Go First cleared to resume operations, set to make history

At the same time, the airline owes money to travel agents and passengers, who would be more interested in knowing the fate of their money before proceeding to book flights with Go First in the future.

India continues to be a market where flight bookings are driven by indirect channels such as travel agents and online travel agents. Without their past dues being cleared or a plan to clear those dues, both segments would be wary of putting in more money.

However, the Indian market is also driven by cost-conscious travellers who are loyal to low fares. Passengers could well be attracted by dropping prices. This may not help the airline shore up profit, but a “going concern” is better than a grounded one when it comes to attracting buyer interest and decking up for a possible sale.

What are the challenges?

The audit by the Directorate General of Civil Aviation would have covered various aspects – from crew and staff to maintenance and engineering and the ability to sustain operations, subject to funding. It is now up to the bankers to decide on the quantum of funding that may be needed.

If the lessors and the airline do not come to an agreement on the use of aircraft, there is limited wet lease capacity available across the world for the airline to use in line with current local laws. Wet-lease is an expensive proposition but could come in handy in imparting confidence to lessors, passengers and the entire ecosystem that the airline is here to stay.

Airports have temporarily handed over Go First’s slots to other airlines that are flying with short-term schedules. Based on the slots that Go First utilises, there will be challenges for other airlines, but in some sectors – if not all – the competition landscape would have changed since May.

Seasonality is playing its part, with the July-September quarter being a lean one. Go First’s traditional higher presence in tourist-centric markets will not help garner higher revenue in these lean months. At 114 flights a day, Go First will be operating less than 1 percent of all domestic flights and will be smaller than Akasa Air or SpiceJet.

Tail Note

Go First may create history when it takes off, but the route to survival is long and may get bumpy with court cases. Will the Wadia group bid for the airline with or without a partner?

For now, the focus will be on managing costs. The airline had 50+ aircraft in its fleet and operated half of it. This effectively meant it had to generate revenue to pay for leasing and parking 50 planes by operating only half of them. With 15 aircraft that do not have engine issues – five of which are likely to be A320ceos – the airline will be further hard-pressed to make ends meet.

Resumption itself is a massive achievement, but continued operations will be the real challenge and a lot could hinge on what turns the case against Pratt & Whitney in the Delaware court takes. The airline has so far cited the judgement of a Singapore arbitration court directing Pratt & Whitney to provide engines, while the engine manufacturer has made public its inability to do so and also talked about contractual violations by the airline on payments.

How will this dispute end? With an eye on the market, will this be settled amicably or will it go down to the wire in the courtroom?

Any thoughts right now would be as unpredictable as the monsoon rains.