Sky-high Rescue: Scindia assures aid for Go First amid flight cancellations due to financial woes
- Posted on May 2, 2023
- News
- By Top Stories
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Airline carrier
Go First has recently announced flight cancellations due to financial
constraints. The airline is under the ownership of the Wadia Group, who
reportedly expressed reluctance to provide additional funds as they have
already invested over $300 billion.
Go First, a
financially struggling Indian domestic airline, has received a 'show cause'
notice from the Director-General of Civil Aviation for violating regulations by
canceling its May 3 and 4 flights without providing a written explanation. The
airline's decision to file for voluntary insolvency before the National Company
Law Tribunal has further complicated the situation, causing potential
inconvenience to passengers.
The DGCA has
given Go First 24 hours to respond to a notice, If it fails to respond within
24 hours, the issue will be handled ex-parte. This comes after the airline
cancelled flights and filed for insolvency, citing financial difficulties due
to the non-supply of engines by Pratt & Whitney. As a result, over half of
its fleet of 28 planes had to be grounded.
Go First's CEO,
Kaushik Khona, stated that the decision to cancel flights and file for
insolvency was unfortunate but necessary to safeguard the company's interests.
The airline is currently facing a financial crunch and had no choice but to
ground a significant portion of its fleet due to the engine shortage.
According to
Reuters news agency, an airline with more than 3,000 employees has notified the
government and is submitting a report to the DGCA. The airline has suspended
flights and will only resume them after the insolvency application is approved.
The aviation minister, Jyotiraditya Scindia,
stated that the government has been helping the airline in any way possible and
has communicated with those involved.
Go First has been
forced to take action because of a rise in the number of engine failures from
American manufacturer Pratt & Whitney. As a result, the airline has had to
ground 25 planes as of May 1. Go First's cash-and-carry business model, where
it pays daily for each flight it operates, has suffered due to the lack of
flights, making it difficult to pay oil marketing companies.
Go First has also
stated that P&W has not provided any additional leased engines. The airline
has been struggling to raise funds since posting its largest annual loss in the
fiscal year 2022, and its owners, Wadia Group, have been in discussions to sell
a majority stake or leave the company.
The airline has
stated that it has received a substantial amount of funds amounting to ₹3,200
crore over the past 36 months, with ₹2,400 crore provided in the last 24 months
and ₹290 crore in April. The airline has suffered losses of ₹10,800 crore due
to engine supply issues, and to recover these losses and other expenses, it has
sought compensation of ₹8,000 crore from a Singapore tribunal.
Go First has
taken legal action against Pratt & Whitney in a US federal court for
failing to provide engines and is seeking the enforcement of an arbitral award
from Singapore.
According to a
P&W representative, "global supply chain challenges" have resulted
in limited availability of certain parts needed for engine production, leading
to grounded flights. This is not the first time this has happened, and as a
result, Go First's market share declined from 8.4% in January to 6.9% in March,
according to the DGCA.
For more updates
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