The decision by no-frills carrier Go First to file for insolvency proceedings and cancel flights has sparked concerns within the airline industry, with travel agents’ grouping TAAI warning that the move could reduce capacity and push up airfares in certain routes. Go First has cancelled flights for three days starting May 3 as it struggles with an acute financial crunch, largely due to the grounding of more than half of its fleet due to P&W engine supply woes. The Wadia group-owned airline has filed for voluntary insolvency resolution proceedings under the Insolvency and Bankruptcy Code (IBC).
TAAI President Jyoti Mayal said the situation is bad for the airline industry, which has already experienced significant losses due to Kingfisher Airlines and Jet Airways going bankrupt. The developments at Go First, which has been flying for more than 17 years, come at a time when domestic air traffic is on an upward trajectory. Mayal warned that airfares could rise in sectors where Go First had previously operated, due to the reduction in capacity caused by the cancellations and insolvency proceedings.
Mayal said that there is currently high 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.” She also noted that there could be challenges with refunds for booked tickets if the company goes into insolvency. TAAI, which has around 2,800 members, urged the government to take steps to support the aviation industry, which has been severely impacted by the Covid-19 pandemic.
According to the summer schedule that is in effect from March 26 to October 28, Go First was due to operate 1,538 flights per week. The airline has faced a number of financial difficulties in recent years, with reports suggesting that its losses had increased to INR8bn ($108m) in the year to March 2020. The airline’s debt is estimated to be around INR13bn ($175m).
The news of Go First’s insolvency proceedings and flight cancellations comes as the aviation industry continues to grapple with the impact of the Covid-19 pandemic. Many airlines have been forced to reduce their capacity and suspend routes in response to the drop in demand for air travel. The situation at Go First highlights the challenges faced by airlines that were already struggling financially prior to the pandemic, and underscores the need for government support to help the industry weather the current crisis.