Go First Joins List of Indian Airlines Going Bankrupt
Go First, one of India’s leading airlines has filed for bankruptcy due to severe fund shortage, joining the list of bankrupt Indian airlines, including Kingfisher Airlines and Jet Airways. As of April 30, 2023, Go First had not defaulted on its dues but owing to the current financial situation, the airline anticipates defaulting on its financial creditors, which amounts to Rs 6,521 crore ($798 million). This is the first major airline collapse in India since Jet Airways went bankrupt in 2019 and has put the spotlight on the competition in the airline sector, with IndiGo dominating the industry and Air India’s merger with Vistara soon to be completed under the Tata group. Indigo shares surged by 5% on the news of Go First’s bankruptcy filing.
Go First Blames Pratt & Whitney Engines for Bankruptcy
Go First has attributed the grounding of approximately half of its fleet to “faulty” Pratt & Whitney engines. The airline’s Airbus A320neo fleet relies solely on Pratt & Whitney as its engine supplier, and the company’s refusal to comply with an arbitration order to release spare leased engines that could have enabled the airline to resume full operations resulted in Go First filing for bankruptcy.
Major Banks That Lent Money to Go First
Go First’s bankruptcy filing lists Central Bank of India Ltd, Bank of Baroda Ltd, IDBI Bank Ltd, Axis Bank Ltd, and Deutsche Bank among its financial creditors. Central Bank of India and Bank of Baroda have a consortium loan exposure of Rs 1300 crore each, while IDBI Bank has a smaller exposure of Rs 50 crore. Axis Bank has issued a letter of sanction of credit to the airline, although it is unclear whether the credit has been availed of.
As part of the government’s emergency credit scheme introduced during the Covid crisis, Go First has borrowed Rs 1,292 crore. The government guarantees the loans given by banks to the airline.
Go First’s Total Liabilities
Go First’s total liabilities to all creditors amount to Rs 11,463 crore, including dues to banks, financial institutions, vendors, and aircraft lessors. However, the company’s assets are currently insufficient to cover its liabilities, and it has defaulted on payments to operational creditors, including vendors and aircraft lessors. The airline has already received notices from lessors for the termination of aircraft lease agreements, and some lessors have taken action to ground or repossess aircraft. Six lessors have also invoked letters of credit issued by lenders.
About Go First:
Go First Airlines, an Indian ultra-low-cost carrier located in Mumbai, Maharashtra, was originally known as GoAir Airlines. The Indian commercial juggernaut Wadia Group owns it. With an 8.4% market share in October 2017, it was India’s fifth-largest airline by passenger volume.
For More Latest News Click Here
