Turbulence in Indian airspace

Crisis-hit airline Go First has extended the suspension of its flight operations till May 26, citing operational reasons while expressing hopes it will be able to resume bookings shortly. The company is undergoing insolvency resolution proceedings and had stopped flying from May 3 onward. Aviation regulator DGCA had instructed the cash-strapped airline to stop bookings till further orders. The principal bench of the National Company Law Tribunal (NCLT) has appointed an interim resolution professional to look into the airline’s affairs while suspending its board as part of the insolvency resolution process.

The company’s use of the bankruptcy code to approach the NCLT has come as a body blow to the aviation sector, right at the peak of the summer. The sudden flight cancellation left thousands in the lurch — as the airline operated a fleet that ferried 30,000 passengers every day in March. The growing uncertainty over whether and when the airline will resume operations; its expected re-scheduling of flights; the fleet size and whether it will be able to accommodate those with confirmed tickets are points of concern.

The budget carrier had grounded 50% of its Airbus fleet due to problems with the Pratt & Whitney (PW) engines. It had blamed the latter for its running out of funds. The company is now facing flak from the US aerospace major as reports emerged stating that the airline has a long history of falling short of its financial obligations to PW. Go First had already run into rough weather financially prior to the pandemic due to several reasons.

The profit margins in the sector are wafer thin, while the fixed costs/operational expenses are huge. It’s a capital intensive industry, where rivals opt for aggressive pricing for a larger share of the pie. Many sustain losses for years together, which compels operators sans deep pockets to tap out. The pandemic and the lockdowns had also crippled the industry during the last two years. Passenger traffic recorded during Jan-Feb 2023 stood at 24.6 mn, which is slightly lesser than 25.1 mn passengers recorded during the same period in 2020. The Russian invasion of Ukraine sent the price of aviation turbine fuel (ATF) through the roof.

Several lessors of Go First have approached DGCA for deregistration and repossession of the company’s 45 planes. The National Company Law Appellate Tribunal will pass its order on May 22 on petitions filed by three lessors against the company’s voluntary insolvency resolution proceedings.

Other airlines are making a beeline to capture Go’s 7% domestic share. Like SpiceJet, which said it plans on reviving 25 of its grounded aircraft by deploying Rs 400 cr from the government’s emergency credit line guarantee scheme, as well as cash accruals. Domestic airlines like IndiGo and Air India are being flooded with CVs from staff of Go First, which has a 5,000-strong head count, with 740 pilots, including captains and trainee first officers.

The Go First episode is a reminder of the systemic anomalies plaguing the Indian aviation ecosystem. The country’s regulatory mechanism is languishing due to an archaic framework, while the tax structure ensures that ATF charges remain prohibitive to most operators. It is imperative to restore a sense of healthy competition to the airspace, that will allow the entry of new players, and ensure the longevity of existing ones. Supported by airport expansions and a conducive policy backbone, airlines can offer competitive fares and good service to take India’s aviation business to a new high.