Loss-making budget carrier GoFirst was burning cash of around Rs 200 crore every month since November and could no longer afford it and had to resort to filing for insolvency before the National Company Law Tribunal (NCLT), Kaushik Khona, chief executive officer, exclusively told Moneycontrol over a phone call soon after the announcement.
“Filing for insolvency is not to liquidate the company rather to preserve the company's remaining assets so that we can restart operations soon” Khona said.
GoFirst has been hit by the double whammy of grounded airlines due to faulty engines and mounting dues with vendors and lessors.
Also Read: Go First insolvency: What does it mean for Indian aviation?
On May 2, the cash strapped Wadia Group-owned airline first announced that it would temporarily suspend flight operations on May 3 and 4 due to a severe fund crunch. A bit later in the day, the company said it has filed an application for voluntary insolvency resolution proceedings before the NCLT, Delhi due to a "severe fund crunch".
"GoFirst has been left with no option but to shut down operations at the moment as it has become unsustainable for us to keep paying our vendors and burning cash. The only thing left now is to hope justice prevails and the court system makes the right decision,” Khona said.
The airline hopes to resume operations as soon as NCLT admits the application.
Khona, who is seen as a Wadia loyalist, was branded by fire when he became CEO in August 2020 when the airline industry was severely hit by the pandemic. He replaced industry veteran Vinay Dubey after his short stint at GoFirst, who went on to join the newly launched Akasa Air.
Hoping to Takeoff
Khona said that GoFirst needs at least 20 aircraft to return to service and break even on daily operations.
“We have requested NCLT to expedite taking up the insolvency of GoFirst. We are hopeful that the NCLT will help resolve cash inflow issues faced by GoFirst due to noncompliance by P&W,” Khona said.
GoFirst would be able to return to full-scale operations by September 2023 if Pratt & Whitney provides the airline with the engines, as stipulated in the SIAC order, Khona noted.
"We just require engines, the sooner we have engines the faster we will return to operations," he said.
Also Read: DGCA issues show-cause notice, matter is taken up with stakeholders: Jyotiraditya Scindia
GoFirst was forced to ground half of its fleet citing faulty engines supplied by Pratt & Whitney. While the airline sought compensation from Pratt & Whitney for faulty engines, with fewer operating aircraft its market share shrunk, leading to loss of revenue and delayed payments to vendors.
Blame Game
GoFirst said 25 of its aircraft - which comprises 50 percent of the operating fleet - are grounded awaiting engines.
The airline has squarely blamed Pratt & Whitney for the company's weak financial position, as the American aerospace manufacturer has refused to comply with the arbitral award issued by the Singapore International Arbitration Centre (SIAC) in favour of the airline.
The SIAC, in an order issued on March 30, had asked P&W to provide GoFirst with 10 serviceable engines by April 27, 2023, and 10 engines each month till December this year. However, P&W has refused to comply with the order.
The number of grounded aircraft due to the engine issue increased from 7 percent of its fleet in December 2019 to 31 percent in December 2020 and 50 percent in December 2022. This has resulted in a revenue loss of around Rs 10,800 crore.
"P&W has refused to acknowledge any fault of their own till now...It has become impossible for GoFirst to keep operating with a limited fleet while paying in full lessor fees and other operational costs," Khona said.
The airline had, on April 28, also moved a petition before the Delaware court seeking enforcement of the Singapore arbitration panel's award.
"We hope the Delaware Federal Court upholds the decision awarded by the Singapore International Arbitration Centre," Khona said.
Stand by Me
The troubled airline is hopeful that vendors and employees would stand by the company till operations resume. “I hope my employees continue to remain with us,” Khona said.
The sector regulator, Directorate General of Civil Aviation (DGCA) issued a show cause notice to the airline after it cancelled fresh bookings from 3-4 May. Passengers took to social media to express their angst.
Meanwhile, Minister of Civil Aviation, Jyotiraditya Scindia, in an official statement said, "GoFirst has been faced with critical supply chain issues with regard to their engines. The GOI has been assisting the airline in every possible manner. The issue has also been taken up with the stakeholders involved."
He added that it is unfortunate that this operational bottleneck has dealt a blow to the airline’s financial position and that it is prudent for the judicial process to run its due course following the NCLT application.
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