Reviving Go First won’t be easy. Here’s why

Primarily, the course correction for a failing airline in a market like India requires a hawk-eye over costs, fund infusion and a proactive management.
Primarily, the course correction for a failing airline in a market like India requires a hawk-eye over costs, fund infusion and a proactive management.

Summary

  • Revival of airlines is challenging as a profitable carrier is an output of several things, such as the right fuel price band, perfect aircraft type, solid maintenance contracts, great network, good slots at airports, skilled workforce etc.

SpiceJet boss Ajay Singh and Busy Bee Aviation have submitted a rescue plan for bankrupt airline Go First. Previously, efforts to revive Jet Airways have met with limited success. Mint explains the flight path of recovery and the challenges associated with it.

How difficult is it to revive airlines in India?

Running an airline is a risky business. Virgin Atlantic founder Richard Branson has famously said: “If you want to be a millionaire, start with a billion dollars and launch a new airline." Revival of airlines is challenging as a profitable carrier is an output of several things, such as the right fuel price band, perfect aircraft type, solid maintenance contracts, great network, good slots at airports, skilled workforce etc. In fact, the only revival story over the last three decades is that of SpiceJet, which got a second lease of life in December 2014 in the form the support from the government and a new management.

What will it take to achieve it?

Primarily, the course correction for a failing airline in a market like India requires a hawk-eye over costs, fund infusion and a proactive management. In addition, support from vendors, aircraft and engine lessors, as well as maintenance companies for restructuring of dues repayment plans will be necessary. To regain customer trust, an airline may also need to be rebranded; on-time performance at competitive fares will also help. While Indian aviation is a deregulated market run on the forces of demand and supply, a soft push from the government for revival can go a long way in changing fortunes.

What has the government done; what can it do?

Jet fuel costs make up nearly 40% of Indian airlines’ expenses, compared to a global average of 20-25%. The civil aviation ministry has been working to reduce value added tax on jet fuel and so far, 19 states and union territories have rationalized it. Airlines are also seeking inclusion of aviation turbine fuel under the goods and services tax to reduce the cost burden.

How have revivals played out elsewhere?

They’re rare. Mexico re-launched former state airline Mexicana de Aviacion in December and has plans to add 10 planes in 2024. Founded in 1921, this was Mexico’s biggest airline and the flagship carrier before ceasing operations in August 2010. US’ ExpressJet Airlines is also gearing up for a relaunch in the second half of 2024 under new ownership. The former regional capacity provider for United Airlines suspended operations in 2020, resumed flights but filed for bankruptcy protection in 2022 after covid.

What happens to Go First now?

We do not know yet. Last week, it finally received two financial bids, six months after the launch of bid invitations. The two bids are: a joint bid by Ajay Singh and Busy Bee, and another by Sharjah-based Sky One Aviation. A lot depends on the committee of creditors now—it is expected to come to a decision on the bids within a fortnight. Go First owes 6,521 crore to lenders. Formerly backed by the Wadia Group, the airline filed for insolvency on 2 May 2023 and suspended flights with effect from 3 May.

 

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