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Go First Crisis: There has been an uproar in the Indian Aviation Sector since the application to declare Wadia Group’s company GoFirst as bankrupt. The company has applied for Voluntary Insolvency Proceedings with NCLT. The National Company Law Tribunal (NCLT), while hearing the matter on Thursday, has reserved its decision till Monday, May 8. Along with this, the company has canceled all its flights till May 12 (Go First Flight Cancelled). There has been turmoil in the domestic aviation market since the company’s application to declare bankruptcy. In such a situation, the biggest question arises as to how the company which had the third largest share in the domestic market at one point of time, has become like this today.
Fast growing Indian aviation sector
Recently, Air India has done the biggest aviation deal in history. Due to the increasing middle class in the country, the number of people traveling by flights is increasing rapidly. In such a situation, in view of the increasing demand in the aviation sector in the country, Tata Group’s Air India has signed the biggest aviation deal with Boeing and Airbus. The company has given a big order of 470 aircraft to both the aircraft manufacturing companies. Since then, many more airlines companies are also preparing to order planes on a large scale. In such a situation, the drowning of Go First in the rapidly growing Indian aviation market in this way raises many questions in the mind. We are telling you the story from the formation of the company to its sinking.
What did the company say?
Go First is a proprietary company of the Wadia Group. The company first entered the Indian aviation market in the year 2005. Since then, the company soon became the third largest shareholder in the market by providing cheap air services. But suddenly in May, the company informed about the cancellation of all its flights on 2 and 3 May. After this the company requested NCLT to declare itself bankrupt. In its application, the company has blamed American engine maker Pratt & Whitney for its bad financial condition.
GoFirst says that the airlines were mostly using Airbus A320neo jets in which Pratt & Whitney engines were being used. Airlines had to suffer huge losses due to the supply of bad engines. After this, after increasing liabilities on the company, it was running in Cash and Carry mode. In such a situation, he had to pay for the operation every day. In such a situation, the pressure on the airlines started increasing. Along with this, the Corona lockdown increased this problem manifold. According to the company, it has a total liability of Rs 6,527 crore.
Indigo increased the difficulty
GoFirst has tried to target the middle class through cheap air service from the beginning, but Indigo has captured a large share of GoFirst with cheap air service in the last few years. Due to this, the airlines have suffered huge losses. Significantly, this is not the first time that an Indian airlines company has sunk. Earlier, Jay Airways in the year 2019 and Kingfisher Airlines in the year 2012 have also sunk.
Why are Indian airlines sinking?
In the last 11 years, apart from GoFirst, two more big airlines companies have sunk. According to experts, there has been a long history of closure of private airlines companies in the country, behind which there are many reasons. Due to the rising cost of fuel, airlines have suffered huge losses in the last few years. The price of ATF has increased by 60 to 70 percent, while the price of flight tickets has not seen a comparable increase. Along with this, jet fuel, lease, maintenance, etc. have also become costlier due to fluctuations in the dollar price, which has increased the pressure on the airlines companies. At the same time, imbalance in demand on different routes has also caused losses. Along with this, many times the government tries to regulate the air fare. In such a situation, it has a direct impact on private sector companies.
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