Aviation News

Go First mulls options to meet challenges, Infra News, ET Infra

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Wadia group, which owns the loss-making budget carrier Go First, has begun talks with strategic partners to either sell a significant stake in or completely exit the airline, top officials close to the development told ET.

Go First, which made its highest annual financial loss to date in FY22, has been tackling huge operational issues in the past few months as half of its aircraft have been grounded due to supply chain disruptions pertaining to Pratt & Whitney (P&W) jet engines.

For several months, the airline has lost significant business in an otherwise upbeat domestic aviation market. “Go First initially availed Rs 600 crore of loans under the government’s Emergency Credit Line Guarantee Scheme (ECLGS) for its operations amid rising air travel demand. Separately, the Wadia group infused around Rs 3,000 crore in the past 15 months, sources told ET.

“It is a difficult situation that is being tackled. We are burning money with our aircraft on the ground. We have spent ₹3,000 crore in the last 15 months to keep the airline afloat,” said an official aware of discussions between the promoters and potential strategic partners. “All options are being considered, and multiple scenarios have been planned. The last option, unfortunately, will be to exit the airline business.”

In response to ET’s mailed queries, a spokesperson at Go First said the promoters and Go First have sustained themselves with support from all stakeholders, including the government, despite having a substantial number of aircraft grounded.”The promoters have provided the support required, and banks’ support (has come) through ECLGS,” said the spokesperson.

Unable to Harness Tailwinds
“The airline continuously evaluates options to improve its value,” said the Go First spokesperson. Operational glitches have meant Go First hasn’t had the opportunity to harness the tailwinds in domestic
aviation. Passenger load factors have surged in India after mobility curbs were eased and normality returned to business routines.

“Almost 60% of Go First planes are on the ground due to the engine supply issues that have yet to be sorted out with P&W, and that has led to huge losses for the airline in an otherwise upbeat market,” said another official aware of the discussions.

The airline has also been unable to raise funds from the primary market after its IPO plans got delayed following the pandemic. Go had filed a draft red herring prospectus (DRHP) in May 2021 to raise Rs 3,600 crore through an initial public offering. It planned to raise another Rs 1,500 crore through a pre-IPO placement. The company received the market regulator’s nod in August 2021.

IPO Plans Grounded
However, the IPO plans were first postponed due to the Omicron outbreak in November-December 2021. Then, when the company planned to launch its public issue in March-April 2022, the Pratt & Whitney engine supply glitches caused concern among investors.”Go First received a very positive response from investors during its roadshows. However, investors kept raising concerns about the engine supply issue, which affected the IPO plans,” said an investment banking source.

Finally, Go First’s DRHP approval expired on August 26, 2022.

Using the IPO proceeds, the airline planned to repay a debt of Rs 2,015 crore, pay certain aircraft lessors toward securing lease rental payments and future aircraft maintenance with a cash deposit.

Go’s total borrowings jumped to Rs 3,513 crore in FY22, from Rs 2,540 crore in FY21, even as revenue climbed 92% to Rs 4,184 crore, from Rs 2,172 crore during this period. Tourist traffic picked up sharply in FY22, after the Covid-led lockdown in FY21.

“The airline continuously evaluates options to improve its value,” said the Go First spokesperson. Operational glitches have meant Go First hasn’t had the opportunity to harness the tailwinds in domestic aviation. Passenger load factors have surged in India after mobility curbs were eased and normality returned to business routines.

“Almost 60% of Go First planes are on the ground due to the engine supply issues that have yet to be sorted out with P&W, and that has led to huge losses for the airline in an otherwise upbeat market,” said another official aware of the discussions.

The airline has also been unable to raise funds from the primary market after its IPO plans got delayed following the pandemic. Go had filed a draft red herring prospectus (DRHP) in May 2021 to raise Rs 3,600 crore through an initial public offering. It planned to raise another Rs 1,500 crore through a pre-IPO placement. The company received the market regulator’s nod in August 2021.

  • Published On Apr 17, 2023 at 10:39 AM IST

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