May 4, 2023
By: Katya NaiduThe budget airline flows between 24 cities including many top holiday destinations like Goa, Port Blair, Leh, Jammu and Kashmir. It also started flying across seven international routes covering Abu Dhabi, Muscat, Bangkok and more.
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The airline’s troubles started in 2012 when it signed a $1 billion deal for 144 engines with US based company Pratt & Whitney – one of the ‘big three’ aero engine manufacturers of the world. The engines were chosen for their A320neo aircraft, which aid in considerable fuel savings – a must for the low-cost airline.
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The airline had made multiple attempts to raise funds via an IPO. It tried first in 2015 and abandoned the plan in 2017. It filed a DRHP in 2021 as it rebranded itself as Go First, but couldn’t go through with the IPO as the onset of the Omicron variant turned the market uncertain that year. The DRHP expired in 2022.
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The Pratt & Whitney engines fitted on to the narrow-body aircraft have had troubles since their debut in 2016. The Indian aviation regulator DGCA had asked the operators using these engines to modify the component as they were susceptible to mid-air troubles like engine failures, which could result in a crash.
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Apart from Go First, IndiGo was one of Pratt & Whitney’s largest customers. But when troubles began, they shifted to its rival CFM in 2019 — escaping Go First’s fate. Even Air India, which placed a large Boeing and Airbus order early this year, chose CFM’s engines.
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Go First, which was in the process of transforming into an ultra low-cost airline, had a comprehensive agreement with its engine maker that the latter would replace engines within 48 hours, along with compensation. Pratt & Whitney had honoured the provisions until the pandemic. The airline dragged P&W to arbitration at Singapore International Arbitration Centre (SIAC) in February 2023.
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In spite of the arbitrator favouring the airline, Pratt & Whitney did not comply with it, leading the airline to ground half its fleet. In May, it moved NCLT to start bankruptcy proceedings. It owes ₹11,463 crore to all creditors, including a default of ₹3,856 crore towards operational creditors. It has also filed a case in the US against the engine maker, seeking enforcement of arbitration.
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The airline has sought various interim directions from NCLT, including restraining lessors from taking back aircraft; and holding back regulator DGCA from taking any adverse action against it. The regulator however ordered the carrier to process their refunds to passengers. Go First has cited the example of Jet Airways, saying that lessors swiftly re-possessed the planes leading to serious depletion of its asset value. Go First’s dues towards aircraft lessors amounts to ₹2,600 crore.
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