Go First files for bankruptcy amid faulty engine woes and mounting debt
Struggling Indian airline Go First declared bankruptcy yesterday, attributing it to the “faulty” Pratt & Whitney engines that grounded about 50% of its fleet. The airline’s collapse is the first Indian airline bankruptcy since Jet Airways in 2019, highlighting the intense competition in the aviation sector, where rivals IndiGo and the recently merged Air India and Vistara dominate.
Go First detailed debt of 65.21 billion rupees to financial creditors as of April 28, according to its bankruptcy filing. Although it had not defaulted on these debts yet, the company did default on payments to operational creditors, including 12.02 billion rupees to vendors and 26.60 billion rupees to aircraft lessors. The filing was prompted after the engine supplier failed to comply with an arbitration order related to the release of spare leased engines.
The airline reported that grounded aircraft “due to Pratt & Whitney’s faulty engines” escalated from 7% of its fleet in December 2019 to 50% in December 2022, leading to 108 billion rupees (US$1.32 billion) in lost revenue and additional expenses. Pratt & Whitney responded by stating that they have complied with the March 2023 arbitration ruling and that the matter is now subject to litigation.
The bankruptcy news surprised Go First’s lenders, who were expecting to meet with the airline to assess the situation and determine their next steps. The airline’s troubles, which led to the postponement of its planned US$440 million IPO in 2021, resulted in its market share slipping to 6.9% in March from 8.4% in January. The Wadia Group, the owner of Go First, was rumoured to be considering either selling its majority stake or completely divesting its shareholding.
Go First’s downfall could benefit rival airlines as they strive to meet the high demand for post-pandemic air travel. However, the sudden disruption in operations is expected to cause a supply constraint and potential airfare increases.
Employees, who have been receiving their salaries with a delay for the past few months, were caught off guard by the bankruptcy announcement. The airline later addressed the situation, reiterating its commitment to supporting its staff during this challenging period, reports Channel News Asia.
