'If Pratt & Whitney were to comply...': How Go First can return to full operations by Sept 2023

Cash-strapped airline Go First filed for bankruptcy proceedings on Tuesday, blaming 'faulty' Pratt & Whitney engines for the grounding of about half its fleet and also outlined have things have come to such a dire pass. 

Go First on Tuesday filed an application with the National Company Law Tribunal  Delhi for resolution under section 10 of the Insolvency Bankruptcy Code. 

The latest move by the Wadia group-owned carrier, which has been flying for more than 17 years, came after arbitration proceedings in Singapore and a suit filed in a US court seeking enforcement of the arbitration award last month

Go First said it had to resort to this step due to the ever-increasing number of failing engines supplied by Pratt & Whitney’s International Aero Engines, LLC, which has resulted in the airline having to ground 25 aircraft (equivalent to approximately 50% of its Airbus A320neo aircraft fleet) as of May 1, 2023. "The percentage of grounded aircraft due to Pratt & Whitney’s faulty engines has grown from 7% in December 2019 to 31% in December 2020 to 50% in December 2022. This is despite Pratt & Whitney making several on-going assurances over the years, which it has repeatedly failed to meet," the airline said in a statement.

It said it has been forced to apply to the NCLT after Pratt & Whitney, the exclusive engine supplier for Go First’s Airbus A320neo aircraft fleet, refused to comply with an award issued by an emergency arbitrator appointed in accordance with the 2016 Arbitration Rules of the Singapore International Arbitration Centre (SIAC).That order directed Pratt & Whitney to take all reasonable steps to release and dispatch without delay to Go First at least 10 serviceable spare leased engines by April 27, 2023 and a further 10 spare leased engines per month until December 2023, with the objective of Go First returning to full operations and achieving Go First’s financial rehabilitation and survival.

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If Pratt & Whitney were to comply with the orders in the emergency arbitrator’s award, Go First said it would be able to return to full operations by August/September 2023. "Despite the emergency arbitrator’s order, however, at the date of this press release, Pratt & Whitney has failed to provide any further serviceable spare leased engines at all, and has stated that there are no further spare leased engines available for it comply with the emergency arbitrator’s award," said the Wadia-owned airline. 

Go First said it "deeply regrets" the disruption and inconvenience that this will cause to its customers, travel partners, creditors, and suppliers and, "in particular, to its own employees who have remained loyal to and grown with Go First over the years". "Go First has taken today’s step in order to protect the interests of all stakeholders. It has been forced to take this step despite the infusion of substantial funds to the tune of Rs 3,200 crore by the promoters into the airline in the last three years,Rs 2,400 crore of which were injected in the last 24 months, and Rs 290 crore in April 2023 alone. This brings the total promoter investment in the airline since its inception to approximately Rs 6,500 crore. Go First has also received significant support from the Government of India’s exceptional Emergency Credit Line Guarantee Scheme, for which it is extremely grateful. However, even this collective and significant support has not sufficed to prevent the enormous damage caused by Pratt & Whitney’s defective and failing engines," it said.

The grounding of close to 50% of its A320neo fleet due to the serial failure of Pratt & Whitney’s engines, while it continued to incur 100% of its operational costs, has set Go First back by Rs 10,800 crore in lost revenues and additional expenses, the airline claimed. 

Moreover, Go First has paid Rs 5,657 crore to lessors in the last two years of which approximately Rs 1,600 crore was paid towards lease rent for non-operational grounded aircraft from the funds infused by the Promoters & Government of India’s ECLGS.

"In order to recover these (and other) losses, Go First has sought compensation of approximately Rs 8,000 crore in the SIAC arbitration. If Go First is successful in the arbitration, it is hoped that, Go First will be able to address the liabilities of its creditors, small and large. However at this stage, in the absence of Pratt & Whitney not providing the required number of spare leased engines in accordance with the order issued by the emergency arbitrator, Go First is no longer in a position to continue to meet its financial obligations," the airline said.

"Go First has been forced to apply to the NCLT because of the recurring and persistent issues with the GTF (geared turbofan) engines supplied by Pratt & Whitney, coupled with Pratt & Whitney’s failure to repair those engines and/or provide sufficient spare leased engines as it was required to do pursuant to its obligations under the relevant agreements entered into between Go First and Pratt & Whitney. Go First’s management repeatedly sought to engage with Pratt & Whitney on the engine issue, but Pratt & Whitney did not respond constructively. Instead, despite its contractual obligations to provide a spare leased engine within 48 hours of failure, it refused to provide sufficient spare leased engines to Go First and refused to repair Go First’s engines," it added.