Go First Collapse: Which Companies Would Emerge As Winners And Losers?

Go First, formerly known as GoAir, has suspended its operations and filed for voluntary insolvency, becoming the latest in a string of failed Indian airlines that include Kingfisher Airlines and Jet Airways.

The Mumbai-based airline, owned by the Wadia Group, had a market share of nearly 7% in India’s air travel market as of March and operated over 200 flights daily, catering to nearly 29,000 passengers.

However, since filing for bankruptcy, the airline has cancelled all flights till May 12 and does not appear to be accepting fresh bookings. This comes after the Directorate General of Civil Aviation (DGCA) ordered the airline to stop the sale of tickets and asked it to explain why it could not carry out its operations reliably and safely, PTI reported.

What Is Happening with Go First?

The airline has blamed its financial struggles on the grounding of 25 Airbus A320neo aircraft due to issues with engines supplied by Pratt & Whitney, grounding half its fleet. Despite an emergency arbitration award requiring Pratt & Whitney to provide spare engines, the engine manufacturer allegedly failed to meet its obligations, causing further disruptions to Go First’s operations.

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Pratt & Whitney has said Go First is in trouble because of its own poor management and COVID-19.

Meanwhile, Go First’s lessors are attempting to claim the planes they have lent out to the struggling airline.

Who Gains Amid Go First’s Crisis?

The collapse of Go First presents an opportunity for its competitors in the aviation industry. Shares of aviation stocks, including market leader IndiGo, surged in response to the news, indicating market optimism and expectations of increased market share for other players.

Shares of Interglobe Aviation, the parent of IndiGo are up 7% to ₹2,212.95 since the news of Go First’s insolvency first broke.

The availability of Go First’s airport slots and bilateral rights may also open doors for airlines to expand their operations, further intensifying competition in the Indian civil aviation market.

Amid Go First’s insolvency, competitors like Air India, IndiGo and SpiceJet have also been flooded with job applications from pilots and crew.

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Who Loses From Go First’s Collapse?

The airline has accumulated a significant debt of over ₹6,500 crore owed to commercial banks such as Central Bank of India, Bank of BarodaIDBI Bank, and Axis Bank, as well as operational creditors. While the exact recovery of these dues remains uncertain, the exposure of banks to Go First’s debt has already affected their stock prices. It is expected that banks may recover only a fraction of the outstanding dues. In total, Go First owes around ₹11,500 crore to financial institutions, lessors, vendors, passengers and other creditors.

Passengers who have booked tickets are also being inconvenienced as they wait for the airline to refund their money. At the same time, passengers may also be faced with higher airfares as Go First’s grounding gives competitors a chance to charge higher fares in some sectors with high demand amid peak travel season.

What’s Next For Go First?

The cash-strapped airline has approached the National Company Law Tribunal to urgently grant it bankruptcy protection last week. The company law tribunal is yet to decide on the matter.

If it is granted protection, Go First will be given a moratorium on its payments and will have some say in the insolvency process rather than being at the whims of its creditors. If successful, the airline will get some time to try and work out a restructuring package with lenders.

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Posted In: EquitiesMarketsAir IndiaGo FirstSpiceJet