‘Airfares likely to rise as Go First cancellations reduce capacity’

: No-frills carrier Go First filing for insolvency proceedings and cancelling flights is bad for the airline industry as the move will reduce capacity and could push airfares in certain routes, travel agents’ grouping TAAI said on Wednesday.

“It is bad for the (airlines) industry... It is such a fragile industry... we lost crores of rupees in Kingfisher Airlines, in Jet Airways and we have another one going into insolvency (proceedings),” Travel Agents Association of India (TAAI) president Jyoti Mayal told a national news agency.

The developments at Go First, which has been flying for more than 17 years, also come at a time when domestic air traffic is on an upward trajectory.

Mayal said right now there is demand for air travel as it is holiday time and “we do expect fares going up in sectors it (Go First) was flying. In the coming weeks, fares are likely to go up.”

Regarding booked tickets, she said it is the company that has to provide refunds and if it goes into insolvency, the rules are different. “Those are the challenges we are going to be facing”. In a statement, TAAI expressed concern over the sudden cancellation of flights by Go First.

“The cancellations and refunds of tickets to its members and consumers have raised concerns at TAAI, who fear that travel agents will be adversely affected, presenting a significant financial blow as they struggle to revive post Covid,” it said.

Meanwhile, Go First CEO Kaushik Khona has informed employees that the airline has been grounded due to reoccurring Pratt & Whitney engine problems and has assured them that the carrier is doing all necessary to handle the situation with the utmost care and regard for all employees. The no-frills carrier has filed for voluntary insolvency and has also suspended all flights for three days beginning Wednesday.

The National Company Law Tribunal (NCLT) will hear Go First’s voluntary insolvency resolution plea on Thursday.

The petition for initiation of voluntary insolvency resolution proceedings was mentioned before the Delhi bench headed by president Justice Ramalingam Sudhakar.

The bench has agreed to an urgent hearing and listed the matter on Thursday for hearing.

The Wadia Group-owned carrier has moved the National Company Law Tribunal (NCLT), Delhi, seeking voluntary insolvency resolution proceedings. Section 10 of the Insolvency & Bankruptcy Code, allows a debtor to initiate an insolvency resolution process against itself if it has committed any default.

Go First is the second major scheduled airline after Jet Airways to seek resolution under insolvency proceedings.

The airline, which has been grappling with engine issues since January 2020, said it has been forced to move the NCLT as P&W refused to comply with an order issued by the Singapore International Arbitration Centre (SIAC), an emergency arbitrator. The arbitrator had ordered P&W to take all reasonable steps to release and dispatch without delay to the airline at least 10 serviceable spare leased engines by April 27 and another 10 spare leased engines per month until December 2023, as per the statement.

Khona stated in a message to staff late on Tuesday that Pratt & Whitney’s refusal to provide engines had caused a horrible predicament. For more than a year, the airline’s management has made every effort to persuade P&W to deliver spare engines and repair engines.

However, P&W has obstructed the discussions, according to the CEO, adding that it has requested Emergency Arbitration in Singapore. The arbitrator, according to the airline, ordered P&W to furnish at least 10 serviceable spare leased engines by April 27 and an additional 10 spare leased engines each month until December 2023.

“With that, the airline would have had all of its A320 neo aircraft operational by August/September 2023... unfortunately, Pratt & Whitney has chosen to defy the order from the Emergency Arbitrator,” Khona wrote in a message.

The airline petitioned the arbitrator, who reaffirmed the ruling, and because P&W chose “to defy for the second time,” he continued, the airline began enforcement procedures in a US court demanding implementation of the judgment.

“We want to reassure you that we are doing everything possible to navigate this situation with the utmost care and concern for all employees,” the CEO stated, addressing the staff as “Go Getters.”

With a diminished fleet, Khona claims the airline is unable to produce money for lessors, who are using coercive measures against the firm by issuing letters of credit, issuing grounding orders, and demanding the return of aircraft.

With agency inputs