The GoFirst Journey: What Happens Next?
GoFirst, formerly known as GoAir, has been a familiar name in the Indian aviation industry for over two decades. However, the low-cost carrier has recently endured a turbulent journey, culminating in its 2023 bankruptcy filing. As the airline navigates potential bids for acquisition, questions regarding its future and the broader impact on the Indian aviation landscape remain unanswered.
GoFirst’s Descent Into Bankruptcy
GoFirst's troubles began with operational challenges stemming from engine issues with their Airbus A320neo fleet, specifically the Pratt & Whitney engines that were being used to power the aircraft.
“[GoFirst] has close to 40 to 50 aircraft, with a majority of them being powered by Pratt & Whitney engines,” said Sanjay Shah, Director, Nangia Andersen LLP. These technical problems led to flight disruptions, cancellations, and ultimately, significant financial losses. Compounding the issue were high lease rentals for their aircraft, leaving them with a heavy debt burden.
Unable to sustain operations, GoFirst filed for bankruptcy protection in May 2023 under the Insolvency and Bankruptcy Code (IBC). “As GoFirst was unable to pay their lease rental, the lessors started taking back their aircraft,” Shah said. “[The airline] is now left with around 15-20 aircraft,” Shah added.
Grounded But Hoping For Takeoff
The airline's current operations are considerably scaled down, with only around 15-20 aircraft available. The fate of GoFirst now rests on the resolution process overseen by the National Company Law Tribunal (NCLT). Several bids for acquisition have been submitted, most notably by Ajay Singh, Chairman and Managing Director of SpiceJet, as well as Nishant Pitti, founder of the travel portal EaseMyTrip and Busy Bee Airways.
“Go First has been an integral part of the Indian aviation ecosystem for the past one-and-a-half decades. It is noteworthy, holding the majority shares of Busy Bee Airways, I have, under my personal capacity, supported a joint bid to resurrect the airline in the interest of the employees and all its stakeholders,” said Nishant Pitti in a post on X regarding his bid for the cash-strapped airline.
“The profit margin is very, very low [for Low-Cost Carriers], only four to six per cent,” Sanjay Shah stated, adding that the reason for Nishant Pitti to submit a bid for GoFirst could potentially be due to the fact that he has other businesses from where he can cross-feed into each other.
Coincidentally, Nishant Pitti had stated on X that they had “greenlit a groundbreaking proposal to venture into the hospitality sector with the establishment of a luxurious 5-star hotel in Ayodhya, strategically located less than 1 kilometre from the revered Shree Ram Mandir.”
Uncertain Skies Ahead
While a bid by Pitti or another investor could offer GoFirst a lifeline, the road ahead remains unclear. The success of any acquisition hinges on various factors, including securing financing, addressing lease agreements, and rebuilding trust with passengers and regulators. Additionally, competition within the Indian aviation sector is fierce, and GoFirst will need to carve out a distinct niche to thrive.
Impact on the Industry
GoFirst's future significantly impacts the Indian aviation industry. A successful revival could bring back much-needed capacity, boosting overall growth. However, concerns exist about potential consolidation, with some airlines potentially benefiting from GoFirst's demise while others face heightened competition.
"Out of about 700 aircraft flying over Indian airspace today, taking out 40 to 50 is a substantial number, but other airlines feel very happy, as they can get [GoFirst’s] business,” commented Shah.
GoFirst's journey serves as a cautionary tale for the competitive world of low-cost aviation. While bids offer a glimmer of hope, the airline's future remains firmly in the hands of the NCLT and potential investors. As the resolution process unfolds, one thing is certain: the outcome will have a significant impact on GoFirst, its employees, and the Indian aviation landscape as a whole.
