Go First insolvency crisis: Aviation experts call for tighter regulatory oversight for the sector

As the war of words between the Mumbai-headquartered low-cost carrier (LCC) Go First and the Connecticut-based engine maker Pratt & Whitney shows no signs of abating, aviation experts have urged greater regulatory oversight on Indian carriers to prevent a similar mess from recurring in the future.

As Business Today pointed out in a May 9 story, the crisis at Go First may potentially result in operational costs rising significantly by way of higher risk premiums and additional guarantees on leased aircraft for other Indian carriers. For their part, the airlines would seek to cover such increases through higher fares.

Domain experts have, therefore, sought the regulator Directorate General of Civil Aviation (DGCA) to closely monitor airlines’ performance to identify any red flags in a timely manner.

“The DGCA receives data from all airlines. Now using simple analysis, if an airline shows an even 1 per cent drop in market share over a one to six-month period, there is a reason for DGCA to undertake closer scrutiny,” said the former executive director of Air India, Jitender Bhargava.

Others go as far as to suggest a financial audit than just simple monitoring of month-on-month performance since an airline going bust has ramifications on other stakeholders including other airlines, airports, oil marketing companies and, most importantly, passengers.

“It is time for the regulator to also start conducting a financial audit of airlines. Because in the final analysis, it is the flying public that loses out,” emphasised the managing partner at the aviation services firm AT-TV, Satyendra Pandey.

Already, airfares on routes serviced by Go First have witnessed double-digit increases due to a contraction in capacity.

Taking proactive action

Thus, DGCA’s role could be expanded beyond just ensuring passenger safety. This would be similar to the telecom regulator Telecom Authority of India (TRAI)’s mission to ensure the protection of consumer interests, while also nurturing the growth of communications services.

“The Ministry of Civil Aviation has to intervene. If the ministry pats itself on the back for flying a record number of passengers, it also has a responsibility of taking proactive action in such a situation,” said Bhargava, adding, “So, if an airline says that it will be operating 1,300 flights per week as against 2,000 flights in the winter schedule, it ought to be questioned.”

Earlier this month, the Mumbai-based LCC had suspended operations citing troubles with P&W’s next-generation PurePower PW1127G-JM geared turbofan (GTF) engines, while also filing for voluntary insolvency resolution with the arbitrator, the National Company Law Tribunal (NCLT).

On May 12, the not-for-profit Bermuda-headquartered legal entity Aviation Working Group (AWG) comprising global aviation original equipment manufacturers (OEMs), leasing companies and financial institutions, issued a watchlist notice on Go First. 

Terming the AWG notice as duplicitous and threatening, Go First claimed in a lengthy May 14 statement that it was an attempt to influence the outcome of the court hearing.

The statement also claimed that apart from 28 GoFirst Airbus A320neo aircraft of Go First, around 50 aircraft of Indigo and 20 aircraft with turboprop engines of Spice Jet were also grounded due to P&W’s faulty engines.

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