Go First Suspends Flights To File For Voluntary Insolvency With NCLT

Low cost airline company, Go First voluntarily files for insolvency as it suspends flights for two days. The company CEO Kaushik Khona said that the airline has filed an application before the National Company Law Tribunal (NCLT) on Tuesday.

The decision was taken after Go First informed Directorate General of Civil Aviation (DCGA) that all its flights will remain cancelled on 3rd and 4th May as the airline has been facing severe fund crunch since half of its fleet (out of 61 aircrafts that Go First has, roughly 28 are in operations) is grounded due to trouble over non-supply of engines from Pratt & Whitney.

Khona, stated that although the choice to initiate voluntary insolvency resolution procedures was unfortunate, it was necessary to do so in order to safeguard the company's interests.

The airline has informed the government of the events and will also provide a thorough report to the DGCA, which oversees aviation safety. Flights will resume after the NCLT approves the application, according to Khona.

"Pertinent to note that the airline was already on cash & carry mode (paying OMCs on daily basis for fuel) and has now filed for voluntary insolvency resolution. Over the last 15 months, promoters had invested US$366mn into the company but it was insufficient to cover up expenses and the airline was planning to raise money in recent weeks which apparently seems to have failed." Jinesh Joshi - Research Analyst, Prabhudas Lilladher Pvt Ltd.

Go First commanded a market share of 8.9 per cent in CY22 which has fallen to 6.9 per cent in March. Its sudden disruption in operations is likely to benefit other players and raise airfares due to supply constraints. More than 5,000 people are employed at Go First.

The airline owned by the Wadia group is in talks with possible investors and looking for a strategic investor in the business.

In addition, the airline has filed a complaint in federal court in Delaware against the US-based engine manufacturer, asking for enforcement of an arbitration ruling requiring Pratt & Whitney to supply it with engines, failing which there is a risk of the airline going out of business.

According to the arbitration ruling in Go First's favour issued on March 30, there is a possibility of permanent harm if emergency engines are not provided.

Further a government official of the civil avaiation minitsry has said that the ministry is keeping a close watch on the developments related to Go First, including the admission of the airline's application by the NCLT as per PTI report.

He also said that the country's civil aviation sector is strong and growing but the external issue of global supply chain disruptions is a primary reason for the Go First situation.

Domestic air traffic touched an "all-time high" of 4,56,082 passengers in a single day on April 30. Go First, which has been flying for more than 17 years, carried 29.11 lakh domestic passengers in the first quarter of this year and its market share during this period was 7.8 per cent, the official added.

While Civil Aviation Minister Jyotiraditya Scindia said that it was unfortunate that the operational bottleneck related to engine supplies has dealt a blow to the airline's financial position. "Go First has been faced with critical supply chain issues with regard to their engines. The Government of India has been assisting the airline in every possible manner. The issue has also been taken up with the stakeholders involved," Scindia said in a statement.

He noted that it is unfortunate that this operational bottleneck has dealt a blow to the airline's financial position. "It has come to our knowledge that the airline has applied to the NCLT. It is prudent to wait for the judicial process to run its course," he said.