Indian airline Go First finds itself caught between a rock and a hard place as its insolvency process has been complicated by aircraft lessors who asked the Directorate General of Civil Aviation (DGCA) to deregister some of its planes as a step towards taking them back.
Go First is the first major Indian airline to collapse since 2019, underlining the fierce competition in a sector dominated by IndiGo and the recent merger of Air India and Vistara under the Tata conglomerate. The cautionary tales of Jet Airways and Kingfisher Airlines highlight the high-risk nature of the aviation industry.
In recent developments, some of Go First’s lessors such as GY Aviation Lease, SMBC Aviation Capital, Pembroke Aircraft Leasing, among others, submitted requests to take back at least 20 planes leased to the airline.
Go First recently grounded more than half its 54 Airbus 320 neos fitted with Raytheon owned Pratt & Whitney engines. It also said that it was cancelling all its flights till May 9 due to operational reasons, adding that a full refund will be issued to the affected passengers. The Wadia group-owned airline is also not taking new bookings till May 15.
The DGCA has also asked the airline to process refunds to passengers as per timelines stipulated in the regulations.
The airline said that it was “forced to apply to the National Company Law Tribunal (NCLT)” after Pratt & Whitney’s International Aero Engines - the exclusive supplier of engines for A320 neos - had failed to meet contractual obligations and refused to comply with an arbitration award from the Singapore International Arbitration Centre (SIAC).
It added that more likely engine failures over the next three-four months, would have made its operations “unviable”. Engine failures have cost the airline INR 108 billion (USD 1.3 billion) in lost revenue and expenses, it said.
Amid the dispute between the lessors and the troubled airline, banks with exposure to it are awaiting the tribunal’s decision to decide their next course of action, sources told Reuters.
The company owes financial creditors INR 65.21 billion (USD 798 million), its bankruptcy filing showed, and had not defaulted on any of those dues by the end of April.