The Nusli Wadia-owned Go First has finally thrown in the towel in an intensively competitive aviation market punctuated by rising fuel costs and higher cost of capital. After a failed attempt for an initial public offer to raise ₹3,600 crore and efforts to rope in strategic investors also failed, the 18-year-old airline on Tuesday (May 2) filed for voluntary insolvency resolution proceedings before the National Company Law Tribunal in Delhi. The airline, whose entire net worth has been wiped out, had run up a debt of ₹3,513 crore, as of March 2022. Over the past four years, the cumulative losses of the airline have piled up to ₹4,543 crore, as per data from Capitaline. The airline has incurred a loss of ₹1,804 crore on revenues of ₹4,183 crore in FY22.

Chief executive officer Kaushik Khona termed the development as "an unfortunate decision" that had to be taken keeping in the interests of the company. For a while now, the airline has been flying on a cash-and-carry model, entailing daily payments to oil marketing companies for each flight since it has not cleared dues of these companies. The airline, which has over 3,000 employees, will submit a report to the Directorate General of Civil Aviation even as it hopes to resume suspended flights after its insolvency application is admitted.

According to reports, the promoters are reluctant to invest any more into the business after having already pumped in $366.2 million over the past 15 months. Over FY13-FY22, the promoters had provided financial support to the airline through inter-corporate deposits (ICDs), rights issue, and preferential allotment. In FY20, the company raised ₹97 crore through a rights issue to the promoters and a stand-by letter of credit of $50 million on the basis of group support. As per the company's draft prospectus, it had raised ₹546 crore through preferential allotment to group entity, Baymanco Investments. Besides, it had also obtained short-term working capital limits of ₹720 crore, backed by promoter's security. Further, the company had outstanding ICDs of ₹415 crore raised from its group company.

Of late, the airline has been forced to ground over half its 61-plane fleet owing to non-supply of the engines, prompting it to file a case against Pratt & Whitney in the US federal court seeking to enforce an arbitral award directing supply of engines as contracted. On a shrunken fleet, the airline has been losing to competition with its market share falling to 6.9% in March. The Wadias had entered the aviation market by incorporating Go Airlines in 2004 and had begun the services under the brand name, Go Air, in 2005. Later in 2021, the company rebranded itself from 'Go Air' to 'Go First'.

The troubles of Go First come against the backdrop of the Jalan Kalrock Consortium (JKC) announcing that Sanjiv Kapoor, the chief executive officer-designate for Jet Airways India, has stepped down from May 1, 2023, after having joined the airline in April 2022 to spearhead its revival. However, the delay has been prolonged with the consortium admitting that the court-approved process has taken more time than originally estimated. "We are in the last leg of closing the transfer of ownership of Jet Airways, subsequent to which we will settle outstanding amounts payable to previous creditors as per our approved resolution plan and shall recommence the commercial operations as per our re-launch plans," stated a release from the consortium.

The other low-cost player, SpiceJet, had recently restructured over $100 million outstanding dues to Carlyle Aviation Partner into equity shares and compulsorily convertible debentures (CCDs). Carlyle Aviation, which is an aircraft lessor, is the commercial aviation investment and servicing arm of private equity giant Carlyle. Following the transaction, Carlyle Aviation will hold over 7.5% equity stake in the airline. Additionally, SpiceJet had to also transfer compulsorily converted debentures of SpiceXpress and Logistics Private Limited, aggregating to $65.5 million. The debentures are slated to be later converted into equity shares of SpiceXpress at an anticipated future valuation of $1.5 billion.

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