The Indian Aviation industry has been infamous for multiple failures over the years. The Jet Airways case, Kingfisher Airlines, Air Sahara, NEPC, Damania Airways etc. are some of the infamous examples of this history. The Go First case however is not at all consistent with these cases. These aviation companies suspended their operations permanently due to heavy loss and no chances of recovery. However Go First is a fighting company which hopes to continue its operations soon. The entire case of the GO first airlines has been running since the last 3 years in background where the aviation department of India, Indian Government, Multiple banks and a U.S company Pratt & Whitney are involved.
The other cases of aviation history included losses due to ineffective costing. It also included cases of promoters involved in multiple scams and hence the company getting dragged into operation halt. However these cases were due to the hard conditions applied in the Indian aviation industry and how the costing has always been a factor for the industry. Indian markets have not responded well to the aviation industry like they are doing today. Previously people considered air travel as a luxury and not a need.
However in today’s times it is more of a need for major users than it is luxury. Hence the current airlines like Indigo are making tremendous profits. Recently Indigo posted its quarterly results with a whopping 900 Crore plus profit. Hence The aviation industry is profitable due to the aggressive demand rising in India.
Go First Case
The Go First airlines have been a major competitor to the Indigo airlines. These were two profitable companies at one time. They had been functioning based on their parameters and their costing was also effective for the companies to earn profit. However the case for Go First went bad when its fleet count started decreasing. The company had been experiencing engine failure in multiple aircrafts. It has a fleet of 55 aircrafts currently and out of that only 23 are functioning. Hence the airline was inducing loss on a daily basis for the last 3 years. The Go First company had come into a contract with Pratt and Whitney but the company did not deliver engines which made Go first incur a loss of nearly 1 billion dollars.
Pratt and Whitney Scenario
This company is an engine manufacturer and supplier for civil as well as military aviation. It had dealt with Go First earlier and had supplied engines as well. However the engines made by Pratt and Whitney stopped functioning as they cna and that resulted in grounding of 25 A320 Neo Jets. After this the companies came to an agreement to exchange the same and Pratt and Whitney failed to do the same. In its defence the company said that Go First had not been delivering the financial assistance in a timely manner. This gave into a delay of the engine problem solution for Go First.
In turn the Go First applied to an emergency arbitrator to solve this issue. In that matter as well the arbitrator ordered Pratt and Whitney to issue 10 engines by April 27 and another 10 by December 2023. However Pratt and Whitney did not comply with the same and this is the reason why Go First Aviation has grounded its fleet as of now and applied for insolvency to NCLT. It had also cancelled its flights coming forward by applying the same to DGCA.
As per Go First the company has incurred a loss of 1 Billion dollars and the reimbursement that it is seeking for the Pratt and Whitney company is also worth 8000 Crore Rs. Alongside this once the engines are fixed the company wants to continue its operations as it has the capacity to turn around its loss streak. The reasons behind this are :- the emerging market of India in air travel and also the costing parameters of Go First airlines.
CEO Statement and Cash Infusion
The promoters have so far infused more than 3600 Crore worth of money in the company. With this the government of India has also given 1300 Crore Rs to the company as the company is a beneficiary of the ECLGS scheme. Go First is confident that the banks and the other promoters are not worried about their money being gone down as the company has already put aside land at a prime location in Mumbai as collateral and it also has its fleet for reimbursement if necessary. Hence the company is not worried about the promoters or even the slots it gets from the airports for parking its fleet. All the airlines want is to get its engines, resolve the issue and get its fleet running again. These are all the statements given by the CEO in a press release made after applying for insolvency of the company.
