Go First files for bankruptcy, suspends flights for 3 days

DGCA serves show cause notice for sudden cancellations, seeks airline’s plan for resumption of flights; Go First says its losses are due to delays in delivery of Pratt and Whitney engines, grounding half its fleet  

May 02, 2023 03:51 pm | Updated 10:16 pm IST - NEW DELHI

The CEO of the airline told PTI that it had filed for voluntary insolvency resolution proceedings before the National Company Law Tribunal. 

The CEO of the airline told PTI that it had filed for voluntary insolvency resolution proceedings before the National Company Law Tribunal.  | Photo Credit: Special Arrangement

Low-cost carrier Go First has filed for bankruptcy at the National Company Law Tribunal and suspended its flight operations for the next three days — May 3,4, and 5 — over mounting losses, which it has attributed to delays in the delivery of Pratt and Whitney engines, resulting in the grounding of half its fleet of aircraft.

The Directorate General of Civil Aviation (DGCA) has served a show cause notice to the airline for the sudden cancellation of flights without sharing prior information with it, and has also asked it to submit its plan of action for the resumption of flights. In a statement, the airline said that once the NCLT admitted its plea, the court would appoint an Insolvency resolution professional who would take over Go First’s operations.

Engine woes

“The grounding of close to 50% of its A320neo fleet due to the serial failure of Pratt & Whitney’s engines, while it continued to incur 100% of its operational costs, has set GO FIRST back by ₹10,800 crore in lost revenues and additional expenses. Moreover, GO FIRST has paid ₹5,657 crore to lessors in the last two years of which approximately ₹1,600 crore was paid towards lease rent for non-operational grounded aircraft,” the airline’s statement said. It added that the grounding of its aircraft, which started in 2019, grew from 7% of its fleet to 31% by December 2020, and to 50% by December 2022.

The current situation was precipitated, the airline maintained, by Pratt and Whitney’s refusal to take steps to immediately release 10 leased engines by April 27, 2023 and another 10 engines by December 2023, as per the order of the Singapore International Arbitration Centre (SIAC). The airline said that, had the engines been made available, it would have returned to full operations by August or September 2023.

Cash crunch

Industry insiders also blame reluctance among shareholders to infuse funds to ease the airline’s cash crunch. The airline said that promoters have invested ₹3,200 crore over the last three years, bringing the total promoter investment since the airline’s inception to ₹6,500 crore.

“Pratt & Whitney has failed to provide any further serviceable spare leased engines at all, and has stated that there are no further spare leased engines available for it to comply with the emergency arbitrator’s award,” the statement said. As a result, it added, “GO FIRST is no longer in a position to continue to meet its financial obligations.” It has also taken steps to enforce the award in the U.S. and other international jurisdictions, including an emergency petition filed in the Delaware federal court against Pratt and Whitney.

The airline has sought a compensation of approximately ₹8,000 crore in the SIAC arbitration, and said that if the arbitration was successful, it would be able to pay dues to its creditors. However, some lessors have already started repossessing some of its aircraft, withdrawn letters of credit, and notified the airline that more aircraft will be removed from Go First’s custody, severely depleting the airline’s ability to maintain viable operations.

‘Alternative arrangements needed’

The DGCA, in its show cause notice to the airline, has given it 24 hours to share what mitigation measures the airline has adopted, as well as to submit its plan of action to resume flights.

Minister for Civil Aviation Jyotiraditya Scindia, in a statement, said that it was “incumbent upon the airline to make alternative travel arrangements for passengers so that inconvenience is minimal.”

The development at a time when the insolvency proceedings of Jet Airways, which shut down in 2019, have thus far failed to revive the airline over payments to lenders.

Top News Today

Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.