Cash-strapped Go First, an Indian airline, declared bankruptcy on Tuesday, blaming the grounding of about half of its fleet on "faulty" Pratt & Whitney engines.
The move emphasises the strong rivalry in a sector dominated by IndiGo and the recent merger of Air India and Vistara under the Tata conglomerate. It is the first significant airline collapse in India since Jet Airways declared bankruptcy in 2019.
In a bankruptcy filing with the National Company Law Tribunal, Go First stated that as of April 28, the total amount owed to financial creditors was 65.21 billion rupees.
As of April 30, the business had not missed a payment on any of those obligations, but it had, according to the petition, missed payments to operational creditors, including 12.02 billion rupees owed to vendors and 26.60 billion rupees owed to aircraft lessors.
Go First stated in a statement that it filed the lawsuit as a result of Pratt & Whitney, the sole engine provider for the airline's fleet of Airbus A320neo aircraft, refusing to abide by an arbitration ruling ordering the transfer of spare leased engines, which would have allowed the airline to resume regular operations.
The airline said that the percentage of its fleet that was grounded "due to Pratt & Whitney's faulty engines" increased from 7% in December 2019 to 50% in December 2022, costing it 108 billion rupees ($1.32 billion) in lost income and associated expenses.
According to a statement Pratt & Whitney provided to Reuters, the company is "committed to the success of our airline customers, and we continue to prioritise delivery schedules for all customers."
"P&W is complying with the March 2023 arbitration ruling related to Go First. As this is now a matter of litigation, we will not comment further," it added.
The head of Raytheon Technologies, which owns Pratt & Whitney, admitted that the GTF engines had reliability problems in February.
Additionally, Pratt & Whitney has been quoted in Indian media as saying that it was impacted by pressures on the supply chain that were experienced by the entire industry and that it anticipates them to ease later this year to support increased production of new and overhauled engines.
Due to its larger fleet and deeper pockets, analysts claim bigger rival IndiGo has been able to withstand the impact better.
On its website, Go First, a subsidiary of the Wadia Group and formerly known as GoAir, announced that it had cancelled flights from May 3 to May 5 for "operational reasons."
"The government of India has been assisting the airline in every possible manner," India's Civil Aviation Minister Jyotiraditya Scindia said in a statement. "The issue has also been taken up with the stakeholders involved."
As the industry works to prepare for an increase in post-pandemic air travel, the collapse could help rival airlines.
"The sudden disruption in operations is likely to benefit other players and increase airfares due to supply constraint," wrote Jinesh Joshi, a research analyst with Prabhudas Lilladher.
According to two bankers with knowledge of the situation, the move caught the lenders of Go First off guard.
A few weeks ago, the lenders met with Go First's management, but according to one of the bankers, no announcement was made. Lenders will soon convene to evaluate the situation and choose a line of action, according to what they indicated.
"I am a little stunned to hear of them file for bankruptcy," said Mark Martin, CEO at aviation consulting firm 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."
According to the most recent data from the Indian aviation regulator, Go First's issues caused it to postpone its anticipated $440 million IPO in 2021, which resulted in a decline in market share to 6.9% in March from 8.4% in January.
The Wadia Group was reportedly in discussions to sell either a majority stake or all of its shares. An email requesting comment from Wadia Group received no response.
The groundings, according to Go First, had some lessors "repossess aircraft, draw down letters of credit, and notify further withdrawal of aircraft."
According to three pilots who wished to remain anonymous, staff members were taken off guard when they learned about the suspension of regular operations from the local media first.
The pilots said, "For the past few months, they have been receiving their salaries with a delay.
"We understand that this news is likely to be distressing, and we remain committed to offer our support to all of you during this difficult time," Go First later said in a email to employees.
(Source:www.bbc.com)
The move emphasises the strong rivalry in a sector dominated by IndiGo and the recent merger of Air India and Vistara under the Tata conglomerate. It is the first significant airline collapse in India since Jet Airways declared bankruptcy in 2019.
In a bankruptcy filing with the National Company Law Tribunal, Go First stated that as of April 28, the total amount owed to financial creditors was 65.21 billion rupees.
As of April 30, the business had not missed a payment on any of those obligations, but it had, according to the petition, missed payments to operational creditors, including 12.02 billion rupees owed to vendors and 26.60 billion rupees owed to aircraft lessors.
Go First stated in a statement that it filed the lawsuit as a result of Pratt & Whitney, the sole engine provider for the airline's fleet of Airbus A320neo aircraft, refusing to abide by an arbitration ruling ordering the transfer of spare leased engines, which would have allowed the airline to resume regular operations.
The airline said that the percentage of its fleet that was grounded "due to Pratt & Whitney's faulty engines" increased from 7% in December 2019 to 50% in December 2022, costing it 108 billion rupees ($1.32 billion) in lost income and associated expenses.
According to a statement Pratt & Whitney provided to Reuters, the company is "committed to the success of our airline customers, and we continue to prioritise delivery schedules for all customers."
"P&W is complying with the March 2023 arbitration ruling related to Go First. As this is now a matter of litigation, we will not comment further," it added.
The head of Raytheon Technologies, which owns Pratt & Whitney, admitted that the GTF engines had reliability problems in February.
Additionally, Pratt & Whitney has been quoted in Indian media as saying that it was impacted by pressures on the supply chain that were experienced by the entire industry and that it anticipates them to ease later this year to support increased production of new and overhauled engines.
Due to its larger fleet and deeper pockets, analysts claim bigger rival IndiGo has been able to withstand the impact better.
On its website, Go First, a subsidiary of the Wadia Group and formerly known as GoAir, announced that it had cancelled flights from May 3 to May 5 for "operational reasons."
"The government of India has been assisting the airline in every possible manner," India's Civil Aviation Minister Jyotiraditya Scindia said in a statement. "The issue has also been taken up with the stakeholders involved."
As the industry works to prepare for an increase in post-pandemic air travel, the collapse could help rival airlines.
"The sudden disruption in operations is likely to benefit other players and increase airfares due to supply constraint," wrote Jinesh Joshi, a research analyst with Prabhudas Lilladher.
According to two bankers with knowledge of the situation, the move caught the lenders of Go First off guard.
A few weeks ago, the lenders met with Go First's management, but according to one of the bankers, no announcement was made. Lenders will soon convene to evaluate the situation and choose a line of action, according to what they indicated.
"I am a little stunned to hear of them file for bankruptcy," said Mark Martin, CEO at aviation consulting firm 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."
According to the most recent data from the Indian aviation regulator, Go First's issues caused it to postpone its anticipated $440 million IPO in 2021, which resulted in a decline in market share to 6.9% in March from 8.4% in January.
The Wadia Group was reportedly in discussions to sell either a majority stake or all of its shares. An email requesting comment from Wadia Group received no response.
The groundings, according to Go First, had some lessors "repossess aircraft, draw down letters of credit, and notify further withdrawal of aircraft."
According to three pilots who wished to remain anonymous, staff members were taken off guard when they learned about the suspension of regular operations from the local media first.
The pilots said, "For the past few months, they have been receiving their salaries with a delay.
"We understand that this news is likely to be distressing, and we remain committed to offer our support to all of you during this difficult time," Go First later said in a email to employees.
(Source:www.bbc.com)
Homepage
Send to a friend
Printable version
Share
