DOWNFALL OF GOFIRST

 

The competition in the aviation sector of India is increasing while different new players are entering the market. On the other hand, some old players are showing downfall and bankruptcy. Recently one of the very popular names in India's aviation sector - GoFirst, has filed for insolvency. The Wadia group-owned airlines have filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal. 

The airline confirmed earlier today that all flights would be cancelled for three days, from May 3 to May 5, due to weather. After Go First made the decision to cancel flights for three days, the aviation regulator DGCA gave the airline a show cause notice. The airline has been ordered to submit information on the measures taken to lessen the inconvenience to passengers who had tickets for the cancelled flights, as well as a plan of action to operate flights in accordance with the authorised schedule beginning on May 5, 2023.

The reason behind the downfall - 

The reason behind the downfall of this airline is not the same as previous airlines like Kingfisher. Previously different aviation companies failed to achieve success because of a lack of proper understanding of the sector or unbearable losses. But the case for GoFirst is different. They have blamed the US aerospace company - Pratt and Whitney for their downfall. According to the company, they have to suffer this loss because of the number of failed engines sent by the US aerospace company. These disputed engine problems led to the company grounding 25 of its aircrafts as of May 1, 2023. The percentage of grounded flights due to problems in the engines of the company has increased from 7% in December 2019 to 31% in December 2020 to 50% in December 2022. The airline has also seen a lot of instability due to frequent changes in the CEO of the company. The company was previously also known for paying irregularly to the vendors and the staff. 

The course of action - 

According to different sources, the lenders of the airline were unaware of the insolvency filing. The future course of action of the airline will be discussed after all the lenders have a meeting. The cash flow of the airline had to face a serious problem as the airlines grounded more than half of their fleets because of the faulty engines supplied by Pratt and Whitney. The engine used to support their Airbus A230 neo aircrafts. The airline is trying to make a good comeback as it has started its search for a strategic investor in the company and has also found out some potential investors. 

The company used to have a market share of 6.9 percent of the total Indian aviation sector, and previously the number was around 9%. According to the current market share, the company used to fly 28,000 to 30,000 passengers every day, and this creates a potential risk of prices shooting up. The downfall of the airline company is also raising questions about the role of the Director General of Civil Aviation as it is the regulating agency of this sector. 

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