Go First: Why Did the Airline Go Bankrupt? The Downfall of India’s Low-Cost Carriers

Go First

Go First: Go First, a Wadia Group-owned airline that was formerly known as GoAir, stated today that it would initiate voluntary insolvency resolution procedures before the National Company Law Tribunal (NCLT) in Delhi. As the airline declared bankruptcy amid a severe cash crunch, all applications received up until May 5 would be cancelled. In the midst of the pandemic challenges, Go First filed draught papers for an IPO of Rs 3,600 crore almost two years ago. The fund-raising strategy did not succeed, problems with the engine supply grew, and two years later, the Wadia group-owned airline had exhausted its financial resources.

The low-cost Airline begun its domestic operations with a flight from Mumbai to Ahmedabad

Go First, formerly known as Go Air, has been operating for more than 17 years and has maintained a relatively ambitious fleet and network expansion strategy in comparison to its more competitive competitors, according to PTI. The low-cost Airline begun its domestic operations in 2005–2006 with a flight from Mumbai to Ahmedabad, and it later began operating internationally in 2018–19. The airline stated on May 13, 2021, that it would rebrand as “Go First” and put a heavy emphasis on an ultra-low-cost business model. At the time, the coronavirus pandemic headwinds were blowing strongly.

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It was forced to make the decision-Go First

In 2022, the no-frills airline carried 109.02 lakh domestic passengers, and its market share was 8.8%. The airline is in last place, trailing IndiGo, the country’s largest airline with a market share of over 50%, Air India, which has a market share of about 10% in India, and Vistara, which has a market share of about 9%. In terms of market share versus SpiceJet and AirAsia India, Go First performs better. Liabilities for the airline currently total close to Rs 9,000 crore. In the financial year that ended in March 2023, the cash-strapped airline reported a loss in the neighbourhood of Rs. 1,800 crore, including a Rs. 800 crore notional loss resulting from accounting standards. Go First said it was forced to make the decision due to “serial failure” of Pratt & Whitney engines, which resulted in the grounding of 50% of the fleet, and is no longer in a position to continue to meet its financial obligations. The airline filed an application for insolvency resolution proceedings on Tuesday. Promoter investments totaling Rs 3,200 crore were made in the last three years to keep the airline running, with Rs 2,400 crore coming in the last 24 months.

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Go First is experiencing turbulence as a result of engine supply issues

Jyotiraditya Scindia, the minister of civil aviation, stated that Go First has experienced serious supply chain problems relating to its engines and that the government has been aiding the airline in every way possible. He added that it is sad that this operational bottleneck has hurt the airline’s financial position and that the matter has also been brought up with the relevant stakeholders. Go First is experiencing turbulence as a result of engine supply issues, while once-stories Jet Airways is trying to resume operations despite finding a purchaser through the insolvency resolution process, all while domestic air demand is surging. On Wednesday and Thursday, more than 180 Go First flights would not take off or land. As the aviation industry experiences yet another tumultuous episode, “what next” is the question that faces the airline, stakeholders, authorities, and passengers.

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