Go First Airlines Cancels All Flights On May 3 And 4 Due To Fund Crunch, Files For Bankruptcy

The Directorate General of Civil Aviation has said that Go First Airlines all flights will remain canceled on May 3 and 4

Go First, owned by the Wadias, has announced the suspension of its flights due to unpaid dues owed to oil marketing companies, according to news reports. ( Image Source :Getty )

The Directorate General of Civil Aviation (DGCA) on Tuesday said all flights of Go First airlines will remain cancelled on May 3 and 4, reported news agency ANI. The aviation regulator said that the airline has informed them that all its flights will remain cancelled on May 3 and 4. The news agency also reported that the DGCA has issued a show cause notice to Go First after the airline cancellation. 

 

The budget carrier has also filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT), Delhi.

 

Airline's chief Kaushik Khona said the airline has grounded 28 planes, more than half of its fleet, due to non-supply of engines by Pratt & Whitney (P&W). This has resulted in a fund crunch. "It is an unfortunate decision (filing for voluntary insolvency resolution proceedings) but it had to be done to protect the interests of the company," he said.

The airline has informed the government about the developments and will also be submitting a detailed report to the DGCA.

According to a report by Economic Times, Go First, owned by the Wadias, has suspended its flights due to a lack of funds to pay oil marketing companies (OMCs). The airline has been facing significant financial challenges as it has had to ground over half of its fleet due to recurring problems and the non-supply of Pratt & Whitney engines, which power its Airbus A320 Neo aircraft, the report said. This has seriously impacted the airline's cash flow.

 

The report said that Go First operates on a cash-and-carry model. It means that it has to pay OMCs daily for each flight and they can stop business if payments are not made, an official of an OMC told the ET. 

In an effort to secure funding, the airline is currently exploring various options, including discussions that Wadia Group would sell a majority stake or completely divest its ownership in the company, the report added. 

According to a Reuters report, Wadia Group is reluctant to invest any more in the airline till the engine issue is resolved; it has injected $366.2 million in 15 months so far. Meanwhile, Go First has filed a lawsuit against Pratt & Whitney in a US federal court to enforce an arbitral award that mandates the engine manufacturer to provide the airline with the necessary supplies, the ET report said.

The grounded flights have led to Go First's market share falling to 6.9 per cent in March from 8.4 per cent in January, the DGCA data showed. Go First also posted its biggest annual loss in fiscal 2022.