Go Airlines, the Wadia Group’s low-cost carrier, this week became India’s first domestic airline since the outbreak of the COVID-19 pandemic to stall mid-air and seek bankruptcy protection. For an airline that rebranded itself as GoFirst in less than two years to make a fresh start, CEO Kaushik Khona at the time said “our consumers come first” and “…to a brighter tomorrow”. our faith” declared. The carrier’s sudden announcement of suspension of operations is full of irony. While it blamed an “ever-increasing number of failed engines” supplied by Pratt & Whitney, which it claimed had grounded half its Airbus fleet, engine problems could be said to be the proximate cause. . Go First’s financial woes predate the fleet troubles and the pandemic and are largely symptomatic of the malaise afflicting the wider industry. Given the high capital and operating costs, the commercial air transport industry operates with very low margins. Added to this, the competitive intensity in India’s budget airline sector a decade and a half ago saw rivals adopt aggressive pricing strategies to gain market share which stretched balance sheets and made companies more vulnerable to shocks.
If the lockdown announced in India in March 2020 and strict travel restrictions to combat the spread of the SARS-CoV-2 virus dealt a severe blow to all contact-intensive sectors, last year in the wake of Ukraine’s invasion of crude oil Prices skyrocketed. The cost of aviation turbine fuel (ATF) combined with the depreciation of the rupee against the dollar is increasing for domestic carriers. And while demand for air travel boomed last year as restrictions linked to the pandemic were lifted, Go First found itself already grounded by December 2020 with nearly a third of its fleet, which is based on low-engine aircraft. It was because of the issues of The airline is now moving the National Company Law Tribunal for initiation of insolvency proceedings and a simultaneous moratorium on the outstanding loan, the aircraft lessors have opposed the carrier’s resolution petition and instead sought deregistration and withdrawal of the aircraft Is. The outcome in NCLT notwithstanding, the development holds a mirror to the systemic weaknesses of the industry. Rival carrier SpiceJet is simultaneously facing a foreign lessee who has moved the insolvency tribunal over unpaid lease rentals. The government is aware of the issues plaguing the industry which include a tax structure that keeps ATF cost prohibitive and a regulatory mechanism that is out of date. The onus lies on the Center to find a long-term policy solution if it wants India’s struggling airlines to thrive.