Go First Bankruptcy: DGCA Issues Show Cause Notice After Airline Cancels Flights

The DGCA said that no prior intimation has been given to the aviation body for such cancellations which is non-compliance with conditions for approval of schedule

On Tuesday, Go First said that it had to initiate voluntary insolvency resolution proceedings as a result of the "repeated failures" of Pratt & Whitney engines.

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The Directorate General of Civil Aviation (DGCA) on Tuesday issued a show cause notice to Go First after the airline cancelled all its flights on May 3 and 4, reported news agency ANI. According to the news agency, the DGCA said that no prior intimation has been given to the aviation regulator for such cancellations which is non-compliance with conditions for approval of schedule. 

The DGCA said, "It has come to the notice of DGCA that Go First has cancelled all scheduled flights of May 3 and 4, 2023, respectively. No prior intimation has been given to DGCA for such cancellations which is non-compliance with conditions for approval of schedule."

"Thus Go First has failed to report in writing the cancellations and reasons thereof. Go first has failed to adhere to the approved schedule which would lead to passenger inconvenience thereby violating the provisions of CAR, Section 3, Series M, Part IV," the aviation agency added.   

On Tuesday, Go First said that it had to initiate voluntary insolvency resolution proceedings as a result of the "repeated failures" of Pratt & Whitney engines, which has led to the grounding of half of the airline's fleet. Consequently, the company is unable to sustain its financial obligations.

Wadia Group has been operating the cash-strapped airline for over 17 years. Following arbitration proceedings in Singapore and a recent lawsuit filed in a US court seeking the enforcement of an arbitration award, the airline has taken the latest step.

In a detailed statement, as per PTI, Go First said it 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.

Pratt & Whitney has failed to repair those engines and/or provide sufficient spare leased engines as it was required to do pursuant to its obligations under the relevant agreements between them. Promoters have infused funds worth Rs 3,200 crore into the airline in the last three years and out of the total amount, Rs 2,400 crore was injected in the past 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. 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.

According to the airline, it is no longer in a position to continue to meet its financial obligations and has taken the step to approach the NCLT "to protect the interests of all stakeholders".

Go Airlines (India) Ltd, which operates under the brand Go First, has applied to the NCLT for resolution and protection under Section 10 of the Insolvency and Bankruptcy Code "due to the ever-increasing failure of the Pratt & Whitney engines that power its fleet", the statement said.

Having faced engine problems since January 2020, the airline has revealed that it has had to take its case to the NCLT as Pratt & Whitney (P&W) has refused to abide by an order from the Singapore International Arbitration Centre (SIAC) emergency arbitrator. The emergency arbitrator had instructed P&W to take all necessary actions to provide the airline with at least 10 serviceable spare leased engines by April 27, and another 10 per month until December 2023. This information was disclosed in a statement by the airline.

"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, reported PTI.