Wadia Group suggests AWG’s warning to India aimed at influencing NCLAT prior to the hearing

A spokesperson from the Wadia Group, owner of Go First airline, criticized AWG’s recent issuance of a “watch list notice” as displaying double standards. The spokesperson suggested that AWG should focus on ensuring its members adhere to international arbitration awards instead of issuing threatening notices to India and using the Cape Town Convention (CTC) to influence the ongoing proceedings in the National Company Law Appellate Tribunal (NCLAT).

Furthermore, the Wadia Group spokesperson advised AWG to address the underlying issue by urging Pratt & Whitney to comply with the law and adhere to the award given by the emergency arbitrator appointed under the 2016 Arbitration Rules of the Singapore International Arbitration Centre (SIAC), to which Pratt and Whitney had voluntarily submitted themselves.

AWG’s membership includes companies such as Airbus, Boeing, Pratt & Whitney, SMBC Aviation, and other OEMs and lessors.

PRATT & WHITNEY

The international arbitrator issued two awards directing Pratt & Whitney to promptly release and deliver a minimum of 10 operational spare leased engines to Go First by April 27, 2023. Furthermore, the authorities instructed Pratt & Whitney to supply an additional 10 leased engines per month until December 2023. The purpose of these awards was to enable Go First to resume full operations, achieve financial recovery, and ensure its survival.

Despite the ruling, Pratt & Whitney deliberately hindered the fulfillment of the order, resulting in Go First not receiving any engines. Pratt & Whitney’s actions constitute a violation of international conventions and contractual obligations, which bind all reputable companies, including members of AWG.

“The Airbus NEO (new engine options) with P&W engines, marketed for its fuel efficiency, has failed, causing 100 aircraft to be grounded in India and much more globally. The entire Indian aviation sector has suffered due to the supply of substandard products by engine manufacturers. P&W cannot evade responsibility for providing substandard engines, which have resulted in substantial losses for all airlines. Currently, 18% of India’s aviation capacity remains grounded due to P&W’s failure to supply engines. P&W engine failures are severely impacting numerous airlines worldwide. Therefore, Go First’s claim attributing its failure to P&W engines carries significant weight. Go First consistently maintained profitability, outperforming the industry leader for approximately five years, including the period before and during the COVID-19 pandemic,” stated Varun Berry, former chairman of Go First.

The warning to India comes right after the adjournment of the NCLAT hearing on May 12 and ahead of its continuation on May 15, which is both ironic and coincidental.

The Aviation Working Group, an association of aircraft lessors, engine makers, and plane makers, has recently put India on its watch list, according to recent reports.

GOAIR

Mark D Martin MRAeS, CEO of Martin Consulting, an aviation consulting firm in Asia, commented on this development. He emphasized the importance of AWG being centered and not influenced by lobbying, urging them to substantiate their claims with facts and clarity. Also, highlighted that other airlines with A320NEO PW-GTF Lessor exposure, such as Turkish Airlines, United, Swiss Air, Air Baltic, ANA Japan, Hong Kong Express Airlines, Air Tanzania, Air Senegal, and others, could be affected by the actions taken regarding GoAir. He also cautioned that AWG’s hasty approach in addressing GoAir and the IBC Court order might have more damaging consequences for lessors in non-India jurisdictions than in India.

Mark D. Martin, CEO of Martin Consulting, an aviation consulting firm based in Asia, emphasized the requirements for invoking the Cape Town clauses, particularly Article 11, stating that substantiated evidence of perpetual default in lease rental payments by the Lessee/Go Air is necessary. He also pointed out that the lessors had the opportunity to involve the DGCA within the past year instead of waiting until now. Martin highlighted the challenges of the Indian leasing market and the high risks and rewards associated with aircraft leasing in Asia.

Martin further expressed his surprise at the lack of data sharing among the small Lessor Fraternity, suggesting that nothing prevents lessors from reaching a similar deal with Go Air as SpiceJet. However, he noted that the market for A320 PW-GTF NEO aircraft is currently fragile and uncertain, with airlines worldwide choosing to opt out of this aircraft type. Therefore, there is no significant demand for failing or broken PW-GTF Airbus A320s, and lessors should prioritize establishing closer relationships with lessees, especially after the challenging COVID-19 airline lockdown period.

Airlines

Martin mentioned that Lessors cannot fly out their aircraft or release them to other airlines due to the long waiting list for PW-GTF engines, with priority given to Lufthansa, Turkish Airlines, United, Swiss Air, Air Baltic, ANA Japan, Hong Kong Express Airlines, Air Tanzania, Air Senegal, and others. Lessors have no choice but to stay with Go Air, ensure timely storage checks, and prevent asset value erosion.

P&W’s faulty engines have severely impacted the Indian aviation sector, grounding a significant number of aircraft. These engine issues have grounded 178 aircraft globally, with 100 of them being in India.

Despite the Indian Government’s request for P&W to establish an MRO organization in India for the past three years, the engine maker has ignored it. The Raytheon Group claims commitment to India’s aviation industry, but its treatment of India as a second-class market through P&W’s damaging actions contradicts this.

At the time of admission into IBC, GoFirst had 28 grounded aircraft due to P&W’s failure to supply engines and comply with the international arbitrator’s award. Additionally, around 50 aircraft from Indigo and 20 turboprop engines from SpiceJet are reportedly grounded due to P&W’s faulty engines.

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