Go First cancels all flights till May 6, leaving DGCA fuming and passengers in a lurch

It was only a few days ago that India's Aviation Minister Jyotiraditya Scindia tweeted about the skyrocketing domestic airline passenger traffic post-Covid and related it to the country's high growth.

On April 30, India reached a milestone as domestic air traffic hit a record high with 4,56,082 passengers and 2,978 flights taking off on a single day. Days later, a domestic airlines carrier, Go First, filed for bankruptcy after suspending flights for days due to a lack of cash. 

Go First, owned by the Wadia Group, filed for involuntary solvency on May 2, Tuesday, marking the first major airline collapse in India since Jet Airways in 2019. Several flights were cancelled without any notice much to the frustration of passengers. Go First has promised to refund the ticket expenses to passengers. 

Below is a statement from Go First Airlines regarding cancelled flights. It is not known whether Go First will operate flights once again post-May 5. 

Following the cancellation of flights, the Directorate General of Civil Aviation (DGCA) issued a show-cause notice to the airline.

Read below to understand what Go First's fall means for the aviation industry in India and regular flyers.  

So what happened? 

• Go First has blamed American aerospace manufacturer Pratt and Whitney for causing the Airline's bankruptcy. 
• Go First alleged that it has been facing a financial crunch because of the non-supply of engines by Pratt and Whitney. It also said that the non-supply has resulted in the grounding of 28 planes. 
• Furthermore, Go First also alleged that the engines supplied by Pratt and Whitney have been increasingly failing leading to the grounding of nearly 50% of its Airbus A320neo fleet (P&W is the exclusive engine supplier to the aircraft).
•  As a result, Go First claimed that it was forced to incur 100% of its operational costs, setting the airline by Rs 10,800 crores in lost revenues and additional expenses.

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What is Pratt and Whitney saying?

Pratt and Whitney hit back saying that Go First has a "lengthy history of missing its financial obligations" to the engine supplier. P&W also said that it is prioritising the delivery of engines to Go First in compliance with a March 2023 emergency arbitration. 

Go First said that it was supposed to receive spare leased engines in part by April 27 and then again later in December 2023, but did not receive them. The Airline also said that if P&W were to honour the arbitration then it would be able to resume operations by August/September 2023. 

Reuters reported that in February 2023, Raytheon Technologies which owns Pratt & Whitney had acknowledged there were "reliability issues" with its GTF engines. Furthermore, Go First's statement claimed that even the Singapore International Arbitration Centre (SIAC), which ruled on the emergency arbitration, found that Go First's current financial position was partly due to its grounded aircraft resulting from the unavailability of P&W engines. 

What does it mean for the Indian aviation industry and flyers?

• Go First may or may not collapse at this point. It could be taken over by a new owner too. But if it were to collapse, then it would come as a boost to rival airlines.
• For flyers, this could also mean an increase in airfares on Go First's routes due to supply constraints. 

• However, Go First's bankruptcy also exposes a number of banks as they were the lenders to the airlines. 

Exposure details:

• Central Bank of India - Rs 1561.6 crore
• Bank of Baroda - Rs 1429.82 crore
• Axis Bank - Rs 30 crore
• IDBI Bank - Rs 58.58 crore
• Deutsche Bank - Rs 1320 crore

The financial pains of Indian airlines go deeper than a non-supply of engines. Go First's bankruptcy exposes the ills that plague the Indian aviation industry where traditionally most airlines have always struggled to make a profit and stay afloat and where there's a lot of investment also riding (read: Tata-owned Air India's massive aircraft order). 

The Indian aviation industry is plagued by a combination of economic policies and demand that include keeping airfares as cheap as possible, while fuel costs remain high with taxes adding on to it. 

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