P&W vows engines; Go First to fly soon

(File Picture) The National Company Law Tribunal (NCLT) earlier admitted the plea of Go First Airlines for insolvency proceedings in its judgement. (ANI Photo)  (ANI)
(File Picture) The National Company Law Tribunal (NCLT) earlier admitted the plea of Go First Airlines for insolvency proceedings in its judgement. (ANI Photo) (ANI)


Airline to compensate those who had booked but couldn’t fly

Go First is set to return to skies with US-based Pratt & Whitney (P&W) committing to providing and servicing jet engines and the low-fare airline agreeing to meet two key conditions set by India’s aviation regulator, two people aware of the matter said.

Go Airlines (India) Ltd, which operates as Go First, suspended flights in May, citing acute engine scarcity. Since then, the Directorate General of Civil Aviation (DGCA) has asked the airline to compensate those who had booked tickets but couldn’t fly and ensure adequate infrastructure and crew requirements before taking off again.

Graphic: Mint
View Full Image
Graphic: Mint

“P&W has committed to providing engines to Go First and service them. Once flights resume, cash flows can be used to pay all dues in the coming months," one of the two people said on condition of anonymity. “Tickets worth about 400 crore had been booked or pre-booked by retail passengers. But they could not take Go First flights as operations have been suspended at the moment."

The Delhi Bench of the National Company Law Tribunal (NCLT), which is hearing the airline’s insolvency petition, has taken note of the passenger compensation issues as well. “It has come to our notice that a large number of passengers are sending email requests/phone calls for refund of booked/cancelled tickets in the case relating to Go Air," the tribunal said on Monday, advising passengers to contact Shailendra Ajmera, the company’s resolution professional, to submit their claims.

DGCA wants Go First to refund this money or offer alternative flights as compensation, the two people said. It also wants the airline to ensure it has adequate infrastructure and staff members to provide safe and seamless operations even with the 26 aircraft to begin with, the two people said.

The person cited earlier said the Wadia Group-owned airline expects permission to resume flights in seven to 10 days. The cash-strapped airline has openly blamed P&W’s engine failures for the grounding of 25 aircraft, or half of its entire fleet, as of 1 May.

Emails sent to DGCA, P&W, Go Air resolution professional, and the airline’s lead lenders, Central Bank of India and Bank of Baroda, remained unanswered till press time.

Go Air approached the Singapore International Arbitration Centre (SIAC) in March, claiming P&W had not provided engines as agreed. In an emergency award, SIAC asked P&W to provide Go Air 20 engines lying in its maintenance, repair, and overhaul (MRO) unit by December 2023 and pick up 44 failed engines lying with Go First in India at different airports for over 270 days.

After its NCLT filing in May, Go First approached the Delaware federal court to implement the SIAC award. Following this, P&W approached SIAC again, saying Go First had not paid the engine maker its dues worth about $100 million. Go First has requested SIAC not to view the NCLT case as one of insolvency but as a case of “corporate resolution" since the management and the original owners have moved away from their “operational responsibilities", and the company has not defaulted on any repayment.

The SIAC hearing concluded in June last week, and its final ruling is expected in the next few weeks, said the two people. If the SIAC order is in favour of Go First, the airline has to approach the Delaware court again to get the ruling enforced.

According to the two persons, irrespective of how SIAC rules, P&W has agreed to provide aircraft engines and service them once the airline resumes flights.

Meanwhile, Go First’s lenders have agreed to provide interim financing to help it resume operations. “The lenders have started working on the required disbursal of 400-500 crore to Go First. This will enable the company to pay the fresh lease rentals that will start after the resumption of flights," said the second person.

Go First owes creditors at least 6,500 crore. Central Bank has 1,987 crore of loans outstanding from Go First, which includes about 650 crore of post-covid emergency credit lines.

The two people said the financing would not entail any change in aircraft engines or new contracts, as Go First has no plans to switch to CFM engines that would require a major overhaul, which is not possible at the moment.

P&W’s geared turbofan engines used in Go First’s A320 Neo aircraft have so far displayed a much shorter life than committed by the engine maker. On an average, over the past two years in India, P&W’s engines had to be replaced from the wings before 7,000 hours of flying, which is much lower than the 12,000-hour life marketed by P&W. Nonetheless, Go Air will continue with P&W engines and its existing services for all aircraft, according to the two people.

“The airline has told this to the US court as well. P&W’s existing engines and servicing will remain for several subsequent years until the time the airline repays all its dues and completely gets back to shape," said the second person.

The airline had first suspended operations and cancelled flights scheduled for 3 May before voluntarily moving NCLT under the Insolvency and Bankruptcy Code (IBC).

The airline has said that it had to approach NCLT only because of the failure of P&W to provide engines as agreed. It said P&W did not provide engines for the last three years despite several requests, prompting it to resort to emergency arbitration which went in the airline’s favour as the arbitrator had advised P&W to provide at least 10 engines by 28 April and then 10 engines every month till December. Since P&W did not abide by the SIAC award, it had to approach the Delaware court since P&W is based in the US, Go Air had said.

Before landing at the insolvency court, the promoters of Go First had to pump in more than 3,200 crore in the last 24 months since P&W didn’t provide engines, the airline had said.

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.


Switch to the Mint app for fast and personalized news - Get App