India's Go First touts owner, govt backing after bankruptcy filing (updated)

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03/05/2023 14:51

(Repeats with no changes to text)

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      No question of Wadia Group exit -CEO
    

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      India govt keen "we should not fail" -CEO
    

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      Rival airlines' shares surge, lenders drop
    

  
    By Tanvi Mehta, Dhanya Skariachan and Chris Thomas
       BENGALURU, May 3 (Reuters) - The owner of Go Airlines
(India) has no plans to exit the budget carrier after engine
troubles forced it into bankruptcy, the  airline's CEO told
Reuters on Wednesday, as frustrated flyers complained of abrupt
flight cancellations.
    India's third-largest airline, which recently rebranded as
Go First, filed for bankruptcy on Tuesday, blaming Pratt &
Whitney's "faulty" engines, which it uses on its Airbus 320
 AIR.PA  neo aircraft.
    The collapse of the first Indian airline since Jet Airways
in 2019 comes amid fierce competition in the sector led by its
largest rival IndiGo and Tata Group-owned Air India, as
passenger traffic roars back after the pandemic.
    "The Wadia group, in particular Nusli Wadia, has always
tried to see that the company and the airline operations go on,
on a normal basis, in spite of the fact that we are completely
disabled to that extent by Pratt & Whitney," CEO Kaushik Khona
said. 
    "There is no question of Wadia group having any intention to
exit or move out."
    Wadia group, which owns 100% of Go First, pumped 2.90
billion rupees ($35.46 million) into the airline in April alone,
bringing the group's total investment in Go First to 65 billion
rupees.
    "The Indian government is very keen we should not fail,"
Khona said.
    The abrupt flight cancellations after the bankruptcy filing
also upset travellers and Khona said the airline was not selling
tickets until at least May 15.
    "I had to shell out more than double of what I originally
paid for a ticket on another flight," said Mumbai-based
advertising executive Timir Roychoudhury, whose Goa-Mumbai
flight was cancelled.
    
    ENGINE WOES  
    In its bankruptcy filing, Go First claimed its failure
followed a refusal by the U.S. company to abide by an
arbitration order to release spare leased engines, that would
have allowed it to return to full operations.
   Go First argued in the case that Pratt & Whitney engines had
a "serious design flaw" that caused shutdowns and premature
failure, which led to the grounding of 28 of its aircraft
as of this week.
    Pratt said in the arbitration case that Go First's arguments
relied on "fabricated obligations".
    The engine maker, owned by Raytheon  RTX.N , also asked why
Go First bought another 156 engines in 2019, three years after
it began operating them, if they were defective from the start.
    Pratt said Go First could not show it was the "sole or
exclusive cause – or any cause at all – of its poor financial
condition". 
    The Pratt engine has faced problems with durability in hot
and dusty climates including India, requiring more frequent
maintenance. Gaps in availability have been compounded by a
shortage of repair capacity.
    In 2019, IndiGo dropped Pratt as a supplier and placed a $20
billion order for CFM International's LEAP engines for its fleet
expansion following some plane groundings. 
    
    REVIVE, NOT SELL 
    The insolvency proceedings were aimed at reviving the
airline and not selling it, CEO Khona said, confirming it had
made all required payments to Pratt.
    Go First's market share in India dropped to 7% in October
2022 while its weekly departures fell 39% by March, from their
2021 levels.    
    On Wednesday, the airline's CEO said it was looking to
dissuade lessors from taking action and confirmed some parties
had expressed an interest in taking a stake in the airline.
    Pilots have been receiving their salaries with a delay for
the past few months, and are already considering moving to
bigger rivals, according to three pilots who did not wish to be
named.
    Go First's lenders will most likely meet on Wednesday to
discuss what to do next after the bankruptcy filing, two bankers
aware of the development told Reuters.
    The airline owed financial creditors 65.21 billion rupees
($797 million), its bankruptcy filing showed. As of April 30, Go
First had not defaulted on any of those loans, it said in the
filing seen by Reuters.
    Shares of Go First lenders Central Bank of India  CBI.NS ,
Bank of Baroda  BOB.NS  and IDBI Bank  IDBI.NS  fell on
Wednesday, while stocks of the airline's rivals surged.    

($1 = 81.7840 Indian rupees)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
FACTBOX-The engine dispute at the heart of Go First's bankruptcy
filing     L4N37017T 
Go First gone: engine troubles, COVID bring down India's
third-largest airline     urn:newsml:reuters.com:*:nL4N370129
Where Go First stands    https://tmsnrt.rs/3oT71aX
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Tanvi Mehta in New Delhi, Chris Thomas and Dhanya
Skariachan in Bengaluru; Additional reporting by Siddhi Nayak
and Sudipto Ganguly in Mumbai, Arpan Chaturvedi in New Delhi,
Tim Hepher in Paris and Kevin Krolicki in Singapore ; Editing by
Dhanya Ann Thoppil, Savio D'Souza, Gerry Doyle and Sharon
Singleton)
 ((chris.thomas@thomsonreuters.com; +91 80 6210 0487;))