BENGALURU, May 2 (Reuters) – Indian airline Go First filed for bankruptcy on Tuesday, blaming “faulty” Pratt & Whitney engines for grounding nearly half of its fleet.
The move marks the first major airline collapse in India since Jet Airways filed for bankruptcy in 2019, and underscores fierce competition in a sector dominated by IndiGo and the recent merger of Air India and Vistara under Tata conglomerate.
Go First’s total debt to financial creditors was 65.21 billion rupees as of April 28, it said in a bankruptcy filing with the National Company Law Tribunal.
The company had not defaulted on any dues as of April 30, but had defaulted on payments to operating creditors, including 12.02 billion rupees to vendors and 26.60 billion rupees to aircraft lessors, it said. in confrontation.
In a statement, Go First said its filing follows the refusal of Pratt & Whitney, the exclusive engine supplier for the airline’s fleet of Airbus A320neo aircraft, to comply with an arbitration order to release spares leased engine that would allow the airline to return in full. operations.
Grounded aircraft “due to faulty Pratt & Whitney engines” plunged from 7% of its fleet in December 2019 to 50% in December 2022, the airline said, costing 108 billion rupees ($1.32 billion) in lost revenues and additional costs.
Pratt & Whitney said in a statement to Reuters that it is “focused on the success of our airline customers, and we continue to prioritize delivery schedules for all customers.”
“P&W is complying with the March 2023 arbitration ruling related to Go First. As this is a matter of litigation, we will not comment further,” it added.
In February, the boss of Raytheon Technologies ( RTX.N ), which owns Pratt & Whitney, admitted that its GTF engines had reliability issues.
Pratt & Whitney was also quoted in Indian media as saying that it has been affected by supply chain pressures across the industry and that it expects those to ease later this year, supporting higher output of new and overhauled engines.
Analysts said bigger rival IndiGo weathered the impact better, thanks to its larger fleet and deeper pockets.
Go First, owned by the Wadia Group and formerly known as GoAir, said on its website that it had canceled flights scheduled for May 3 to May 5 due to “operational reasons”.
“The Indian government is helping the airline in every possible way,” India’s Civil Aviation Minister Jyotiraditya Scindia said in a statement. “The issue has also been taken up with the stakeholders involved.”
The fallout could boost rival airlines as the industry tries to meet a surge in post-pandemic air travel.
“The sudden disruption in operations is likely to benefit other players and increase fares due to the supply constraint,” wrote Jinesh Joshi, a research analyst with Prabhudas Lilladher.
SURPRISE MOVE
The move surprised Go First’s lenders, two bankers familiar with the matter told Reuters.
Lenders had met Go First’s management a few weeks ago, but had given no hint, one of the bankers said. The lenders will meet soon to assess the situation and decide on the future course of action, they said.
“I was a little stunned when I heard they filed for bankruptcy,” said Mark Martin, CEO at aviation consulting firm Martin Consulting LLC. “I still feel that this may not be the end of Go First. It should be a vehicle and a way for someone new to take over.”
Go First’s problems, which forced it to postpone a planned $440 million IPO in 2021, led to its market share eroding to 6.9% in March from 8.4% in January, most recently data from the Indian aviation regulator showed.
The Wadia Group is reportedly in talks to sell its majority stake or exit its shareholding altogether. The Wadia Group did not respond to an email seeking comment.
Go First said the groundings have prompted some lessors to “take back aircraft, issue letters of credit and notify additional aircraft departures.”
The employees were caught unawares because they heard about the halt in daily operations from local media, according to three pilots who did not want to be named. They have been receiving their salaries with delay for the past few months, the pilots added.
“We understand that this news is likely to be troubling, and we remain committed to offering our support to all of you during this difficult time,” Go First said in an email to employees.
($1 = 81.7420 Indian rupees)
Varun Vyas reporting in Bengaluru; Editing by Savio D’Souza
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