Promoters have infused funds worth Rs 3,200 crore into the airline in the last three years and out of the total amount, Rs 2,400 crore was injected in the last 24 months. An amount of Rs 290 crore was pumped in April this year
Cash-strapped Go First on Tuesday sought voluntary insolvency resolution proceedings and decided to cancel flights for three days starting from May 3, as the budget airline is unable to meet financial obligations amid the grounding of half of its fleet due to the non-availability of Pratt & Whitney engines.
Go First, which has been flying for more than 17 years, will cancel all flights for three days -- May 3, 4 and 5 -- and promised to make a full refund to the customers. It operates around 180-185 flights, carrying around 30,000 passengers on a daily basis.
The airline's CEO Kaushik Khona said the airline has grounded 28 planes, more than half of its fleet, due to the non-supply of engines by Pratt & Whitney (P&W), and that has resulted in a fund crunch.
"It is an unfortunate decision (filing for voluntary insolvency resolution proceedings), but it had to be done to protect the interests of the company," he told PTI.
The Wadia group-owned carrier has moved the National Company Law Tribunal (NCLT), Delhi, seeking voluntary insolvency resolution proceedings.
Go First is the second major scheduled airline after Jet Airways to seek resolution under insolvency proceedings.
Amid travel disruptions due to the sudden cancellation of Go First flights, aviation regulator DGCA has issued a show cause notice to the embattled carrier.
The Directorate General of Civil Aviation (DGCA) said the airline has cancelled the scheduled flights for May 3 and 4 "without any prior intimation."
While the carrier announced that it will cancel the flights for May 3 and 4, it was extended by another day to May 5, as per a notice on the carrier's website.
According to Khona, the current liabilities of the airline would be around Rs 9,000 crore. The carrier has around 7,000 direct employees.
Civil Aviation Minister Jyotiraditya Scindia said it was unfortunate that the operational bottleneck related to engine supplies has dealt a blow to the airline's financial position.
"It is prudent to wait for the judicial process to run its course," he said in a statement.
The civil aviation ministry is keeping a close watch on the developments at crisis-hit Go First and the proceedings that are expected at the National Company Law Tribunal (NCLT) this week, a senior official said.
In a detailed statement, Go First said it has been forced to seek voluntary insolvency resolution proceedings due to "serial failure" of Pratt & Whitney engines, resulting in the grounding of 50 per cent of the fleet and is no longer in a position to continue to meet its financial obligations.
There was no immediate comment from P&W on Go First.
P&W has not been providing the engines and it has been more than 12-18 months that the airline has been continuously following up with them. "We also found that Pratt & Whitney was not serious enough to commit to their obligations," Khona said.
Go Airlines (India) Ltd, which operates under the brand Go First, has applied to the NCLT for resolution and protection under Section 10 of the Insolvency and Bankruptcy Code "due to the ever-increasing failure of the Pratt & Whitney engines that power its fleet", the statement said.
The airline, which has been grappling with engine issues since January 2020, said it has been forced to move the NCLT as P&W refused to comply with an order issued by the Singapore International Arbitration Centre (SIAC), an emergency arbitrator.
The arbitrator had ordered P&W to take all reasonable steps to release and dispatch without delay to the airline at least 10 serviceable spare leased engines by April 27 and another 10 spare leased engines per month until December 2023, as per the statement.
"If Pratt & Whitney had followed the directions laid down in the award, Go First would have been able to return to full operations by August/September 2023, leading to Go First's financial rehabilitation and survival.
"Pratt & Whitney has failed to provide any further serviceable spare leased engines at all at the date of this press release and has stated that there are no further spare leased engines available," the statement said.
Promoters have infused funds worth Rs 3,200 crore into the airline in the last three years and out of the total amount, Rs 2,400 crore was injected in the last 24 months. An amount of Rs 290 crore was pumped in April this year.
"This brings the total investment in the airline since its inception to approximately Rs 6,500 crore," the statement said.
Further, Go First has received funds under the government's Emergency Credit Line Guarantee Scheme (ECLGS).
"The grounding of close to 50 per cent of its fleet due to the serial failure of Pratt & Whitney's engines, while incurring 100 per cent of its operational costs has set Go First back by Rs 10,800 crore in lost revenues and additional expenses," it said.
According to the airline, it is no longer in a position to continue to meet its financial obligations and has taken the step to approach the NCLT "to protect the interests of all stakeholders".
The airline flew 29.11 lakh domestic passengers in the first quarter of this year, and the market share during this period was 7.8 per cent.
Jet Airways, which was grounded in April 2019, is yet to restart operations amid differences between lenders and Jalan Kalrock Consortium, which emerged as the winning bidder under the insolvency resolution process.