Go First at NCLT: What are the airline’s allegations against Pratt & Whitney?

Go First’s voluntary insolvency proceeding plea was heard at the National Company Law Tribunal (NCLT) on Thursday. The airline argued that the Los Angeles-based engine-maker is to be blamed to a great extent, along with COVID-19 restrictions, for its situation today. Go First had also moved for emergency arbitration in Singapore. 

The low-cost airline has cancelled its flights till May 9. Meanwhile the Directorate General of Civil Aviation (DGCA) has asked Go Air to process refunds as early as possible for the passengers impacted by the cancellations. 

In the NCLT application, Go First said that it has already paid Rs 19,980 crore from April 2020 till date to its creditors. It said that it has now exhausted all financial resources. It said it owes Rs 11,463 crore to its creditors including banks, financial institutions, vendors and aircraft lessors.

Go First said that due to its financial stress, goods and service providers, including fuel suppliers, are not willing to offer their services. 

“A corporate entity cannot sustain this kind of liquidity crisis for a long time,” said Go First in the application, adding that it has made all effort to endure as long as it can. 

Also read: Go First's sorry tale of submissions to NCLT: All financial resources exhausted, 7,000 jobs at risk, Rs 208 crore to pay staff

As the parties approach the NCLT, here’s a look at Go First’s allegations on Pratt & Whitney:

• According to the plea at NCLT, Pratt & Whitney supplied “inherently defective engines and failed to provide requisite and satisfactory maintenance, resulting in breach of its agreements with the airline, and grounding of a majority of Go First’s fleet.
• Go First said that more than 80 per cent of first-time engines removals occurred even before they completed 5,000 engine hours. The key reason behind the engine failures have been combustor distress, said the airline. Go Air also said that Pratt & Whitney has itself acknowledged the failure of engines that put the engine-maker in a difficult operational and financial situation.
• The grounding of the planes because of engine failures had a cascading effect on Go First. 
• Go First said in its application that 96 per cent of the fleet in FY2015 were available for flying, which reduced to 54 per cent in FY2023. As of March 1, 2023, 50 per cent of Pratt & Whitney engines were unavailable for flying, it said.
• The non-availability of planes and engine failures cost the company Rs 10,800 crore in losses in the form of revenue and additional expenses.
• Go First said that what was "historically one of India's fastest growing airlines service providers" started facing losses and started operating with 50 per cent revenue while incurring 100 per cent cost. 
• The deterioration of the financial performance was also accentuated by the COVID-19 outbreak that restricted air travel, it said. Due to the grounding of the planes and COVID-19, Go First’s losses increased from Rs 1,346 crore in FY 2020-21 to Rs 3,600 crore in FY 2022-23. 
• Go First said that its expenses increased from Rs 2,250 crore in FY 2014-15 to Rs 5,907 crore in FY 2022-23.
• The airline said that it had to bear fixed costs in relation to its grounded fleet, including lease rentals, aircraft maintenance charges, parking charges and employee costs, “irrespective of the fact that the grounded fleet does not contribute any revenue to the company”. 
• Pratt & Whitney had provided guarantees under the purchase agreements to replace engines within 48 hours and repair failed engines free of cost, Go First said. However, the engine-maker backed out from its commitments and is now demanding payments for its repairs. 
• The airline said that Pratt & Whitney paid Rs 400 crore up to March 2020 after "recognising its failure". "However, it now refuses to recognise any claim for compensation," said Go First, adding that it has now been forced to move for emergency arbitration in Singapore.
• Go First said that Pratt & Whitney defied the compliance of the emergency award under the pretext that they don’t have any engines available to supply to the company. Go First then approached the emergency arbitrator for supplementary reliefs.
• Pratt & Whitney has still not supplied the first 10 engines pursuant to the April 2023 award. Go First has filed enforcement proceedings in Delaware. 
• Go Air said that it defaulted in payments of lease rentals owed to the lessors and received multiple notices demanding payment of outstanding dues. 
• Six lessors have collectively invoked letters of credit worth Rs 344 crore. They have also started drawing other LCs that will devolve on the Indian banks to the tune of Rs 1,400 crore, the airline said. 
• Lessors have also started action against the company to ground or repossess aircraft. If the lessors are permitted to take possession or divest the company from its legal right to operate the aircraft, then it will lead to the closure of the airline, said the airline.  
• Go First said that it has cancelled 4,118 flights with 77,500 passengers in the last 30 days and will be constrained to cancel further flights. 
• The employability of 7,000 direct and 10,000 indirect employees will be impacted.

Also read: Go First at NCLT: 'Not a for case for first day, first show relief,' say aircraft lessors

Also read: Go First cancels all flights till May 9; cites 'operational reasons'