Budget airline Go First on Tuesday said it has been forced to seek voluntary insolvency resolution proceedings due to shortage of spare engines from US firm Pratt & Whitney (P&W), resulting in grounding of 50 per cent of the fleet. The airline added it is no longer in a position to continue to meet its financial obligations.
The airline also said that it regrets the disruption and inconvenience that the latest move will cause to its customers, travel partners, creditors, and suppliers and, in particular, to its own employees.
Here's the full statement by Go First:
Go Airlines (India) Limited forced to apply to the National Company Law Tribunal Delhi for resolution & protection under Section 10 of IBC due to the ever-increasing failure of the Pratt & Whitney engines that power its fleet
Mumbai, 2nd May 2023: Go Airlines (India) Limited ("GO FIRST"), India's third largest airline, today filed an application with the National Company Law Tribunal ("NCLT") Delhi for resolution under section 10 of the Insolvency Bankruptcy Code ("IBC").
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.
More precisely, GO FIRST has been forced to apply to the NCLT after Pratt & Whitney, the exclusive engine supplier for GO FIRST's Airbus A320neo aircraft fleet, refused to comply with an award issued by an emergency arbitrator appointed in accordance with the 2016 Arbitration Rules of the Singapore International Arbitration Centre (SIAC).That order directed Pratt & Whitney to take all reasonable steps to release and dispatch without delay to GO FIRST at least 10 serviceable spare leased engines by 27 April 2023 and a further 10 spare leased engines per month until December 2023, with the objective of GO FIRST returning to full operations and achieving GO FIRST's financial rehabilitation and survival.
If Pratt & Whitney were to comply with the orders in the emergency arbitrator's award, GO FIRST would be able to return to full operations by August/September 2023. Despite the emergency arbitrator's order, however, at the date of this press release, Pratt & Whitney has failed to provide any further serviceable spare leased engines at all, and has stated that there are no further spare leased engines available for it comply with the emergency arbitrator's award.
GO FIRST deeply regrets the disruption and inconvenience that this will cause to its customers, travel partners, creditors, and suppliers and, in particular, to its own employees who have remained loyal to and grown with GO FIRST over the years. GO FIRST has taken today's step in order to protect the interests of all stakeholders. It has been forced to take this step despite the infusion of substantial funds to the tune of INR 3,200 crores by the promoters into the airline in the last three years, INR 2400 crores of which were injected in the last 24 months, and INR 290 crores in April 2023 alone. This brings the total promoter investment in the airline since its inception to approximately INR 6,500 crores. GO FIRST has also received significant support from the Government of India's exceptional Emergency Credit Line Guarantee Scheme, for which it is extremely grateful.
However, even this collective and significant support has not sufficed to prevent the enormous damage caused by Pratt & Whitney's defective and failing engines.
The grounding of close to 50% of its A320neo fleet due to the serial failure of Pratt & Whitney's engines, while it continued to incur 100% of its operational costs, has set GO FIRST back by INR 10,800 crores in lost revenues and additional expenses.
Moreover, GO FIRST has paid INR 5,657 crores to lessors in the last two years of which approximately INR 1600 crores was paid towards lease rent for non-operational grounded aircraft from the funds infused by the Promoters & Government of India's Emergency Credit Line Guarantee Scheme.
In order to recover these (and other) losses, GO FIRST has sought compensation of approximately INR 8000 crores in the SIAC arbitration. If GO FIRST is successful in the arbitration, it is hoped that, GO FIRST will be able to address the liabilities of its creditors, small and large. However at this stage, in the absence of Pratt & Whitney not providing the required number of spare leased engines in accordance with the order issued by the emergency arbitrator, GO FIRST is no longer in a position to continue to meet its financial obligations.
While GO FIRST awaits admission into the NCLT proceedings, it is committed to attending to as many queries as possible from its stakeholders. In the interim, detailed FAQs are available at https://www.flyGO FIRST.com/. Once the NCLT processes GO FIRST's application under section 10 of IBC, an Interim Resolution Professional ("IRP") will take over and operate GO FIRST. GO FIRST's Board & Management will cooperate fully with the IRP and trusts that the IRP will address the concerns of GO FIRST's stakeholders as appropriate.
GO FIRST has been forced to apply to the NCLT because of the recurring and persistent issues with the GTF (geared turbofan) engines supplied by Pratt & Whitney, coupled with Pratt & Whitney's failure to repair those engines and/or provide sufficient spare leased engines as it was required to do pursuant to its obligations under the relevant agreements entered into between GO FIRST and Pratt & Whitney. GO FIRST's management repeatedly sought to engage with Pratt & Whitney on the engine issue, but Pratt & Whitney did not respond constructively. Instead, despite its contractual obligations to provide a spare leased engine within 48 hours of failure, it refused to provide sufficient spare leased engines to GO FIRST and refused to repair GO FIRST's engines.
As a result, GO FIRST was left with no option but to commence an arbitration against Pratt & Whitney under the 2016 Rules of the Singapore International Arbitration Centre (SIAC) - seeking compensation in excess of INR 8000 crores and other final relief - as well as to seek interim, emergency relief as permitted by those Rules. By an award dated 30 March 2023, an emergency arbitrator appointed in accordance with the SIAC Rules found that GO FIRST's current financial position was due in large part, if not wholly, to the number of grounded aircraft caused by the unavailability of Pratt & Whitney's engines. Among other things, the emergency arbitrator ordered Pratt & Whitney to take all reasonable steps to release and dispatch without delay to GO FIRST at least 10 serviceable spare leased engines by 27 April 2023, and a further 10 spare leased engines per month until December 2023.
Pratt & Whitney has refused to comply with the emergency arbitrator's order and to date, it has provided no spare leased engines at all nor provided any certainty with respect to the timeframe for the provision of spare leased engines in the future. It has also failed to induct faulty engines for repair.
After Pratt & Whitney failed to comply with the emergency arbitrator's order, GO FIRST approached the emergency arbitrator again, the emergency arbitrator confirmed the orders in the emergency arbitrator's award in a second award dated 15 April 2023. Had Pratt & Whitney complied with the emergency arbitrator's award, all of GO FIRST's aircraft would have been operational by August/September 2023, ensuring profitable operations in the fast-growing Indian aviation market. As a result of Pratt & Whitney's failure to comply with the emergency arbitrator's award, GO FIRST is being driven to take steps to enforce the award in the U.S. and other international jurisdictions.
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.
The additional consequence of Pratt & Whitney's actions has also driven some lessors to repossess aircraft, draw down letters of credit and notify further withdrawal of aircraft. The culmination of these actions will result in a severe depletion in the number of aircraft available for GO FIRST to operate going forward, thereby making it further unfeasible for GO FIRST to continue its operation and meet its financial obligations.
Prior to the acute issues caused by the serial failure of Pratt & Whitney's engines, GO FIRST enjoyed a market share of 10.8% in FY'20, and was consistently profitable from 2010-2020, with a comparable EBITDAR to its largest competitor from 2016-2020. In FY'22 GO FIRST reported EBITDAR better than that of the largest competitor by almost 3.4%. The operating costs of the company continued to be lower than that largest competitor from 2020-2022.
For over 17 years, GO FIRST has proudly served 84 million passengers. GO FIRST anticipates and expects that that once the application under section 10 of IBC is admitted, the appointed Interim Resolution Professional will sustain GO FIRST's operations, allowing it to serve many more passengers in the years to come.
Featured Video Of The Day
Amid Bangladesh Turmoil Fallout, Hilsa Prices Soar
Ground 3 Engines, Handover Them To Lessors In 15 Days: Delhi High Court To Spicejet Video Shows Eels Slithering On Canada Airport's Tarmac After Escaping From Cargo Box On Camera: Black Man Dies After Being Pinned Down By Security Guards In US Trump, Musk Groove To Bee Gees' 'Stayin' Alive' In AI-Video Now Viral 150 mg Semen In Kolkata Doctor's Body, Suspect Gang-Rape: Parents To Court Mob Vandalises Hospital During Protest Over Kolkata Horror US Judge Says "Monopolist" Google Can't Avoid App Store Reforms NASA To Decide Stranded Starliner Astronauts' Route Home By End Of Month Mob Vandalises Hospital During Protest Over Kolkata Horror Track Latest News Live on NDTV.com and get news updates from India and around the world.