Go First files for voluntary insolvency proceedings with NCLT, blames US engine maker for woes

“Once the NCLT processes Go First’s application…an interim resolution professional (IRP) will take over and operate Go First. Go First’s board and management will cooperate fully with the IRP and trusts that the IRP will address the concerns of Go First’s stakeholders as appropriate,” the carrier said. Meanwhile, Go First has also suspended its flights scheduled for May 3 to May 5 due to a severe cash crunch, which is a result of the widespread grounding of its aircraft, the Press Trust of India reported quoting Go First’s Chief Executive Officer Kashik Khona.

Go First is the first Indian carrier since Jet Airways to go to the NCLT under the Insolvency and Bankruptcy Code.

Meanwhile, the Directorate General of Civil Aviation (DGCA) issued a showcause notice to Go First over cancellation of all its flight scheduled for May 3 and 4. In the notice, the DGCA said that Go First did not give any written intimation to the regulator regarding the flight cancellations, and was, therefore, non-compliant with the norms. The regulator also asked the airline to submit the list of measures taken to mitigate inconvenience caused to passengers due to these cancellations, and also provide a plan of action to operate its scheduled flights for May 5.

“Go First has been plagued by this issue since January 2020 and in this period the percentage of grounded aircraft due to Pratt & Whitney’s faulty engines has grown from 7% in December 2019 to 31% in December 2020 to 50% in December 2022. This is despite several on-going commitments made by Pratt & Whitney over the years, which it has repeatedly failed to meet,” the airline said.

Go First has been “forced to apply to the NCLT” after P&W–the exclusive engine supplier for the carrier’s Airbus A320neo fleet–refused to comply with an order issued by the Singapore International Arbitration Centre (SIAC), the airline said in the statement.

That SIAC had directed P&W to dispatch at least 10 serviceable spare leased engines by April 27, and 10 spare leased engines per month till December. Go First said that if P&W had followed the SIAC’s directions, the airline would have been able to return to full operations by August or September, leading to its “financial rehabilitation and survival”.

The airline has also moved to get the arbitral award enforced in the US and other international jurisdictions. Some international reports suggested that Go First has filed an emergency petition in the Delaware federal court seeking enforcement of the arbitral award.

“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 airline said.

Go First said that as a result of P&W’s actions, some lessors repossessed aircraft and drew down letters of credit, apart from notifying further withdrawal of aircraft. “The culmination of these actions will result in a severe depletion in the number of aircraft available for Go First to operate going forward, thereby making it further unfeasible for Go First to continue its operation and meet its financial obligations,” the airline said.

The carrier said that its management repeatedly sought to engage with P&W regarding frequent issues with the engines, but the engine maker did not respond “constructively”, and despite its contractual obligation to provide a spare leased engine within 48 hours of an engine failure, it refused to provide necessary spare engines and even refused to repair the faulty engines.

“As a result, Go First was left with no option but to commence an arbitration against Pratt & Whitney under the 2016 Rules of the Singapore International Arbitration Centre – seeking compensation in excess of INR 8000 crores and other final relief – as well as to seek interim, emergency relief as permitted by those rules,” the airline said.

“Go First deeply regrets the current situation, which has forced it to apply to the NCLT. It is evident that with Pratt & Whitney refusing to abide by the directions in the arbitration award…and with further engine failures expected in the next 3-4 months, the operations of Go First will be made unviable,” the carrier added.

The airline said that it was forced to approach the NCLT despite its promoters infusing substantial funds –around Rs 3,200 crores in the past three years–taking the total investment in the airline since its inception to around Rs 6,500 crores. The airline had also received funds under the government’s Emergency Credit Line Guarantee Scheme.

“However, even this collective and significant support has not been adequate to prevent the enormous damage caused by Pratt & Whitney’s defective engines. The grounding of close to 50% of its fleet due to the serial failure of Pratt & Whitney’s engines, while incurring 100% of its operational costs has set Go First back by Rs 10,800 crores in lost revenues and additional expenses,” the carrier added.