Go First Airlines files for bankruptcy, DGCA issues show cause notice

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Go First Airlines: On May 2, 2023, it was reported that low-cost airline Go First has filed for bankruptcy at the National Company Law Tribunal and suspended its flight operations for the next three days. The airline has cited mounting losses, which it has attributed to delays in the delivery of Pratt and Whitney engines, resulting in the grounding of half its fleet of aircraft.

Go First’s current situation was reportedly exacerbated by Pratt and Whitney’s refusal to take steps to immediately release 10 leased engines by April 27, 2023, and another 10 engines by December 2023, as per the order of the Singapore International Arbitration Centre. The airline said that, had the engines been made available, it would have returned to full operations by August or September 2023.

In addition to the engine delays, industry insiders have reportedly blamed reluctance among shareholders to infuse funds to ease the airline’s cash crunch. However, the airline said that promoters have invested ₹3,200 crore over the last three years, bringing the total promoter investment since the airline’s inception to ₹6,500 crore.

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Go First’s statement said that the grounding of close to 50% of its A320neo fleet due to the serial failure of Pratt & Whitney’s engines, while it continued to incur 100% of its operational costs, has set the airline back by ₹10,800 crore in lost revenues and additional expenses. Moreover, Go First has paid ₹5,657 crore to lessors in the last two years of which approximately ₹1,600 crore was paid towards lease rent for non-operational grounded aircraft.

The airline has sought a compensation of approximately ₹8,000 crore in the SIAC arbitration, and said that if the arbitration was successful, it would be able to pay dues to its creditors. However, some lessors have already started repossessing some of its aircraft, withdrawn letters of credit, and notified the airline that more aircraft will be removed from Go First’s custody, severely depleting the airline’s ability to maintain viable operations.

The Directorate General of Civil Aviation (DGCA) has served a show cause notice to the airline for the sudden cancellation of flights without sharing prior information with it and has asked it to submit its plan of action for the resumption of flights. The DGCA has given the airline 24 hours to share what mitigation measures the airline has adopted, as well as to submit its plan of action to resume flights.

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India’s Minister for Civil Aviation Jyotiraditya Scindia said in a statement that it was “incumbent upon the airline to make alternative travel arrangements for passengers so that inconvenience is minimal.”

The development comes at a time when the insolvency proceedings of Jet Airways, which shut down in 2019, have thus far failed to revive the airline over payments to lenders.

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