Thursday, June 13, 2024

Go First Airline Files For Bankruptcy, Engine Maker Pratt & Whitney Counters Claims

By Staff Correspondent

On May 2, 2023, budget airline Go First announced that it had filed for bankruptcy and insolvency proceedings in the National Company Law Tribunal (NCLT). The sudden news came as a surprise to nearly 5,000 employees who had believed the airline would continue to exist, even as a smaller player in the market.

Go First, founded by Jeh Wadia, son of Nusli Wadia, in 2005, has a history of high CEO turnover, with seven CEOs leaving in over 15 years of existence. The airline blamed engine maker Pratt and Whitney for its grounding, claiming that necessary engines were not supplied to its fleet. However, Pratt & Whitney countered, stating that Go First had a lengthy history of not meeting its financial obligations to the engine maker.

Go First has filed for bankruptcy, but the NCLT has yet to admit it, which could take two to six weeks, according to an unnamed source familiar with such cases. The Wadias may withdraw their petition until it is admitted.

If admitted, the airline’s board will dissolve, and a resolution professional (RP) will be appointed to initiate the six-month Corporate Insolvency Resolution Process (CIRP), which includes seeking claims from various creditors and stakeholders. A committee of creditors (CoC) will oversee the airline’s functioning.

The airline will face several challenges during this process. First, banks may provide only INR50 crore to INR100 crore to keep the airline afloat for six months until a new bidder is found. However, the airline needs an infusion of INR1,600 crore to become viable, and its monthly salary bill is around INR60 crore. The airline has approximately 800 pilots, 900 engineers, and 1,700 cabin crew members.

Second, the announcement of bankruptcy will have already damaged the airline’s bookings, which are crucial for low-cost airlines with no assets of their own.

Third, aircraft lessors will likely request their planes back from the airline before the application is admitted to NCLT over the next month. Once admitted, aircraft lessors cannot repossess planes during the six-month insolvency process. While they cannot fly the planes out due to Pratt and Whitney engine issues, they will likely want to take possession. As a result, many IDERA requests are expected to be filed in the Directorate General of Civil Aviation (DGCA) from tomorrow. Aircraft lessors such as AerCap have already taken back four planes from the airline, reducing its fleet size to around 55, with over half grounded due to faulty engines.

The road ahead for Go First is uncertain, with several challenges to overcome during the insolvency process. The resolution professional and committee of creditors will work towards finding a new bidder for the airline, hopefully leading to its recovery.


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