MC Explains: Why are GoFirst operations hit and what next?

Why have GoFirst’s operations been affected?

GoFirst’s operations have taken a hit in the last few months because the airline has been forced to ground around 20 of its 50 Airbus A320neo aircraft. Around 90 percent of the airline’s fleet of 58 planes is made up of A320neos with Pratt & Whitney engines.

The planes had to be taken out of service due to the non-availability of spare parts and a delay in the supply of retrofitted engines on the part of P&W

The resulting shortfall in active aircraft has resulted in the airline’s flight schedules taking a hit.

“GoFirst does not have the fleet to carry out all its scheduled flights both in the domestic market and in the international market,” an industry insider said.

The airline has hence reduced the number of scheduled flights in its winter schedule published by DGCA. GoFirst has been approved to operate 1,390 flight departures per week, a 40 percent decline from its winter schedule of 2021, when DGCA had approved 2,290 flight departures per week.

Why did GoFirst have to ground its planes?

The major reason for GoFirst grounding flights has been the shortage of spare parts and engines for its Airbus 320neo planes.

Supply chain issues and a labour shortage affecting Pratt & Whitney have forced the aerospace engine manufacturer to defer deliveries of PW1100G geared turbofan engines that power the A320neo aircraft.

The airline had in January sent engines from its older planes to Pratt & Whitney and the upgraded versions were to be delivered in five months. However, that did not happen.

GoFirst as part of its original plan was looking to convert its entire fleet of Airbus A320neos and Airbus A320ceos to Airbus A321neos by the end of 2026-27.  The neo stands for new engine option and ceo for current engine option,

As part of the plans, the airline had to take deliveries of 10 A321neo aircraft per year until 2023-24 and another 72 aircraft between 2023-24 and 2026-27. However, the airline has only taken delivery of two new aircraft in the last six months.

Aircraft and engine manufacturers are facing issues in sourcing raw materials and components. Both Airbus and Boeing are struggling to source titanium and titanium ore due to the Russia-Ukraine war and sanctions against imports from Russia.

How many flights of GoFirst have been affected?

The Business Standard on November 13 reported that according to data available with the Ministry of Civil Aviation (MoCA), 56 percent, 69 percent and 82 percent flights of GoFirst were delayed on  November 10, 11 and 12, respectively.

GoFirst operated 212, 212 and 211 flights on Thursday, Friday and Saturday, respectively, the daily said, quoting aviation analytics company Cirium.

According to the MoCA website, GoFirst’s on-time performance stood at 31 percent on November 11, 18 percent on November 12 and 16 percent on November 13.

Industry insiders who closely track the sector said that in the last two months, around 200 GoFirst flights have been cancelled 24 hours prior to take-off.

“The airline first started cancelling its international flights in September due to a shortage of planes in its fleet. Around 20 international flights of GoFirst were cancelled in September,” one industry insider said.

GoFirst had scrubbed its Dubai-Kannur flight on October 14 and did not provide customers with an alternative flight, another senior executive who closely tracks the sector said. The second executive also said that due to aircraft shortages, GoFirst was consolidating flight bookings of multiple flights into one flight as well.

On October 31, passengers booked on the Indian budget carrier for a flight between Hyderabad and Delhi reached the airport to find out no such flight existed.

According to Cirium, the airline operated 2,070 flights per week in November 2021. This has reduced by 31 percent in November 2022 as the airline is operating just 1,429 flights per week now.

Even in October this year, it operated 24.3 percent fewer flights than October 2021.

What is the airline doing to improve operations going forward?

The airline has applied for a Rs 600-crore loan under the Emergency Credit Line Guarantee Scheme. If it is approved, the airline will also consider raising another Rs 500 crore under the scheme, subject to clearances.

Following the approval of the Rs 600 crore loans, the airline will also consider raising another Rs 500 crore as loans under the ECLGS, subject to government approvals.

“Most of the loans the airline has taken in the past few months were to figure out a way to increase capacity utilization,” a GoFirst official said.

GoFIRST in 2022 has so far taken loans woorth Rs 400 crore under the ECLGS scheme. Apart from these loans the airline's promoters have infused around Rs 2,800 crore in the last 15 months which has helped the carrier tackle multiple headwinds.

He added that the airline is evaluating dry-leasing (where only the aircraft are leased, as opposed to wet-leasing where the crew are supplied) a few A320 planes to overcome the capacity shortage and is also in discussion with multiple engine manufacturers including Pratt & Whitney to provide spare parts.

GoFirst is also looking to merge some of its routes in order to increase domestic fleet efficiency.

By when are the airline’s operations likely to recover?

“Supply chain issues are expected to improve in the next six months, but it has impacted the capacity addition plans of Indian aviation for the next two years,” the GoFirst official said. He added that the airline was expecting up to 16 engines from Pratt & Whitney by the end of November.

“We continue to focus on what we can control by proactively managing the businesses through these dynamic times,” another GoFirst official said.

This person added that based on ongoing discussions with engine makers, a significant portion of the airline’s fleet is likely to remain grounded for the next few months.

A third airline official said that the GoFIRST is looking to take delivery of two new aircraft in the next two months.

While the airline expects some recovery in operations by next year, its fleet expansion plans have taken a major blow.

Will the IPO get delayed?

The airline had planned to come out with its initial public offering in the second quarter of this financial year, but now has deferred it again.

GoFirst’s draft red herring prospectus (DRHP) expired on August 26 and the airline will need to refile its IPO papers with the Securities and Exchange Board of India (SEBI).

The first GoFirst official said that refiling the DRHP is far from the airline’s priority at the moment. “Until operations are not back to normal and fleet expansion starts, the IPO plans have been put on hold,” the person said.

This is the third time GoFirst has delayed its IPO plans since last year. It had received approval from the market regulator for its IPO last year but had held back the share sale plan first in August 2021 after SEBI called the promoters, the Wadias, for a pending inquiry, and then in December 2021, GoFirst further delayed the offering due to the outbreak of the Omicron wave of COVID-19.

In a regulatory filing last month, GoFirst said its net loss more than doubled to Rs 1,807.91 crore in 2021-22 due to P&W’s delay in supplying engines and multiple waves of COVID-19 that affected air travel.

The airline incurred net losses of Rs 1,270.92 crore and 870.48 crore in 2020-21 and 2019-20, respectively.