GoFirst files for insolvency; fate of 5k employees hangs in balance

In a major setback for India’s aviation sector, low-cost carrier GoFirst has applied for voluntary corporate insolvency resolution proceedings under Section 10 of IBC. The decision to file insolvency was came due to severe financial crunch caused by non-supply of engines by Pratt & Whitney (P&W), according to GoFirst CEO Kaushik Khona. The airline has suspended all operations from May 3-5 causing inconvenience to thousands of passengers.

GoFirst claims that P&W’s faulty engines have resulted in grounding 25 of its Airbus A320neo aircraft fleet, which is 50% of its total fleet as of May 1, 2023. Although GoFirst has assured that the filing of insolvency does not signify the end of the airline, many are pessimistic about its future. GoFirst’s market share has dropped to 7.8% in the Jan-March quarter, and the airline has been facing difficulty in paying salaries on time to its large employee base.

Civil aviation minister Jyotiraditya Scindia has stated that it is unfortunate that this operational bottleneck at GoFirst has dealt a blow to the airline’s financial position. The aviation regulator, the Directorate General of Civil Aviation (DGCA), has issued a show cause notice to GoFirst after finding that the airline has failed to adhere to the approved flight schedule, causing inconvenience to passengers.

GoFirst’s promoters have invested approximately Rs 6,500 crores in the airline since its inception, with Rs 2400 crores injected in the last 24 months and Rs 290 crores in April 2023 alone. However, the grounding of nearly 50% of its A320neo fleet has resulted in lost revenues and additional expenses of Rs 10,800 crores for the airline, according to GoFirst. The airline has already filed an emergency petition against P&W in the Delaware court in the US seeking enforcement of an order issued by the Singapore International Arbitration Commission (SIAC), and a statement from P&W on GoFirst’s claims is currently awaited.

Employees in shock

This decision to file for insolvency has left over 5,000 employees of GoFirst, including pilots and cabin crew, uncertain about their future. The collapse of Jet Airways in April 2019, which had left over 15,000 employees stranded, has made the employees apprehensive about their future prospects.

The mood among the employees is sombre, and they are waiting for clarity from the management. Many pilots are said to be applying at rival airlines, especially at Tata Group-owned Air India. The lower pay than pilots of rival airlines and the repetitive delay in salary payments had been indicating that all was not well with the airline.

Passengers are equally upset by the sudden cancellations of their flights and are unsure whether they will receive refunds. Many passengers have expressed their anger on social media and requested Aviation Minister J Scindia to intervene.

Meanwhile, the airline has said that it regretted to inform that due to operational reasons, GoFirst flights scheduled for 3rd, 4th and 5th May 2023 have been cancelled. We apologize for the inconvenience caused by the flight cancellations.

“A full refund will be issued to the original mode of payment shortly. We acknowledge the flight cancellations might have disrupted your travel plans and we are committed to providing all the assistance we can,” the airline said in a late night statement.

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