Amid crisis, Go First suspends ticket sales till May 15
The Directorate General of Civil Aviation (DGCA) has reportedly been informed by cash-strapped Indian air carrier Go First about its decision to stop the sale of tickets until May 15. The aviation authority further stated that the airline has filed an application under Section 10 of the Insolvency and Bankruptcy Code. Meanwhile, Go Air has suspended all flights till May 9.
Why does this story matter?
This major development comes after the Wadia Group-owned airline filed for voluntary insolvency before the National Company Law Tribunal (NCLT) on Tuesday. It blamed aircraft engine manufacturer Pratt & Whitney (P&W) for supplying faulty engines that forced the airline to ground half of its A320neo aircraft. Earlier, Go First suspended all its flights till Thursday amid its cash crisis.
NCLT reserves order on Go First's plea for insolvency proceedings
On Thursday, the NCLT reserved its order on Go First's plea seeking voluntary insolvency resolution proceedings. During the day-long hearing, the Wadia group-controlled airline sought the initiation of insolvency proceedings and an interim moratorium on its financial commitments. However, aircraft lessors objected to the airline's request, stating that insolvency proceedings cannot be initiated without first hearing them.
DGCA asks Go First to refund passengers
"Go First has intimated that they have suspended sale of their flights till 15 May 2023 and are working to refund or reschedule for future dates, the passengers already booked to fly with them," said the DGCA. The civil aviation regulator also issued an order "directing them to process the refunds to passengers as per the timelines specifically stipulated in the relevant regulation."
Go First filed case against Pratt & Whitney in US
On Tuesday, Go First CEO Kaushik Khona alleged that the air carrier grounded nearly 28 aircraft, or over 50% of its fleet, amid issues with P&W. Khona also stated that this has severely affected Go First's fund flow, causing a cash crunch. In addition, the airline filed an emergency petition in a US court against the aircraft engine manufacturer over the non-supply of engines.
Pratt & Whitney's response to Go First's allegations
Responding to Go First's allegations, a P&W spokesperson said that the company is committed to the success of its airline customers. It went on to say that it will keep prioritizing delivery schedules for all clients. "P&W is complying with the March 2023 arbitration ruling related to Go First," the spokesperson added. "As this is now a matter of litigation, we'll not comment further."
Understanding voluntary insolvency
Voluntary insolvency can be simply defined as a company accepting that its business is insolvent. It can be described as a procedure where a company claims that it can't pay its debts and needs assistance from someone else. Furthermore, it should be noted that it is a time-bound procedure and must be concluded within 270 days from the commencement of voluntary liquidation.
