The CEO of Go Airlines (India) said that the company’s owner had no intentions to sell the budget airline after engine problems led it into bankruptcy. Frustrated passengers had been complaining about sudden flight cancellations.
On Tuesday, the third-largest airline in India, which had just changed its name to Go First, filed for bankruptcy, citing “faulty” Pratt & Whitney engines that it uses on its Airbus 320 (AIR.PA) neo aircraft.
As passenger volume surges back after the pandemic, the first Indian airline to go bankrupt since Jet Airways in 2019 faces intense competition from Tata Group-owned Air India and its biggest rival IndiGo.
“The Wadia group, in particular Nusli Wadia, has always tried to see that the company and the airline operations go on, on a normal basis, in spite of the fact that we are completely disabled to that extent by Pratt & Whitney,” CEO Kaushik Khona said.
“There is no question of Wadia group having any intention to exit or move out.”
Wadia group, the only shareholder in Go First, invested 2.90 billion rupees (about $35.46 million) in the airline in April alone, bringing the group’s total investment in the company to 65 billion rupees.
“The Indian government is very keen we should not fail,” Khona said.
Travellers were particularly unhappy by the sudden flight cancellations following the bankruptcy filing, and Khona said that the airline would not begin selling tickets until at least May 15.
“I had to shell out more than double of what I originally paid for a ticket on another flight,” said Mumbai-based advertising executive Timir Roychoudhury, whose Goa-Mumbai flight was cancelled.
Go First said in its bankruptcy case that the U.S. company’s failure to comply with an arbitration ruling to provide spare leased engines would have allowed it to resume full operations.
As of this week, 28 of Go First’s aircraft have been grounded due to Pratt & Whitney engines because of a “serious design flaw” that caused shutdowns and early failure.
Pratt claimed that Go First’s arguments were based on “fabricated obligations” in the arbitration dispute.
The Raytheon-owned engine manufacturer also questioned why Go First purchased an additional 156 engines in 2019, three years after it started using the first 156.
Go First couldn’t demonstrate that it was the “sole or exclusive cause – or any cause at all” of its dire financial situation, according to Pratt.
In hot and dusty environments, like as India, the Pratt engine has had durability issues that necessitate more frequent maintenance. Availability gaps have been made worse by a lack of repair capability.
In response to some plane groundings, IndiGo withdrew Pratt as a supplier in 2019 and signed a $20 billion order for LEAP engines from CFM International for its fleet growth.
CEO Khona stated that the airline has paid all dues to Pratt and that the insolvency proceedings were not intended to sell the company.
Go First’s market share in India dropped to 7% in October 2022 while its weekly departures fell 39% by March, from their 2021 levels.
On Wednesday, the airline’s CEO said it was looking to dissuade lessors from taking action and confirmed some parties had expressed an interest in taking a stake in the airline.
Pilots have been receiving their salaries with a delay for the past few months, and are already considering moving to bigger rivals, according to three pilots who did not wish to be named.
Go First’s lenders will most likely meet on Wednesday to discuss what to do next after the bankruptcy filing, two bankers aware of the development told Reuters.
According to the airline’s bankruptcy petition, it owed creditors $797 million or 65.21 billion rupees. According to the file viewed by Reuters, as of April 30, Go First had not defaulted on any of those loans.
On Wednesday, shares of lenders to Go First, including Central Bank of India, Bank of Baroda, and IDBI Bank, declined while those of the airline’s competitors rose.
(Adapted from USNews.com)