On Monday, the crisis-hit airline company, Go First announced that the flights will remain suspended till June 22, 2023, i.e. Thursday because of operational reasons. The company announced on Twitter about the same. The move comes after it was reported that banks are planning to organize a forensic audit of the accounts of the company to understand if there were any chances of funds diversion.
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The airline has been owned by the Wadia Group and it filed for voluntary insolvency on May 2 before the National Company Law Tribunal – NCLT of the Delhi bench. Also, the company’s plea was accepted by the tribunal on 10 May 2023. The cash-trapped airline company has canceled its flights since 3 May 2023.
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As of 28 April 2023, the company Go First Airlines’ total outstanding debt amount to banks stands at Rs 6,521 crores. The lenders’ list includes Bank of Baroda, Central Bank of India, IDBI Bank, and Deutsche Bank.
Go First was earlier founded as GoAir. It was said to be an Indian ultra-low-cost airline company for passengers. Its office is located in Mumbai in Maharashtra. The company was ranked as the fifth largest airline in India in October 2017 having a passenger market share of 8.4%. It began its operations in 2005. In March 2020, the airline company had running 330 daily flights to 36 different locations, which included both domestic and international destinations. The base locations included Mumbai, Delhi, Bengaluru, Kolkata, Hyderabad, Chandigarh, and Kannur.
Go First Airlines got hugely affected by the supply chain problems of Pratt & Whitney PW1000G engines that support their A320neos. This led to huge financial losses and the company was forced to declare itself insolvent voluntarily owing to a cash crunch. It also blamed Pratt & Whitney for non-compliance with a crisis arbitrator’s order, including providing “at least 10 serviceable spare leased engines by 27 April 2023”. Pratt & Whitney replied by saying that it was conceding with the arbitration order.
Go First’s management also announced that the company’s insolvency status is not to sell the airline but get back to normal conditions. The company’s CEO Kaushik Khona also mentioned that the Wadia Group has no ideas to exit the business.
It is sad to see the plight of profit-making businesses that go through such rough patches. No wonder how banks face issues as well when they have so many outstanding amounts left with corporates. When companies make losses and don’t clear the debts with the lenders, it affects the economy, which in turn negatively impacts the common public.
One can notice how bank charges so many different types of fees like SMS charges, net-banking charges, ATM charges, etc. at increased rates and lower their annual interest rates on savings and fixed deposits. This affects the pockets of the common man who works really hard to make a decent living. One needs to understand how these crisis-hit companies should get support from the best financial advisors to recover from the losses and keep their balance sheets in order.
(Image/Goodreturns)
