New Delhi: Go Airline, which operates Go First brand, said Tuesday that it was forced to file an application with the National Company Law Tribunal (NCLT) for insolvency to protect the interests of all stakeholders “due to the ever-increasing number of failing engines supplied by Pratt & Whitney”.
The low-cost airline has also stopped fresh bookings for the next two days. Any attempt to book a flight on Go First’s website either for 3 or 4 May throws up a ‘no flights’ response.
Citing issues with Pratt & Whitney, Go First said in a statement that it had to ground 25 aircraft, or about 50 per cent of its Airbus A320neo aircraft fleet, as of 1 May 2023. Connecticut-based Pratt & Whitney is the exclusive engine supplier for Go First’s Airbus A320 neo aircraft fleet.
The application for resolution and protection under Section 10 of The Insolvency Bankruptcy Code, 2016 was filed Tuesday.
In a related development, the Directorate General of Civil Aviation (DGCA) issued a show cause notice to Go First, stating that the fleet was grounded without its prior intimation. It added that the airline “failed to adhere to the approved schedule which would lead to passenger inconvenience”, amounting to a violation of civil aviation requirements (CAR) norms.
The regulator sought a response from the airline within 24 hours, along with details of steps taken to “mitigate the inconvenience caused to the passengers booked on flights for 3rd & 4th May 2023”.
Additionally, according to a US-based legal news website Law360, Go First filed an “emergency petition” in a Delaware federal court, seeking enforcement of two arbitral awards that order a Pratt & Whitney partner to immediately provide the low-cost carrier with serviceable engines that the business says it needs to stay aloft.
In the statement, Go First said that its percentage of grounded aircraft due to Pratt & Whitney’s faulty engines surged from 7 per cent in December 2019 to 31 per cent in December 2020 to 50 per cent in December 2022. “This is despite Pratt & Whitney making several on-going assurances over the years, which it has repeatedly failed to meet,” it added.
The airline stated that it “has been forced to apply to the NCLT after Pratt & Whitney refused to comply with an award issued by an emergency arbitrator appointed in accordance with the 2016 Arbitration Rules of the Singapore International Arbitration Centre (SIAC)”.
The SIAC order directed Pratt & Whitney to take all reasonable steps for dispatching at least 10 serviceable spare leased engines without delay to Go First by 27 April. It further directed the aircraft engine maker to provide another 10 spare leased engines each month until December, with the objective of the airline returning to full operations and “achieving its financial rehabilitation and survival”.
“If Pratt & Whitney were to comply with the orders in the emergency arbitrator’s award,
Go First would be able to return to full operations by August/September 2023,” the airline said.
It added that Pratt & Whitney failed to provide any serviceable spare leased engines, and claimed that there were no spare leased engines available for it to comply with the emergency arbitrator’s award.
ThePrint reached Pratt & Whitney via email for comment but had not received a response by the time of publication. This report will be updated if and when a response is received.
‘Promoters infused Rs 290 cr in April alone’
The Wadia Group-owned airline, which was in 2021 looking to bring an initial public offering (IPO), said it was forced to take this step despite the infusion of “substantial funds” to the tune of Rs 3,200 crore by the promoters in the last three years. Of this, it added, Rs 2,400 crore were injected in the last 24 months, and Rs 290 crore in April 2023 alone.
“This brings the total promoter investment in the airline since its inception to approximately Rs 6,500 crore. GO FIRST has also received significant support from the Government of India’s exceptional Emergency Credit Line Guarantee Scheme… However, even this collective and significant support has not sufficed to prevent the enormous damage caused by Pratt & Whitney’s defective and failing engines,” it added.
Go First said that the grounding of close to 50 per cent of its A320neo fleet while continuing to incur 100 per cent of its operational costs, has set the airline back by Rs 10,800 crore in lost revenues and additional expenses.
“Moreover, GO FIRST has paid Rs 5,657 crore to lessors in the last two years of which approximately Rs 1,600 crore was paid towards lease rent for non-operational grounded aircraft from the funds infused by the Promoters & Government of India’s Emergency CreditLine Guarantee Scheme,” it added.
In order to recover losses, Go First said it has sought compensation of approximately
Rs 8,000 crore in the SIAC arbitration.
“If GO FIRST is successful in the arbitration, it is hoped that, GO FIRST will be able to address the liabilities of its creditors, small and large. However at this stage…GO FIRST is no longer in a position to continue to meet its financial obligations,” read the statement issued Tuesday.
Once NCLT processes its application under section 10 of IBC, an Interim Resolution Professional (IRP) will take over and operate Go First. The airline has said its board and management will cooperate fully with the IRP.
Stressing that it was forced to apply to the NCLT because of the recurring and persistent issues with the GTF (geared turbofan) engines supplied by Pratt & Whitney and its failure to repair them and/or provide sufficient spare leased engines, Go First said its management repeatedly sought to engage with Pratt & Whitney on the engine issue, but the firm did not respond constructively.
“Instead, despite its contractual obligations to provide a spare leased engine within 48 hours of failure, it refused to provide sufficient spare leased engines to GO FIRST and refused to repair GO FIRST’s engines,” it said.
(Edited by Amrtansh Arora)
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