mismanagement. Go First has been servicing debt on a regular basis as late as April and is not designated as a special mention account (SMA). The insolvency has come as a surprise to us. The airline hardly gave us any update on the ongoing challenges. We are taking stock of the situation,” said a senior banker.
A public-sector bank executive said: “While the asset has been performing, it was under stress. So we have been making additional provisions as a prudent step. If it is declared non-performing assets, the provision amount may go up.”
Go First’s bank exposure is around Rs 2,600 crore, excluding loans granted under the government’s emergency credit loan guarantee scheme.
Over 90 per cent of the debt is provided by Bank of Baroda and Central Bank and the rest by IDBI Bank.
Civil Aviation Minister Jyotiraditya Scindia spoke in defence of the airline.
“It is unfortunate that this operational bottleneck has dealt a blow to the airline’s financial position. The government of India has been assisting the airline in every possible manner. The issue has also been taken up with the stakeholders involved.”
