Go First Files For Bankruptcy. What Happens Now?

Go First airline's bankruptcy filing on Tuesday triggered speculations on what would happen next for the airline and its employees. In a staff note to employees late on Tuesday, Go First CEO Kaushik Khona slammed American aerospace manufacturer Pratt & Whitney, saying that the latter's failure to supply engines had crippled the company.

Khona also said that the company was doing everything possible to "navigate this situation with the utmost care and concern for all employees".

The impact of the development was already visible on the market with aviation stocks flying and bank shares dropping on Wednesday morning. Meanwhile, the Travel Agents Association of India (TAAI) said that Go First's bankruptcy filing could reduce capacity and could push airfares in certain routes.

Aviation Shares Soar While Bank Stocks Drop

A day after Go First filed for voluntary insolvency, shares of InterGlobe Aviation (IndiGo), Jet Airways and SpiceJet surged up to 8% during the early trading session on Wednesday. Shares of InterGlobe Aviation rallied to Rs 2,235.95 on Wednesday, before trading at Rs 2,174.60 at 9.35 am, while SpiceJet shares surged about 6% to Rs 33.25 and Jet Airways' shares also surged 5% to Rs 60.59.

Jefferies analyst Prateek Kumar said that a prolonged suspension of Go First would benefit other airlines. "If the suspension is prolonged, other airlines that are adding capacity would look to avail the slots vacated by Go First and grab onto the market share," he said, as per Reuters.

"Indigo is facing a similar problem with P&W engines for some of its fleet but has been able to better maneuver the crisis owing to its much larger fleet size and better negotiations with the vendor," Kumar added.

Meanwhile, Go First's bankruptcy filing shows that the airline owes creditors 65.21 billion rupees. As per the filing, Go First had not defaulted on any of these dues as of April 30.

The filing lists Central Bank of India Ltd (CBI.NS), Bank of Baroda Ltd (BOB.NS), IDBI Bank Ltd (IDBI.NS), Axis Bank Ltd (AXBK.NS) and Deutsche Bank (DBKGn.DE) among Go First's financial creditors.

On Wednesday, Central Bank of India shares sank 7.2% and Bank of Baroda shares dropped to 4.1%. Meanwhile, IDBI Bank and Axis Bank shares dropped 3% and 1.1% respectively.

SpiceJet Cashing In?

Defunct airline SpiceJet on Wednesday said that it plans to revive 25 grounded aircrafts and has mobilised Rs 400 crore for this. The funds are being drawn from the government's Emergency Credit Line Guarantee Scheme (ECLGS) and better cash accruals, the company said in a statement.

Pratt & Whitney Responds To Go First's Allegations

After Go First blamed non-supply of engines by Pratt & Whitney leading to the airline declaring bankruptcy on Tuesday, the American aerospace manufacturer responded to the allegations. In a statement it said, "Pratt & Whitney is committed to the success of our airline customers, and we continue to prioritize delivery schedules for all customers. P&W is complying with the March 2023 arbitration ruling related to Go First. As this is now a matter of litigation, we will not comment further."

Furthermore, a source told news agency ANI that Go First has a "lengthy history of missing its financial obligations".

Meanwhile, Go First CEO Kaushik Khona in an interview with Reuters confirmed that the airline had made all required payments to Pratt & Whitney.

Pratt & Whitney, an American aerospace manufacturer, is Go First's exclusive engine supplier for its Airbus A320neo aircraft fleet. The airline blamed Pratt & Whitney's "faulty engines" for the increase in its grounded aircrafts, as per Go First.

Wadia Group Has No Plans to Exit Go First

Go First CEO Kaushik Khona on Wednesday said that Go Airlines (India) Ltd owner Wadia Group is completely committed to the airline and had no plans to exit it, as per Reuters.

The insolvency proceedings were aimed at reviving the airline and not selling it, Khona said. He also confirmed that the company had made all required payments to Pratt & Whitney.

"The Indian government is very keen we should not fail," Khona said.

Furthermore, as uncertainty gripped Go First employees, Khona in a staff note told employees that the airline was "doing everything possible to navigate the situation with utmost care, concern for all employees."