India’s budget carrier Go First on Tuesday filed for bankruptcy before the National Company Law Tribunal (NCLT) and temporarily suspended flight operations on May 3 and 4 due to a “severe fund crunch”.
Chief Executive Kaushik Khona said that flight operations will resume once the NCLT admits the application, PTI news agency reported. More than 5,000 people are employed with Go First.
“It is an unfortunate decision (filing for voluntary insolvency resolution proceedings) but it had to be done to protect the interests of the company,” he told PTI.
Go First said it has been forced to file for bankruptcy because of the recurring and persistent issues with the GTF (Geared Turbofan) engines supplied by Pratt & Whitney (P&W).
Khona said they have grounded 28 planes, which is more than half of its fleet, as a result.
Further, the company claimed that P&W failed 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 between them.”
Promoters have infused funds worth Rs 32 billion into the airline in the last three years and out of the total amount, Rs 24 billion was injected in the last 24 months. An amount of Rs 2.9 billion was pumped in April this year, the Wadia Group-owned airlines said.
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“This brings the total investment in the airline since its inception to approximately Rs 6.5 billion,” the statement said.
Further, Go First said it has received significant support from the government’s Emergency Credit Line Guarantee Scheme (ECLGS).
“Even this collective and significant support has not been adequate to prevent the enormous damage caused by Pratt & Whitney’s defective engines.
The government has been informed about the airline’s decision, Khon said, adding that they will be submitting a detailed report to aviation regulator Directorate General of Civil Aviation (DGCA).
“The grounding of close to 50 per cent of its fleet due to the serial failure of Pratt & Whitney’s engines, while incurring 100% of its operational costs has set Go First back by Rs 10,800 crore in lost revenues and additional expenses,” it said.
The airline posted its biggest annual loss in fiscal 2022.
The latest development comes after reports that Go First was looking to raise funds and that Wadia Group was in talks to either sell a majority stake or completely exit its shareholding in the airline.
(With inputs from agencies)
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