India's Go First bankruptcy seen helping rivals, boosting airfares

Bengaluru: Go First's bankruptcy will likely boost airfares in India and give other domestic airlines a chance to grab a larger chunk of the market share, analysts said on Wednesday.

Shares of India's largest airline IndiGo rose by more than 8% on Wednesday, a day after cash-strapped airline Go First filed for bankruptcy, blaming "faulty" Pratt & Whitney (P&W) engines for the grounding of about half its fleet.

"If the suspension is prolonged, other airlines that are adding capacity would look to avail the slots vacated by Go First and grab on to the market share," Jefferies analyst Prateek Kumar said in a client note.

"Indigo is facing a similar problem with P&W engines for some of its fleet but has been able to better maneuver the crisis owing to its much larger fleet size and better negotiations with the vendor," Kumar added.

Lessors may also be keen to allocate some of the Go First aircraft to IndiGo, within India itself, given a similar fleet type, Credit Suisse analysts wrote in a note, adding that the development would benefit IndiGo in terms of market share and stronger yields in a capacity strained environment.

Lenders to Go First, including Central Bank of India , Bank of Baroda, IDBI Bank and Axis Bank dropped 1.1% to 6.8% on Wednesday. Go First owes financial creditors 65.21 billion rupees ($798 million), its bankruptcy filing showed.

The airline is owned by the Wadia Group, which also runs bread and biscuits maker Britannia Industries and textile firm Bombay Dyeing and Manufacturing Co, whose shares dropped up to 1.5% and 5%, respectively.

Bombay Burmah Trading, which is also owned by Wadia and has given loans to Go First in the form of inter-corporate deposits, slid 10%.