By Staff Correspondent
Go Airlines (India) Limited, the third largest airline in India, has filed for insolvency resolution under section 10 of the Insolvency Bankruptcy Code (IBC) with the National Company Law Tribunal (NCLT) Delhi. According to the airline, the move was prompted by Pratt & Whitney’s International Aero Engines, LLC’s persistent failure, resulting in the grounding of approximately 50% of its Airbus A320neo fleet as of 1 May 2023. The airline highlighted that Pratt & Whitney repeatedly fell short of its commitments, with the grounding percentage surging from 7% in December 2019 to 31% in December 2020 and 50% in December 2022.
Following Pratt & Whitney’s alleged refusal to comply with an order issued by an emergency arbitrator under the 2016 Arbitration Rules of the Singapore International Arbitration Centre, Go Airlines (India) Limited decided to file for insolvency. The order instructed Pratt & Whitney to provide at least 10 operational spare leased engines to Go Airlines (India) Limited by 27 April 2023, followed by an additional 10 spare leased engines per month until December 2023, aiming to achieve the airline’s financial revival and survival. However, according to the airline Pratt & Whitney’s perceived inability to comply with the order necessitated the application to NCLT.
The company highlighted that despite injecting a significant amount of funds totaling INR 3,200 crores into the airline over the last three years, Go Airlines (India) Limited had to take this action to protect the interests of its customers, travel partners, creditors, suppliers, and employees. The airline expressed regret for the inconvenience caused and received substantial support from the Government of India’s Emergency Credit Line Guarantee Scheme. Nevertheless, due to the grounding of around 50% of its A320neo fleet and related costs, the Go Airlines (India) Limited suffered losses of INR 10,800 crores.
The airline has claimed that it already paid INR 5,657 crores to its lessors in the last two years, with approximately INR 1600 crores paid towards lease rent for non-operational grounded aircraft using the funds infused by the Promoters and Government of India’s Emergency Credit Line Guarantee Scheme. The company has now filed for resolution under section 10 of the IBC to seek compensation of approximately INR 8000 crores in the SIAC arbitration and to address the liabilities of its creditors.
GO FIRST, formerly known as Go Airlines (India) Limited, had enjoyed a market share of 10.8% in FY’20 before the Pratt & Whitney engine failures. In the company’s own admission, the airline was seen as being consistently profitable from 2010-2020, with a comparable EBITDAR to its largest competitor from 2016-2020. Additionally, in FY’22, GO FIRST reported EBITDAR better than its largest competitor’s by almost 3.4%. Furthermore, the company’s operating costs remained lower than the largest competitor’s from 2020-2022.
Over 17 years, GO FIRST has served 84 million passengers. The airline is hopeful that the appointed Interim Resolution Professional will sustain its operations after the application under section 10 of IBC is admitted, allowing it to continue serving many more passengers in the years to come.