Why analysts are not surprised at Go First’s bankruptcy filing

Go First has cancelled all flights until May 5 and promised to refund passengers who have booked tickets.

What really led Go First to file for bankruptcy?

For one, it was the constant churn at the top which made it difficult for the airline to maintain continuity in its operations and goals, say industry watchers.

Also Read | GoFirst files for bankruptcy: What it means for Indian aviation

It became more pronounced in the last three years. Though the airline had constantly changing CEOs even earlier, trouble started after Wolfgang Prock Schauer’s resignation in January 2020. Within months of his quitting, two other senior officials also left.

In August 2020, the airline announced that Vinay Dube is no longer the Chief Operating Officer. Dube joined in February 2020, initially joining as an advisor to the carrier. Shauer is currently the President and Chief Operating Officer of IndiGo, and Dube is the founder and CEO of Akasa, which launched operations in August 2022.

Also Read | GoFirst’s insolvency: An opportunity for others?

Style of operation, financials

The Wadia group-owned airline’s style of operation also started taking its toll. Go First followed a lean-machine attitude in running its various departments. All the departments were run by very few people and when almost half the top team left, it cost Go First dearly.

Its financials are another sore point. Though Go First is not a listed company, and its financials have not been made public, there have been media reports that the airline suffered its highest financial loss to date in fiscal 2022.

Also Read | InterGlobe Aviation soars as Go First bankruptcy opens doors for higher fares, market share

This is despite the owners pumping in Rs 3,000 crore in the airline in the last 15 months and the airline also receiving support from banks as part of the Centre’s bailout through the Emergency Credit Line Guarantee Scheme (ECLGS).

This was bad enough for Go First, in a scenario which had just started picking up after two disastrous years, thanks to Covid and the grounding of flights.

Also, like any business house, the Wadia Group wants to concentrate on its profit-making ventures. Go First was not such a venture.

Why the company reasoning fails

The company squarely blames the failure of Pratt & Whitney engines for taking the insolvency route. However, these engines have spelt trouble for other airlines, like IndiGo in India and many other carriers in the rest of the world.

According to aviation analysts, engine troubles are not insurmountable. They argue that it is like yourself getting admitted to a hospital, suspecting a virus infection, instead of consulting a doctor.

They add that if Go First was keen on staying afloat, it should have worked out some arrangement with its lenders rather than voluntarily opting for insolvency.

Also Read | Go First's insolvency caps Wadia group's steady decline

The road ahead

Analysts are now divided about what the future holds for the airline. While some believe that insolvency proceedings are going to be a long-drawn-out process and the airline is as good as a shut shop, others are not ready to write it off.

Since it has been around for close to 17 years, has slots at most Indian and some international airports, is the third largest airline in India, has a valid Air Operator's Permit (a valid permit is required to run an airline in India), and has trained manpower, many feel Go First can be an interesting pick for an investor with deep pockets who is keen to get an airline in a growing market at less than what it will takes to start a new airline.

Also Read | Airfares likely to rise as Go First cancellations reduce capacity: TAAI

However, it won’t be smooth going for potential buyers, say analysts. The biggest challenge before the new owners will be winning back passenger trust. This is likely to be a slow process as the airline has left many passengers stranded as it ceased operations almost overnight.

Also, existing domestic airlines will try to stifle competition by seeking the slots used by Go First. There is a precedent here. Once Jet Airways stopped operations, its slots were given to existing airlines to ensure there was no passenger inconvenience.

Having approached the National Company Law Tribunal (NCLT), there will be a moratorium on payments by Go First.