The Indian aviation sector is back in the news. On 2nd May 2023, the Indian airline – Go First, which was once known as Go Air, initiated its bankruptcy proceedings. This airline’s company is owned by one of the oldest names in the Indian business world – The Wadia Group.
Also, this is not the first time an airline company hitting turbulence and declared bankruptcy. Almost four years back, Jet Airways also declared bankruptcy. It was a leading Indian airline, and now Go First stands in the same place.
The airline made a humble start in 2005 with one Airbus aircraft. But, later, it was rebranded, and during the pandemic, the airline flew to 27 destinations in India and nine international destinations.
But, after the pandemic, its fate changed. The first signs of trouble emerged several years ago when 80% of the engines acquired by Pratt & Whitney began to malfunction before reaching the 5,000-flying-hour mark.
This malfunction had a ripple effect, and Go First began to lose business. As per a Reuters report, the airline had to ground 7% of its fleet in December 2019, which skyrocketed to 50% three years later in December 2022. Over this period, the airline’s revenue and additional expenses took a massive hit of Rs 108 billion!
On top of the already dire situation, Go First has cancelled a staggering 4,118 flights over the past 30 days. With more engines nearing their expiration, the situation was indeed worse.
Pratt & Whitney paid Go First a compensation of Rs 400 crore till March 2020 for the engine malfunction. However, the airline continued to lose revenue as its planes remained grounded, and the manufacturer refused to recognise any further claims for compensation.
The bankruptcy of Go First follows in the footsteps of Jet Airways, and the NCLT proceedings are ongoing. However, it begs the question: how are the existing players in the Indian aviation sector doing?
Current Situation of the Indian Aviation Sector
An aviation consultancy named CAPA India has predicted that the Indian aviation sector will face a combined loss of $1.6 – $1.8 billion in the upcoming financial year. Additionally, according to The Hindu, the aviation industry is grappling with a job crisis, with one in every three trained pilots in India currently unemployed.
It is safe to say that the airline companies are witnessing a churn. Only time will tell what’s ahead for the aviation space.
And in the case of Go First, its tagline ‘You Come First’ has never been more appropriate, considering they are the first airline to file for bankruptcy in the past four years.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information only. This is not investment advice.