Go First Clears The First Hurdle To Take To The Skies Again

Indian aviation is not for the faint-hearted, but there is value in operating in this market which has so much potential. Only 4-5% of India’s population currently flies, and the country is well on its way to becoming one of the top three markets around the globe for aviation. In this context, we have seen quite a few airlines calling it a day over the past decade. Kingfisher, Jet Airways, and now Go First. However, for the first time, we might see a reversal of fate as well.

Go First cancelled all its flights and filed for voluntary bankruptcy on May 2. Since that day, the airline has lost its pilots and other staff members, many of whom have gone on to join other airlines, and it has almost lost its aircraft as well, with many lessors having served notices to deregister their aircraft from Go First.

There is an ongoing case right now about the legality of a moratorium imposed on aircraft which are not owned by Go First, and on which the lessors had already filed IDERA notices for repossessing them before the National Corporate Law Tribunal accepted Go First’s Insolvency petition. There are 30 aircraft involved in this lawsuit, and Go First’s website states that they have a total of 59 aircraft in their fleet.

After much back and forth, the DGCA conducted a special audit of Go First, trying to establish if they should be given the go-ahead to relaunch operations. On an overall basis, the DGCA determined that Go First did not have enough pilots, engineers and trainers to restart operations at the levels it envisioned. DGCA also stated that Go First did not have enough specially trained pilots for some of the high-altitude airfields that it intended to operate military charters to such as those to Leh and Thoise.

Go First has since scaled down its plans, offering to restart with 114 flights to be operated by 15 aircraft. This is the plan that has been approved but with many riders by the DGCA. This will put them behind Akasa or SpiceJet in terms of the size of the operation.

Even though Go First has been given the green light to restart operations, there are riders involved. First and foremost, it cannot operate the 30 aircraft which are still being contended for at the Delhi High Court till there is specific permission to do so. However, it is now responsible for the maintenance of these aircraft twice a month, under orders from the Delhi High Court. 

Second, although there is a binding arbitration order for Pratt and Whitney to provide five engines every month to Go First between August and December this year, Pratt & Whitney has earlier stated that it had no spare engines available at the moment to hand over to Go First. 

Third, it is unclear yet about how Go First intends to refund their customers who have been unable to avail of their services over the months. The Resolution Professional has indicated to the DGCA that over Rs 500 crore are due in refunds to customers for operations not done over the period of May to early July. The airline has indicated that it intends to process these refunds to customers over a period of about 120-150 days after the restart of operations. 

But where will this money come from? Fresh bookings, you say? The travel agent community and customers might not bite so easily. The grounding of the airline did leave some pretty angry customers, who still do not know how their prior bookings will be made good to them. Travel agents, who usually have to make prepaid deposits to airlines to book with them, already have their own money blocked with the airline awaiting a refund. 

With an insignificant schedule and re-starting operations in the lean period of rains, the airline might have to drop prices to attract occupancy, which won’t be a wise move since it will be a piece of cake for IndiGo and Air India to match their pricing if needed. This brings us back to the original point, which is that Go First was unable to make enough money to service its obligations, and hence it went into insolvency in the first place. The airline will also be unable to fly on international routes, given it won’t have 20 aircraft operational at the time of restart. 

The airline has admitted that it has Rs 23,777 crore of obligations in response to the publication of the Expression of Interest. The banks have offered it a few hundred crores to restart operations, which will be quickly run through in the process of making good the prior dues to customers, paying salaries and maintenance of the aircraft and airport dues once operations restart.

In the whole scheme of things, then, the intention to restart the airline might be to sell it to a new bidder as a going concern so that potential buyer can then recapitalise it. Earlier, creditors to the airline might have to take a haircut to see any small bit of their money.

But how Go First will be able to bring back customers, both individual and travel agents, and the lessors is yet to be seen. The lack of trust is substantial for now. Subscale operations are hard to survive without a long-term scale-up plan, and having burnt its bridges with the lessor community, Go First really needs all its ducks in a row and a turnaround specialist in the CEO chair to be able to get back to the skies and stay this time around.

Having said that, getting to the skies will be historic itself, given that so far, no airline in India has come back from the dead, and this might just be the start of that trend. Here is wishing them a safe ride back into the skies. 

Ajay Awtaney writes about aviation and passenger experience at LiveFromALounge.com, and Tweets at @LiveFromALounge.

The views expressed here are those of the author and do not necessarily represent the views of BQ Prime or its editorial team.