DGCA issues show cause notice to Go First as the airline files for insolvency proceedings and suspends flights

The Wadia group owns Go First, but the airline has filed for insolvency resolution due to its inability to meet financial obligations. The airline has cited the “faulty engines” from US company Pratt & Whitney as the reason for grounding 50% of its fleet. CEO Kaushik Khona has confirmed that the airline has submitted an application for voluntary insolvency resolution proceedings to the National Company Law Tribunal (NCLT).

In another development, Go First has announced that it will suspend all its flights from May 3 to May 5. The aviation regulator, DGCA, has issued a show cause notice to the airline following this decision. The notice asks the airline to provide details of the steps it has taken to alleviate the inconvenience caused to passengers who have booked the canceled flights. Additionally, the airline must submit a plan of action to operate flights in accordance with the approved schedule from May 5, 2023, onwards.

In a statement, Jyotiraditya Scindia, the aviation minister, mentioned that Go First has been facing critical supply chain issues related to their engines. He added that the government has been providing every possible assistance to the airline and has taken up the issue with the stakeholders involved. Scindia also acknowledged that the operational bottleneck has impacted the airline’s financial position. He further stated that the airline has applied to the National Company Law Tribunal (NCLT), and it is wise to wait for the judicial process to run its course.

Go First

In response to the insolvency filing, Go First released a statement stating that the airline had to take this step due to the increasing number of failing engines supplied by Pratt & Whitney’s International Aero Engines, LLC. The airline has had to ground 25 aircraft, which is equivalent to approximately 50% of its Airbus A320neo aircraft fleet as of May 1, 2023. The statement also mentioned that the percentage of grounded aircraft due to Pratt & Whitney’s faulty engines has increased from 7% in December 2019 to 31% in December 2020 to 50% in December 2022. Despite the assurances given by Pratt & Whitney over the years, they have repeatedly failed to meet their promises.

The airlines could resume full operations by August/September 2023 if Pratt & Whitney adhered to the orders in the emergency arbitrator’s award, according to a statement.

“Go First regrets having to approach the NCLT due to Pratt & Whitney’s failure to comply with the emergency arbitrator’s directives by providing leased engines. With additional engine malfunctions anticipated in the next 3-4 months, Airline’s operations would be unsustainable,” the statement read.

Sources from Reuters revealed that the airlines’ lenders were unaware of the insolvency application. They will gather to review the airline’s future course of action.

The non-supply of Pratt & Whitney engines, which power Go First’s Airbus A320 neo aircraft, and recurring issues have grounded more than half of the airline’s fleet, severely impacting its cash flow.

The airline is seeking a strategic investor and is currently in discussions with potential investors.

According to an official from an oil marketing company, the airline is operating on a cash-and-carry basis, which means it must pay for the number of flights it intends to operate daily. If the airline fails to make payment, the vendor reserves the right to halt business with the airline.

Go First Filed a Lawsuit

At the same time, Go First has filed a lawsuit in Delaware federal court against the US-based engine maker, seeking to enforce an arbitral award that requires Pratt & Whitney to supply engines to the airline. Failure to provide these engines could result in the airline being forced to shut down. The arbitration award, which was issued on March 30 in favor of Go First, highlighted the possibility of irreparable damage if emergency engines were not made available.

Industry officials reported that as of March 31, Go First had 30 grounded aircraft, including nine for which lease payments were due. The airline’s fleet consists of a total of 61 aircraft, including 56 A320neos and five A320ceos, as indicated on its website.

Despite the pandemic, airfares are high, and traffic is on the rise, yet the airline is experiencing a loss of passenger revenue. Go First plans to operate 1,538 flights per week in the ongoing summer schedule, 40 fewer than last year. The season started on March 26 and will continue until October 28.

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