NCLT to hear GoFirst voluntary insolvency plea today

The National Company Law Tribunal at Delhi will hear cash strapped airline GoFirst's plea for voluntary insolvency on Thursday.

The GoFirst lawyer mentioned the plea before the NCLT on May 3 and sought for an urgent listing and the tribunal agreed to list the case accordingly.

On May 2, the airline announced that it has filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT), Delhi.

Read: Go First proposes insolvency professional Abhilash Lal's name in bankruptcy plea

The announcement was made by the airline’s CEO Kaushik Khona shortly after the Wadia Group-owned carrier said it will temporarily suspend flight operations on May 3 and 4 due to a "severe fund crunch". The flights will be restarted once the NCLT admits the application, Khona said.

Explaining why it is facing a fund crunch, Khona told news agency PTI that the airline has grounded 28 planes, which is more than half of its fleet, due to the non-supply of engines by Pratt & Whitney (P&W).

GoFirst said it had to take this step to protect the interests of all stakeholders. It has been forced to take this step despite the infusion of substantial funds to the tune of Rs 3,200 crore by the promoters into the airline in the last three years since it had to ground nearly 50 percent of its A320neo fleet due to the serial failure of Pratt & Whitney’s engines, which set Go First back by Rs 10,800 crore in lost revenues and additional expenses.

Read: Go First Insolvency Filing: Windfall for competitors as consumers' choices shrink

“GoFirst has had to take this step due to the ever-increasing number of failing engines supplied by Pratt & Whitney’s International Aero Engines, LLC, which has resulted in GoFirst having to ground 25 aircraft (equivalent to approximately 50 percent of its Airbus A320neo aircraft fleet) as of May  1, 2023. The percentage of grounded aircraft due to Pratt & Whitney’s faulty engines has grown from 7 percent in December 2019 to 31 percent in December 2020 to 50 percent in December 2022. This is despite Pratt & Whitney making several ongoing assurances over the years, which it has repeatedly failed to meet,” the loss-making airline said in a statement.

“It is an unfortunate decision (filing for voluntary insolvency resolution proceedings) but it had to be done to protect the interests of the company,” Khona said.

Pratt & Whitney, the exclusive engine supplier for GoFirst’s Airbus A320neo aircraft fleet, refused to comply with an award issued by an emergency arbitrator appointed in accordance with the 2016 Arbitration Rules of the Singapore International Arbitration Centre (SIAC). It had directed Pratt & Whitney to take all reasonable steps to release and dispatch without delay to GoFirst at least 10 serviceable spare leased engines by April 27 and a further 10 spare leased engines per month until December 2023, with the objective of GoFirst returning to full operations and achieving its financial rehabilitation and survival, the airline said.