Cash-strapped Indian airline Go First Airways filed for insolvency proceedings with the National Company Law Tribunal on Tuesday, blaming Pratt & Whitney engines for the grounding of about half its fleet.
The insolvency filing marks the first major airline collapse in the country since Jet Airways filed for bankruptcy in 2019, and underscores the fierce competition in the sector.
Go First’s filing comes after Pratt & Whitney, the exclusive engine supplier for the airline’s Airbus A320neo aircraft fleet, refused to comply with an order to release engines to the airline that would have allowed it return to full operations, the company said.
“…in the absence of Pratt & Whitney not providing the required number of spare leased engines in accordance with the order issued by the emergency arbitrator, Go First is no longer in a position to continue to meet its financial obligations,” the airline said.
Pratt & Whitney, a Raytheon Technologies (RTX.N) unit, was not immediately available for comment.
Local media reported that Go First had suspended its flights for May 3 and 4.
Go First’s lenders were unaware of the airline’s plan to file for voluntary insolvency, two bankers aware of the matter told Reuters.
The lenders met Go First’s management a few weeks ago, but no intimation was given, said one of the bankers. Lenders will meet shortly to assess the situation and decide on the future course of action, they said.
The number of grounded aircraft due to the engine issue increased from 7 per cent of its fleet in December 2019 to 31 per cent in December 2020 and 50 per cent in December 2022, the airline said.
The groundings cost Go First 108 billion rupees ($1.32 billion) in lost revenues and additional expenses, it said.
The grounded flights resulted in Go First’s market share falling to 6.9 per cent in March from 8.4 per cent in January, latest data from the Indian aviation regulator showed.
“I am a little stunned to hear of them file for bankruptcy and proceed for IBC,” said Mark Martin, CEO at aviation consultancy Martin Consulting LLC. “I still feel that this might not be the end of GO First. This must be a vehicle and a means for somebody new to take over.”
Martin blamed 80 per cent of Go First’s financial woes on Pratt & Whitney and said it was not a case of mismanagement by promoters.
The airline was seeking to raise funds and Indian conglomerate Wadia Group was reported to be in talks to either sell a majority stake or completely exit its shareholding.
“The additional consequence of Pratt & Whitney’s actions has also driven some lessors to repossess aircraft, draw down letters of credit and notify further withdrawal of aircraft,” the airline said.