Manas Dasgupta
NEW DELHI, May 2: After losing market share despite an air traffic boom in the country, the low cost carrier Go First Airlines on Tuesday cancelled all its flights on Wednesday and Thursday due to a severe fund shortage, official sources said.
The carrier, owned by the Wadia Group, has also filed for voluntary insolvency resolution proceedings before the National Company Law Tribunal in Delhi. “It is an unfortunate decision (filing for voluntary insolvency resolution proceedings) but it had to be done to protect the interests of the company,” Go First chief executive Kaushik Khona said.
Go First has been battling financial headwinds for some time now. It has been in a cash-and-carry arrangement with the oil companies. This means that the carrier has to pay for the fuel each day and is not getting any credit from the suppliers.
At the centre of the crisis is the grounding of about half of its aircraft fleet of the Airbus A320 family due to issues with its Pratt & Whitney (P&W) engines and lease rental payment delays. Salary delays have become a regular occurrence at Go First over the recent past.
Reports from the United States suggest that the airline has filed an emergency petition in Delaware against P&W, stating that there is a “significant risk” of the airline going out of business and declaring bankruptcy if it does not receive engines soon.
Media reports last month had indicated that the textile giant Wadia group was in talks with strategic partners to either sell a majority stake in loss-making budget airline Go First or completely exit it. Go First posted its biggest annual loss in fiscal 2022 and has been facing operational problems in the last few months as half of its aircraft were grounded due to supply chain disruptions related to Pratt & Whitney (P&W) jet engines, the report said.
Khona said the company had grounded 28 aircraft, more than half of its fleet, after not getting engines from US-based Pratt & Whitney. This has directly led to a funds crunch as not having enough aircraft flying dries up earnings very fast in the aviation sector. Go Air said it had told the government about the situation and would send a report to the airlines regulator Directorate General of Civil Aviation (DGCA).
Some people who have booked Go First in the next two days said they have received auto-generated emails about flight cancellations due to “operational issues.” A senior DGCA official confirmed that the airline has suspended operations for May 3 and 4.
With 28 out of 55 aircraft in the airline’s fleet have been grounded for more than a year, the company was suffering from dwindling cash flow. Go First employs over 5,000 people. On its website, the airline said its fleet has 59 aircraft, of which 54 are A320 NEO and five are A320 CEO.
The Wadia group, which runs companies including textiles maker Bombay Dying & Manufacturing Co Ltd, is reluctant to invest more until the issue with P&W is resolved, after infusing around 30 billion rupees ($366.2 million) in the last 15 months to keep the airline afloat, the sources said.
The no-frills airline lost market share in February even amid a domestic air traffic boom. The airline had filed papers for an initial public offering in May 2021, but coronavirus outbreaks and the P&W engine issues hindered its plans, media reports said.