The cash-strapped Indian airline Go First filed for bankruptcy on Tuesday, blaming “faulty” Pratt & Whitney engines for grounding about half of its fleet.
The move marks the first major airline collapse in India since Jet Airways filed for bankruptcy in 2019, underlining fierce competition in an industry dominated by IndiGo and the recent merger of Air India and Vistara under the Tata conglomerate.
Go First’s total debt to financial creditors stands at 65.21 billion rupees ($797 million) as of April 28, it said in a bankruptcy filing viewed by Reuters.
The company has not defaulted on any of these dues as of April 30, but has defaulted on payments to operating creditors, including 12.02 billion rupees ($146.9 million) to vendors and 26.60 billion rupees ($325 million) to aircraft lessors, it said in the filing.
Go First said in a statement the filing with the National Company Law Tribunal comes after Pratt & Whitney, the exclusive engine supplier for the airline’s Airbus A320neo aircraft fleet, refused to comply with an arbitration order to release spare leased engines to the airline. which would have allowed it to return to full operations.
Pratt & Whitney did not immediately respond to Reuters’ emails and calls seeking comment. Parent company Raytheon Technologies was not immediately available for comment.
A problem with Pratt & Whitney’s engines that safety authorities had warned could cause a plane’s engine to fail mid-flight has dogged Indian airlines in recent years.
Pratt & Whitney is quoted in Indian media as saying it has been hit by supply chain pressure across the industry and expects it to ease later this year, which would support increased production of new and remanufactured engines.
Analysts have said larger rival IndiGo has been able to withstand the impact better, thanks to its larger fleet and deeper pocket.
Go First, owned by the Wadia Group and formerly known as GoAir, also said on its website that it had canceled scheduled flights from May 3 to May 5 due to “operational reasons”.
“The Government of India has assisted the airline in every way possible,” India’s Civil Aviation Minister Jyotiraditya Scindia said in a statement. “The problem has also been addressed with the stakeholders involved.”
The collapse could benefit rival airlines as the industry tries to cope with a wave of post-pandemic air travel.
“The sudden disruption to operations is likely to benefit other players and increase air fares due to supply constraints,” wrote Jinesh Joshi, a research analyst at Prabhudas Lilladher.
The move took Go First lenders by surprise, two bankers familiar with the matter told Reuters.
The lenders met with Go First’s management a few weeks ago, but no indication has been given, one of the bankers said. Lenders will meet shortly to assess the situation and decide on future course of action, they said.
According to a January report from Acuite Ratings, Go First has 56 billion rupees ($685 million) in Indian bank debt. Central Bank of India and Bank of Baroda hold the largest share.
“I’m a little dismayed to learn they’ve filed for bankruptcy,” said Mark Martin, CEO of aviation consulting firm Martin Consulting LLC. “I still feel like this may not be the end of Go First. This should be a vehicle and a resource for someone new to take over.”
The number of planes grounded “because of Pratt & Whitney’s failed engines” has exploded from 7 percent of the fleet in December 2019 to 50 percent by December 2022, the airline said. income and additional costs.
The troubles, forcing Go First to delay its planned $440 million IPO in 2021, also resulted in an erosion of its market share from 8.4 percent in January to 6.9 percent in March, the latest data from the Indian market showed. aviation regulator.
The airline was trying to raise money and the Wadia Group was said to be in talks to either sell a majority stake or completely end its shareholding. Wadia Group did not respond to an email from Reuters asking for comment.
Go First said the grounds had also prompted some lessors to “take back aircraft, record letters of credit and report further aircraft withdrawals”.
According to three pilots who do not want to be named, the employees were not aware when they heard through local media about the closure of the daily operation. They have received their salaries with delays in recent months, the pilots added.
“We understand that this news is likely to be distressing and we remain committed to supporting you all during this difficult time,” Go First later said in an email to employees, viewed by Reuters.