Wadia Group controlled ultra-low cost Go First Airlines filed for voluntary insolvency before the National Company Law Tribunal on Tuesday after facing acute financial troubles. The Airlines also cancelled all flights on 3, 4 and 5 May, causing DGCA to issue a show cause notice to it.
The airline blamed the “faulty” Pratt & Whitney engines used on its Airbus A320 planes, as half of its fleet was grounded due to engine issues. The airline in a statement said that it was “facing a financial crunch due to non-supply of engines by Pratt & Whitney, which has forced the company to ground 28 planes, over half of its fleet.”
Go First said that it was forced to file for bankruptcy after a refusal by Pratt & Whitney, the exclusive engine supplier for the airline’s Airbus A320neo aircraft fleet, to comply with an arbitration order to release spare leased engines that would have allowed the airline to return to full operations. It said that the number of grounded aircraft “due to Pratt & Whitney’s faulty engines” increased from 7% of its fleet in December 2019 to 50% in December 2022, costing it ₹10,800 crore ($1.32 billion) in lost revenues and additional expenses.
According to Go First, Pratt & Whitney has refused to comply with an award by an emergency arbitrator, directing the American engine maker to supply 10 engines by April 27 and 10 more engines per month till the end of 2023. The airline added that if P&W supplies the engines, it will be able to resume full operations by August/September 2023.
However, Pratt & Whitney tried to hit back at Go First, accusing the airline of having a “lengthy history of missing its financial obligations.” While the company has not issued an official statement, a spokesperson of the company told media that Go First has been missing its financial obligations to Pratt & Whitney.
At the same time, the spokesperson said that the company is committed to the success of its airline customers, and added that the company is complying with the March 2023 arbitration ruling related to Go First. They refused to divulge further details saying that it is now a matter of litigation.
While Pratt & Whitney has accused Go First of missing financial obligations, the creditors of the airline have said that the company is repaying its loans in time. A banker said that the airline was facing issues only because of the problems with aircraft engines.
A new engine facing problems since its launch
Go First operates 57 A320 aircraft made by Airbus and almost 50 of them are Airbus A320neo, powered by Pratt & Whitney PW1100G engines. This is a high-bypass geared turbofan engine, a newer technology, which consumes less fuel. However, ever since its launch, the engine has been facing various problems, reducing its reliability to a great extent. Several airlines across the world had to ground their aircraft using the engine, including IndiGo, Go Air, Lufthansa, JetBlue, Nippon, Hong Kong Express and others.
The engine was launched in 2016, and in 2017, several A320neo planes powered by the P&W engine were grounded across the world, including the planes of IndiGo and Go First.
In fact, in 2016, Qatar Airways cancelled an order for A320 Neo planes over engine issues. The Airline had said that while there were no issues with the aircraft, there were many problems with the engines.
India’s largest airline IndiGo, the biggest customer of A320 Neo, replaced all engines on its fleet of A320 Neo aircraft with modified engines provided by Pratt & Whitney, on the orders of the Directorate General of Civil Aviation (DGCA) due to problems with the engine. When IndiGo placed two orders for 590 new Airbus A320neo aircraft in 2019 and 2021, it selected the CFM International LEAP-1A engine, the only other engine available for the narrowbody aircraft.
Earlier this year when Air India ordered 470 Boeing and Airbus planes, it selected CFM International engines for 210 Airbus 320/321 Neo and 190 Boeing 737 Max planes.
Pratt & Whitney has acknowledged the problems with its geared turbofan engines. In February, P&W owner Raytheon Technologies Corp CEO Greg Hayes said that the engine’s reliability has not been up to expectations and that the company was working to fix problems.
Go First’s trouble with P&W engines and legal battle
However, Go First chose the P&W engines when it ordered 72 A320 Neo aircraft in 2011, when it was known as Go Air. The airline also bought a comprehensive service agreement which mandated compensation from the engine maker for any maintenance issues. The agreement had three main conditions: Pratt & Whitney has to provide spare engines within 48 hours of an aircraft getting grounded due to failure of its engine, the faulty engines have to be repaired free of charge as they are under warranty, and the engine maker has to pay compensation for loss of business due to grounding of its aircraft.
The airline said that it had selected the P&W engine because the American company had offered better fleet-management terms, and the engines are more fuel efficient, quieter and require less service. Go First received its first A320 Neo plane powered by Pratt & Whitney PW1100G engine in 2016, and within 6-8 months, the engines started facing issues.
Go First said that P&W honoured the provisions of the agreement till March 2020, and it provided spare engines on time, repaired without cost, and provided some compensation. However, after the Covid-19 pandemic, the engine maker has stopped providing any of this. Moreover, the airline began to to experience “more severe” engine failures in 2020, and P&W stopped providing maintenance service to the company in 2022 over financial disputes.
In February 2023, Pratt proposed to supply replacement engines at a rate “four times lower than the failure rate.” As a result, Go First moved Singapore International Arbitration Commission (SIAC) against P&W in the next month for not supplying spare engines as mandated by the maintenance agreement. In the arbitration, Pratt & Whitney’s lawyers claimed that its engines were not faulty, even if they were not performing in the expected manner. They also claimed that the airline owed them over $100 million.
The arbitration award issued on March 30 this year went in the airline’s favour. The SIAC ordered Pratt & Whitney to supply 10 engines to Go First by April 27, and then 10 spare leased engines per month until December 2023.
However, P&W refused to comply with this order, and the airline was forced to continue grounding A320 Neo planes due to faulty engines. As a result, the SIAC issued a second arbitral award on April 15, asking the US-based company to comply with its order. But P&W continued to refuse to comply, and only committed supply only three engines by May-end. While the airline needs a minimum of 103 engines from Pratt for normal operations, and only 56 engines are currently serviceable.
The battle ahead
With losses mounting due to decreased business as half of its planes are grounded, the airline decided to file for voluntary insolvency. Go First also said it suffered a loss of ₹10,800 crore in lost revenues and additional expenses due to the grounding of the planes. The airline said that it paid ₹5,657 crore to lessors in the last two years, out of which ₹1,600 crore was paid towards lease rent for non-operational grounded aircraft.
The airline is seeking compensation of approximately ₹8,000 crore from P&W.
Along with filing for bankruptcy, the airline also moved a court in Delaware, United States, seeking enforcement of the arbitration award. Go First moved an emergency petition before the Delaware Federal Court on April 28, calling for a legal order to force Pratt & Whitney to comply with SIAC’s two arbitral awards, issued on March 30 and April 15.
“If Pratt does not immediately comply with the awards, there is a significant risk that Go First will go out of business and be forced to declare bankruptcy,” the petition stated. “The court should recognize the awards due to Go First’s dire need for immediate confirmation and enforcement, without which Go First faces irreparable harm, and absent which the emergency arbitration would be rendered meaningless,” the petition further added.
The allegations of the airline against P&W made in the petition include the supply of defective geared turbofan engines, failure to repair the faulty engines, and failure to provide sufficient spare leased engines.
Pratt & Whitney on Wednesday said that it is complying with the arbitration order.
As Go First is facing trouble for no fault of it, the govt of India has said that it will help the airline. “Go First has been faced with critical supply chain issues with regard to their engines. The government has been assisting the airline in every possible manner,” civil aviation minister Jyotiraditya Scindia said in a statement.
Go First is not the only airline to be hit by faulty P&W engines. Over 30 Airbus A320 Neo planes of IndiGo are also currently grounded due to engine faults, even after the original engines were replaced by ‘modified’ engines. However, as IndiGo is a much bigger operator with several types of aircraft in its fleet, it has been able to sustain the situation without much impact on its operations.
