What is Go First Airline Crisis?
Go First Airlines filed for bankruptcy at the National Company Law Tribunal on May 02. The airline has suspended its flights operations for three days, 3rd, 4th and 5th May 2023¹. Go First Airlines cited ‘operational reasons’ for the cancellation of the flights.
The airline has been struggling for some time now, with half its fleet of aircraft grounded due to snags in their P&W engines, and other financial problems. The airline said it was “forced to apply to the NCLT” after the ever-increasing number of failing engines supplied by Pratt & Whitney’s International Aero Engines led to the grounding of 25 aircraft, or half its fleet of Airbus A320 neo planes, and major financial stress.
The airline has claimed that the percentage of its grounded aircraft due to P&W’s “faulty engines” had grown from 7% in December 2019 to 31% in December 2020, and to 50% in December 2022. This, while incurring 100% of operational costs, has set it back by Rs 10,800 crore in lost revenues and additional expenses.
The DGCA has asked Go First to process refunds for passengers who have booked tickets.
What are P&W Engines?
P&W engines are aircraft engines and auxiliary power units designed and manufactured by Pratt & Whitney, a world leader in the aviation industry. Some of the P&W engines used by commercial airlines are GTF Engine, V2500 Engine, GP7200 Engine, PW4000 Engine, PW2000 Engine, JT8D Engine and JT9D Engine.
Go First Airlines uses P&W engines for its fleet of Airbus A320 neo planes. However, the airline has been facing frequent engine failures and snags due to P&Ws faulty engines. The airline has blamed P&W for its financial crisis and filed for bankruptcy.
How did P&W respond to Go First's allegation?
P&W responded to the allegations made by Go First by saying that the airline has a "history of missing its financial obligations" to P&W. P&W also said that it is complying with the March 2023 arbitration ruling related to Go First and that it is committed to the success of its airline customers.
P&W also said that it is prioritizing delivery schedules for all customers and that it has a total pool of "295 spare leased engines" globally. P&W is in active discussions with Go First and expects to provide 16 new engines in the coming weeks.
History of Go First Airlines
Go First Airlines has a history of 16 years in the Indian aviation sector. Here are some key points about its history:
- Go First was founded as GoAir on 4 November 2005 by Jeh Wadia, son of Indian industrialist Nusli Wadia. The airline is a wholly owned subsidiary of the Wadia Group.
- The airline commenced its operations using an Airbus A320 aircraft and operated its inaugural flight from Mumbai to Ahmedabad on 4 November 2005.
- The airline expanded its network to various destinations in India, including Goa, Coimbatore, Delhi, Bangalore, Kolkata, Hyderabad, Chandigarh and Kannur. It also launched international flights to nine destinations in Asia and the Middle East.
- The airline placed orders for 92 Airbus A320neo aircraft in 2011 and 2016, making it one of the largest customers of the aircraft type in the world. However, it faced delays and issues with the engines supplied by Pratt & Whitney, which affected its operations and finances.
- The airline adopted a strategy of focusing on profitability rather than market share, which helped it to survive in the competitive and challenging Indian aviation market. It turned a profit for six consecutive years from 2012 to 2018.
- The airline rebranded itself as Go First on 13 May 2021, with a focus on an ultra-low-cost business model²⁴. It also planned to launch an IPO to raise funds from the market.
- The airline filed for bankruptcy protection at the National Company Law Tribunal (NCLT) on 2 May 2023, blaming Pratt & Whitney for its financial troubles. It cancelled its flights for three days from 3 May to 5 May 2023 and sought interim directions from the NCLT to allow it to function.
What is NCLT?
NCLT stands for National Company Law Tribunal. It is a quasi-judicial body that adjudicates matters related to companies, insolvency and bankruptcy under the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016. NCLT has the power to hear and decide cases such as company mergers, winding up, oppression and mismanagement, revival and rehabilitation, class action suits, etc. NCLT has its principal bench in New Delhi and 14 other benches across India. The orders of NCLT can be appealed to NCLAT within 45 days.
How did P&W respond to Go First's allegations?H
What is Companies Act 2013?
Companies Act, 2013 is an Act of the Parliament of India that regulates the incorporation, responsibilities, dissolution and other aspects of companies in India. The Act consolidates and amends the law relating to companies that was previously governed by the Companies Act, 1956. The Act has 29 chapters, 470 sections and 7 schedules. The Act covers various topics such as types of companies, share capital and debentures, prospectus and allotment of securities, management and administration, accounts and audit, mergers and acquisitions, winding up and liquidation, etc. The Act also provides for the establishment of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) to adjudicate matters related to companies.
What is DGCA?
DGCA stands for Directorate General of Civil Aviation. It is a statutory body of the Government of India that regulates civil aviation in India. It became a statutory body under the Aircraft (Amendment) Act, 2020. The DGCA investigates aviation accidents and incidents, maintains all regulations related to aviation and is responsible for issuing licenses and authorizations to pilots, aircraft, operators, aerodromes, etc. The DGCA also provides online services such as eGCA, Pariksha and E-Sahaj for various stakeholders.