In a recent announcement, Go First, an airline company has suspended their operations for three days in May citing operational difficulties. A recent announcement on the airline’s website announced the cancellation of their flights which were to operate on 3rd, 4th and the 5th of May. A full refund will be issued to passengers being affected by this move by the airline.
Credits: India Today
The History of Go First:
It wasn’t too long ago that air travel was considered a luxury reserved for the upper echelon of our society and to have travelled on an airplane was considered a mark of success. However, with the inception of low cost and ultralow-cost airlines like IndiGO and SpiceJet, air travel was now within the monetary reach of the Indian middle class. Founded as GoAir Airlines in 2005, the airline company now known as Go First was one of the above mentioned ultralow-cost airlines. Based in Mumbai, Maharashtra and owned by the business conglomerate Wadia group, GoAir commenced their operations on 4th November 2005 with a fleet of Airbus A320 Aircrafts. They were declared the fifth largest Indian airline with a market share of 8.4% in 2017 and by March 2020 they operated over 330 daily flights between more than 36 destinations among which 27 were domestic and 9 International. As of February 2023, Go First Airlines has a fleet of 53 aircrafts with orders for an additional 89 yet pending.
The problems that led to this situation:
The covid pandemic and the resulting back-to-back lockdowns, curfews had left most of the airlines and other travel companies paralyzed. Go First was no exception as they experienced a sudden yet significant decline in revenues starting in February 2020 which resulted in a net loss of over Rs. 470 crores in the nine months that followed. The cash crunch was so severe that the company started to default on the lease payments of their aircrafts. It was due to this reason that in 2021 the company decided to make the move to go public as its parent company wished to raise a gargantuan amount of Rs. 3600 crore from the primary market of which almost Rs 255 crore were to be used to clear the outstanding dues the company had accumulated with oil companies against fuel supplies. A major portion of this amount was owned to Indian Oil. According to a report from FY20, the company had a debt of Rs. 1780 crore.
Bankruptcy:
Despite all the debts and downfall in the revenue, the company had been able to survive and barely hold itself together as it focused on providing low-cost aviation options to its passengers. It rebranded itself after 15 years in the air as Go First Airlines and was set to make a comeback as the covid threat finally receded and the Airlines industry started to make a comeback. However, any hopes for a miracle revival were shattered as the company on Tuesday filed for bankruptcy at the National Company Law tribunal. They further suspended the operations of all their flights for the next two days in a desperate attempt to prevent the mounting losses they had been experiencing.
In a detailed statement submitted by the company, the plea for bankruptcy was attributed to the fact that almost 50% of their fleet had been grounded due to delays in delivery of engines from the US based aircraft engine manufacturers Pratt and Whitney. This had resulted in loss of revenue for Go first airlines along with additional expenses incurred for the maintenance of the planes grounded. The airline claims that it was forced to ground 50% of its A320neo fleet due to a mass failure of Pratt and Whitney engines that rose from 7% in December 2019 to 31% in December 2020 and 50% in December 2022. The airline aims to seek a compensation of around Rs 8000 crores in the SIAC(Singapore International Arbitration Centre) arbitration which if successfully received will be used by the company to pay the dues to their creditors.
