Go First files for insolvency proceedings, suspends flights; DGCA issues show cause notice

Wadia group-owned Go First on Tuesday said it has filed for insolvency resolution and can no longer continue to meet financial obligations, blaming US company Pratt & Whitney's "faulty engines" for grounding of 50% of its fleet. The airline has filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT), said CEO Kaushik Khona.

Earlier today, the airline announced it would suspend all flights for three days from May 3 to May 5. Aviation regulator DGCA has issued a show cause notice to the airline after Go First decided to cancel flights for three days. The airline has been directed to submit the details of the steps taken to mitigate the inconvenience caused to the passengers booked on the cancelled flights and submit plan of action to operate flights as per the approved schedule from 5th May 2023 onwards.

Aviation minister Jyotiraditya Scindia in a statement said: "Go First has been faced with critical supply chain issues with regard to their engines. The government has been assisting the airline in every possible manner. The issue has also been taken up with the stakeholders involved. 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."


On insolvency filing, the airline in a statement said: "Go First has had to take this step due to the ever-increasing number of failing engines supplied by Pratt & Whitney’s International Aero Engines, LLC, which has resulted in Go First having to ground 25 aircraft (equivalent to approximately 50% of its Airbus A320neo aircraft fleet) as of 1 May 2023. The percentage of grounded aircraft due to Pratt & Whitney’s faulty engines has grown from 7% in December 2019 to 31% in December 2020 to 50% in December 2022. This is despite Pratt & Whitney making several on-going assurances over the years, which it has repeatedly failed to meet."

It also said if Pratt & Whitney were to comply with the orders in the emergency arbitrator’s award, the airlines would be able to return to full operations by August/September 2023.

"Go First deeply regrets the current situation, which has forced it to apply to the NCLT. With Pratt & Whitney failing to abide by the directions in the emergency arbitrator’s award by providing spare leased engines, and with further engine failures expected in the next 3-4 months, the operations of Go First will be made unviable," said the company statement.

According to Reuters sources, lenders to the airlines were unaware of the insolvency filing. They are expected to meet and discuss the airlines' future course of action.

The airline’s cash flow has been seriously hit as it has grounded more than half of its fleet due recurrent issues and non-supply of engines from Pratt & Whitney engines which powers its Airbus A320 neo aircraft.

The airline has been looking for a strategic investor in the company and is talking to potential investors.

“The airline is on cash and carry mode meaning it has to pay daily for the number of flights it wants to operate. It has agreed that if there is non-payment, then the vendor can stop business,” an official of an oil marketing company said.

Simultaneously, the airline has filed a lawsuit against the US-based engine maker in Delaware federal court seeking enforcement of an arbitral award that asks Pratt & Whitney to provide the airline with engines failing which there is a risk of the airline shutting down. The arbitration award in favour of Go First given on March 30, said that that there was a risk of irreparable harm if emergency engines are not provided.

Go First had 30 aircraft grounded as of March 31, including nine on which the lease payments are due, industry officials said. Go First has a total of 61 aircraft in its fleet – 56 A320neos and five A320ceos, according to the airline’s website.

The loss of passenger revenue comes when airfares are high and traffic is soaring after the pandemic. The airline plans to operate 1,538 flights a week in the ongoing summer schedule, 40 lower than last year. The season started on March 26 and goes on till October 28.