Indian budget carrier Go First announced on May 2 that it was cancelling all flights for the next two days. That was at the start of the summer rush in air travel. Suddenly, thousands of passengers were stranded. Families, who had booked holidays months in advance, didn’t know what to do, and tourists were left scrambling for alternatives. The cancellations were due to a fund crunch, and soon the airline announced that it had filed for bankruptcy. The cancellations were extended until mid-May, and uncertainty loomed.
The Wadia group-owned airline, facing financial difficulties, had grounded half the fleet due to engine failures. It blamed the troubles on American aerospace giant Pratt and Whitney and its “increasing number of failing engines”. The engine troubles forced the grounding of 25 planes or 50 per cent of Go First’s fleet, severely impacting its profits. Pratt and Whitney issued a rebuttal saying Go First had a “lengthy history of missing its financial obligations”. The Wadias said they do not plan to exit, and the insolvency proceedings are meant to revive the airline.
How other airlines will gain
The collapse of Go First has severe implications for India’s aviation sector. While other airlines will be eyeing more passengers, it means higher airfares, especially on the routes operated by Go First. Experts point out that passengers will become the biggest losers when only two or three players dominate the market. The plan to revive another defunct airline, Jet Airways, has also been delayed.
Airlines will now scramble to secure Go First’s market share. According to official data, Go First’s market share was 7.8 per cent in the first quarter. Air India has a market share of 9 per cent and Vistara 8.8 per cent.
The pandemic hit the aviation industry hard, with airlines scaling back operations and reducing salaries for pilots and other staff. Despite the headwinds, India’s aviation sector has proved to be resilient.
Go First had a bigger market share than Air Asia (7.3 per cent) and SpiceJet (6.9 per cent). Indigo is the dominant player by miles at 55.7 per cent of the market share.
Go First’s collapse ironically comes when India’s aviation sector is booming, with almost all airlines reporting over 90 per cent occupancies. Passenger traffic was up 51.7 per cent from January to March compared to last year.
The pandemic hit the aviation industry hard, with airlines scaling back operations and reducing salaries for pilots and other staff. Despite the headwinds, India’s aviation sector has proved to be resilient. Air India is in the middle of a massive overhaul and has signed the biggest civil aviation deal with orders for new planes from Boeing and Airbus.
Indigo has shown a remarkable recovery, posting a net profit of $80 million for the quarter ending March 31, against a net loss of $147 billion a year ago due to Covid. Increased passenger demand and cost-cutting measures have helped. SpiceJet too has withstood the turbulence and bounced back after a rough couple of years.
Indian aviation is at an exciting phase. The next few months will provide more pointers to the future.