Cash-strapped airline Go First on Tuesday announced that it will file for voluntary insolvency resolution proceedings following the cancellation of all its flights on May 3,4 and 5. The airline, in a statement, said that it is seeking voluntary insolvency due to “serial failure” of Pratt & Whitney engines, reported PTI.
The airline was forced to ground more than half of its fleet due to the non-supply of engines by Pratt & Whitney (P&W). The carrier, which has been in operation for more than 17 years and is owned by the Wadia group, took this step following arbitration proceedings in Singapore and the filing of a lawsuit in a US court to enforce an arbitration award.
As per PTI, Go First in a detailed statement said that has been forced to apply to the National Company Law Tribunal (NCLT) because of the recurring and persistent issues with the GTF (Geared Turbofan) engines supplied by P&W.
The agreements between Go First and Pratt & Whitney required the latter to repair the engines or provide an adequate number of spare leased engines. However, Pratt & Whitney has failed to fulfill these obligations, the report said.
The airline has been grappling with engine issues since January 2020. Go First said that Pratt & Whitney failed to follow an order issued by the Singapore International Arbitration Centre (SIAC) emergency arbitrator to deliver at least 10 leased serviceable spare engines by April 27 and another 10 spare leased engines each month until December 2023. This led to the airline being unable to comply with its financial obligations and hence forced to approach the NCLT.
“If Pratt & Whitney had followed the directions laid down in the award, Go First would have been able to return to full operations by August/September 2023 leading to Go First’s financial rehabilitation and survival. Pratt & Whitney has failed to provide any further serviceable spare leased engines at all at the date of this press release and has stated that there are no further spare leased engines available,” the statement said.
Also Read: Go First Bankruptcy: DGCA Issues Show Cause Notice After Airline Cancelled Flights
Promoters have infused funds worth Rs 3,200 crore into the airline in the last three years. Out of which Rs 2,400 crore was injected in the last 24 months. An amount of Rs 290 crore was pumped in April this year.
“This brings the total investment in the airline since its inception to approximately Rs 6,500 crore,” the statement said.
“Even this collective and significant support has not been adequate to prevent the enormous damage caused by Pratt & Whitney’s defective engines. The grounding of close to 50 per cent of its fleet due to the serial failure of Pratt & Whitney’s engines, while incurring 100 per cent of its operational costs has set Go First back by Rs 10,800 crore in lost revenues and additional expenses,” it said.
Go First also added that it has received significant support from the government’s Emergency Credit Line Guarantee Scheme (ECLGS).
As per the statement, Go First has applied to the NCLT for resolution and protection under Section 10 of the Insolvency and Bankruptcy Code.
The airline in its statement said that it regrets the disruption and inconvenience that the latest move will cause to its customers, travel partners, creditors, and suppliers, and, in particular, to its own employees.