Implications of Go First Airline Suspension

May 18, 2023

The aviation industry in India has been hit hard once again with the collapse of Go First airline. Formerly known as GoAir, the airline suspended its operations and filed for bankruptcy before the National Company Law Tribunal, sending shockwaves through the civil aviation sector.

The Journey from GoAir to Go First

Go First airline, previously called GoAir, had a significant market share in India, carrying nearly 29,000 passengers daily in March. With over 200 daily flights, it was a prominent player in the domestic aviation scene. However, the grounding of 25 of its Airbus A320neo aircraft due to ongoing issues with Pratt & Whitney engines proved to be a significant setback for the airline.

The Troubles with Pratt & Whitney Engines

Both Go First and IndiGo airlines faced grounding issues due to the Pratt & Whitney engines installed in their aircraft. These engines, which were plagued with technical problems since their introduction in 2016, led to regulatory orders requiring airlines to replace faulty engines before expanding their fleets. Go First claimed that the American engine manufacturer failed to meet contractual obligations, exacerbating its financial struggles.

The Collapse and its Implications

Go First’s collapse has left a void in the Indian aviation industry, making it the first major airline to collapse since Jet Airways in 2019. As the airline files for bankruptcy, an interim resolution official will take charge until the insolvency process concludes. The collapse has had a direct impact on passengers, with last-minute flight cancellations and skyrocketing airfares during the peak summer travel season.

Debt and Creditors

Go First faced a substantial debt burden, with total liabilities exceeding Rs 11,400 crore. The airline owed significant amounts to operational creditors, including vendors and aircraft lessors. Banks such as Axis Bank, Bank of Baroda, Central Bank of India, Deutsche Bank, and IDBI Bank also found themselves as creditors to the troubled airline. However, the prospects of recovering these dues seem grim, with experts predicting a meager 25% to 30% recovery for the banks.

Opportunities for Rival Airlines

While Go First’s collapse has disrupted the industry, it has presented an opportunity for rival airlines to expand their market share. SpiceJet, a competitor, has already announced plans to bring back 25 grounded aircraft to capitalize on the void left by Go First. The opening up of airport slots and bilateral rights, which were previously scarce, may provide further opportunities for other carriers in the highly competitive Indian civil aviation market.

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