Struggling Indian airline Go First declared bankruptcy yesterday, attributing it to the “faulty” Pratt & Whitney engines that grounded about 50% of its fleet. The airline’s collapse is the first Indian airline bankruptcy since Jet Airways in 2019, highlighting the extraordinary competition in the aviation sector, the place rivals IndiGo and the recently merged Air India and Vistara dominate.
Go First detailed debt of 65.21 billion rupees to financial creditors as of April 28, according to its chapter filing. Although it had not defaulted on these money owed but, the company did default on payments to operational collectors, together with 12.02 billion rupees to distributors and 26.60 billion rupees to aircraft lessors. The filing was prompted after the engine supplier did not comply with an arbitration order related to the discharge of spare leased engines.
The airline reported that grounded aircraft “due to Pratt & Whitney’s faulty engines” escalated from 7% of its fleet in December 2019 to 50% in December 2022, resulting in 108 billion rupees (US$1.32 billion) in lost income and extra expenses. Pratt & Whitney responded by stating that they’ve complied with the March 2023 arbitration ruling and that the matter is now subject to litigation.
The bankruptcy information stunned Go First’s lenders, who were expecting to fulfill with the airline to evaluate the scenario and decide their subsequent steps. The airline’s troubles, which led to the postponement of its deliberate US$440 million IPO in 2021, resulted in its market share slipping to six.9% in March from 8.4% in January. The Wadia Group, the proprietor of Go First, was rumoured to be contemplating either selling its majority stake or completely divesting its shareholding.
Fully refundable could benefit rival airlines as they strive to fulfill the high demand for post-pandemic air travel. However, the sudden disruption in operations is anticipated to trigger a supply constraint and potential airfare will increase..