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Indian Airlines Go First has announced that it will be cancelling all flights till May 6 due to technical issues, while voluntarily filing for bankruptcy to initiate insolvency proceedings.
Go First Airlines is the aviation arm of the Wadia Group, one of India's oldest conglomerates. The Wadia group consists of several famous and heritage companies such as Bombay Dyeing, Bombay Burmah Trading, Britannia Limited and National Peroxide.
Go First is a Low-Cost Carrier (LCC) which was incorporated in 2004. It is India's third largest airline and has a fleet of 59 aircraft using which the company operates flights across 35 destinations, 27 domestic and 8 international.
According to Kaushik Khona, the CEO of Go First, the company was cancelling all flights till 5th May due to technical issues but promised a full refund for the same. Moreover, he added that the company was voluntarily entering insolvency proceedings to protect the interest of all stakeholders.
The filing by the company stated that it was undertaking the step due to faulty engines from Pratt & Whitney, which was the company's largest engine supplier. It stated that the company failed to meet its assurances as the company was forced to ground 50% of its fleet due to engine issues.
This led to a severe shortage of funds for the airline as it is reportedly working on everyday earnings as financial liabilities are consistently adding on.
The company has also filed a lawsuit against the engine manufacturer for enforcement of an award in favour of the company which would force Pratt and Whitney to give engines to Go First, failing which the airline could shut down.
However, Go First has gotten into a lot of trouble. Aviation regulator DGCA has issued a show cause notice to Go First over its abrupt cancellation of the flights.
Moreover, the airline reportedly owes around $800 million to financial creditors. The lenders reportedly had no idea about the company's plans to voluntarily file for insolvency. In rupee terms, the airline owes around Rs 6,521 crores to lenders like the Central Bank of India, Axis Bank, IDBI Bank and Deutsche Bank.
Pratt & Whitney has also come out and said that Go First had a long history of missing its financial obligations to Pratt & Whitney, further bringing under scrutiny the airline's statement about the aerospace engine manufacturer.
According to reports, a default of financial liabilities appears imminent for Go First. Interestingly, the airline had attempted to go public earlier where the company was planning to use the funds to repay debts, but the plan fell through during the pandemic and there appears to be no hope for the plans today.
- Aman Agarwal
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