DBEA55AED16C0C92252A6554BC1553B2 Clicky DBEA55AED16C0C92252A6554BC1553B2 Clicky
May 26, 2024
Wadia’s look to sell significant stake or exit Go First
Care to share?

Go First, the low-cost airline promoted by the Wadia Group could either have a new owner or the Wadia group could look at selling a significant stake in the loss-making airline, Economic Times reported on Monday.

Go First commenced operations in November 2005. The airline’s website says that it has a fleet of 59 aircraft of which 54 are Airbus A320neo and the remaining are A320ceo models. According to the Economic Times report the Group has started talks with a strategic partner. It, however, does not name the strategic partner or whether the strategic partner was from the airline industry or not. The report states that the airline, which reported its highest-ever financial losses to date in fiscal 2022, is facing more headwinds as a large part of its fleet has been grounded as it is facing supply chain issues primarily due to issues relating to Pratt & Whitney Geared Turbofan engines.

While the Group is said to have pumped in around Rs 30,000 million in the last 15 months in the airline the report adds that it is now unwilling until the engine issues are sorted out. In addition, the airline also received support from banks as part of the Indian government’s bailout through the Emergency Credit Line Guarantee Scheme (ECLGS).

The report quotes unnamed officials as saying that all options are being examined with the last option being exiting the airline. The airline was also not able to raise money from the stock market after its Initial Public Offering plans were delayed due to the pandemic. While the first attempt at launching the IPO was derailed due to the Omicron virus the second time the Group planned to approach the stock market, its operations were affected by issues with P&W engines affecting its operations.

Interestingly, Economic Times in March this year reported that Go First was planning to sue Pratt & Whitney’s parent company Raytheon Technologies over compensation for financial damages it suffers from the continuous grounding and repairs of the Geared Turbofan engines on its Airbus A320neo fleet. According to that report, P&W is unwilling to compensate Go First, although the carrier claims to have a contract for maintenance and repairs that includes compensation.

Engine issues derail summer

The airline says it is suffering significantly from constant issues with the GTF. It fears that the continued grounding of aircraft could derail the upcoming summer season. Earlier this month the Directorate General of Civil Aviation had taken up issues with P&W after more than 60 Airbus aircraft of IndiGo and Go First were grounded due to maintenance problems and a lack of spare parts. There are industry-wide complaints about the GTF, which on the A320neo family, A220, and Embraer E2-Jets suffer from higher internal wear than anticipated and need to come off wing earlier. With repair shops swamped with engines, it takes up to eight months before airlines get their engines back. P&W is promising improvements but these take time.

India, which is set to become the third largest domestic aviation market, is seeing a bounce back in the number of domestic passengers taking to the air. Before the Covid outbreak, domestic airlines were carrying close to 400,000 passengers a day and they are now close to touching that figure. On February 21 this year, Jyotiraditya Scindia, Minister of Civil Aviation said that 44,4845 passengers had flown surpassing the 398,579 average passengers flown daily pre-Covid times.

Commenting on the latest developments at Go First, Mark D. Martin, MRAes, Chief Executive Officer, Martin Consulting, said that the situation is not of  Wadia’s making. “The company has pumped in money. They have been done in by lack of aircraft which will help them generate revenues as almost 60 percent of their fleet is down with engine issues. In the given circumstances what options do the Wadia’s have?” he asks. He adds that Go First is an airline that has survived in the highly competitive Indian aviation market for over 15 years while some others have fallen by the wayside. “Go First is still a very good investing proposition given the order book that they have and the Indian aviation story. Any good investor should be able to make this airline into a good aviation company giving a run for the money to both Air India and IndiGo,” Martin added.

author avatar
Ashwini Phadnis
Former Senior Deputy Editor at Business Line (aka The Hindu Business Line)

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.