Why did Go Air go Bankrupt even with a 10% market share? | Go First latest news | Go Air Bankruptcy
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- čas přidán 4. 07. 2024
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Go First news today has been full of images from passengers stranded at the airport. Go Air bankruptcy has caused big trouble for its passengers. Nobody was there on 3rd of May to attend to these passengers or answer their queries. Go Air filed for bankruptcy on May 2nd. Go Air or as it’s popularly called Go First airline has a market share of 10%. It is one of the biggest aircraft carriers in the country. Go First bankruptcy is a big deal because of this. Go air latest news today is trifled with customers asking for refunds. Go First flight cancelled on the 3rd, 4th, and 5th of May have derailed many travel plans.
All flights of Go Air operate from Mumbai to other Tier 1 and Tier 2 cities. Why Go Air flights are getting cancelled? Why is Go Air filing for bankruptcy? Go Air flight news is scary but we need to understand the reasons behind this downfall. First, we look at the total debt of Go Air. Go Air mentioned in their bankruptcy filing that the EMIs they were paying were ₹6521 crores in April. With this Go Air repaid all of its monthly outstanding debt by April 30th. But because of the current situation of their fleet, they realized that they are not going to fulfil their debt/EMI commitments in May. Because of this Go First filed for involuntary insolvency proceeding in May.
In the last 30 years, on average 1 airline has gone bankrupt in India. Why? Why is India so special? If we look at the revenue model difference between aircraft carriers in the US and in India, we can see the reason behind this. For a 1000km flight from Washington DC and Chicago, the average price comes down to ₹16,000 to ₹17,000 rupees, but when you look at a 1200km flight from Hyderabad to Delhi, the cost comes down to ₹7000 after all the inflation and everything accounted for. Of course, the purchasing power and income levels differ between India and the US. But there’s no major difference in the cost structure. 30% of the total cost of these airlines is coming from the cost of the aircraft itself.
The aircraft cost is constant because the manufacturers are international manufacturers. Boeing and Airbus sell their aircraft at the same price in India as they do elsewhere. The other 20% is the fuel price which is regulated by the international market. Then on top of it, there is another 15-20% which is maintenance which again costs you more money because the maintenance is done by international players. This tells us that the 70% costs for Indian airlines and American Airlines are the same. But Indian airlines are working at a disadvantage because of a lower fare structure.
Specific to the case of Go Air, maintenance has been a major issue. Go Air has said that it lost to close to 47 years of flying time which is 17000 hours. Why? Because of faulty engines. Go Air wants some of these engines replaced by an engine and spare parts manufacturer Pratt and Whitney. But Pratt and Whitney is not committed to issuing engines and automotive parts to Go Air. This is the exact issue Go Air was facing. The persons responsible of Aircraft spare parts were not supplying Go First with the spare parts they needed to make their fleet operational.
Airbus CEO has also said the same thing about experiencing irregularities with spare parts supply from Pratt and Whitney. What happens next? The guys who want EMIs from Go Air will come to seize the properties. This is called senior debt. There is another kind of debt which is not given against collateral. It is called junior debt. Operational debt is also there which is the debt to run day-to-day operations and includes employee compensation. Of course, the junior debt guys may lose up to 90% of the total value.
Lastly, I shared about the impact of Go Air going down on its 5000+ employees and the customers as well.
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I publish meaningful and valuable content on this channel. My aim is to make business news more accessible and easy to grasp. If you find my videos informative and insightful then make sure to subscribe and leave a comment. I’ll see you in the next video
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Chapters
0:00 - Intro
1:05 - Total Debt
1:45 - Why do airlines struggle in India?
4:00 - Go Air vs Maintenance
5:33 - What happens next?
8:00 - 5000 employees laid off
8:42 - Rise in Fare prices
9:49 - Outro - Zábava
Great insights Pavan. I love how you break down such complex and make a video out of it! It is eaiser to understand this way.
Great video Pavan! You always provide value with your awesome content.
I heard that the airport charges are same across India, i.e, there is no change in charges for airports in T1 cities vs that in T2 locations, which doesnt help any company trying to operate similar to RyanAir in EU.
Hi pavan great insights into aviation industry
Really helpful..
Congratulations keep going..
That's why they canceled my flight last April, and until now they I have not received any refund. Really disappointing it almost ruin my vacation. What if I miss to check my email? Then I will lose all my onward arrangements (hotel, tours, & Flights) in four countries.
I don't know how if I will refund. 😢
Hi, Thank You for an indepth analysis......I had a few queries, and I wanted to know about it from you....
1) Why only Pratt and Whitney? Is it a monopolistic entity for spare parts??
2) What are the technical reasons that Go Air Mgmt. did not spot that coming???
3) What are the options available for diversification of suppliers of spare parts, if not now at least in the mid-term?
Pavan you should also make a vedio on pratt and Whitney
Very informative.
Very insightful information, and explained in a lucid manner.
Good to know the terms "Junior Debt & Senior Debt" for 1st time, though the situation is bit more scary! Would like to know the stakeholders esp. bankers & their action plan, options etc. Thanks!!
Excellent explanation and delivery -Thank you (Ex Go Air Employee)
its sad to see what has happened with Go Air and the negative affects are already visible. the flight which i used to book earlier, from del to bom for 4K are now already 5k+. not knowing much about the logistics myself, I believe it has something to do with insane layovers as well. really hard time for few airlines sadly.
What an informative video! I mean, someone who has no knowledge of how an airline's downfall impacts the economy and the individuals can also understand everything due to how you explain. Keep going! It's amazing!
Glad to hear that!!!
Did Akasa ever took a flight ✈️?... what happened to this ? Late sri Rakesh Junjunwala founded
Yes, it is currently operational.
In India we have UDAAN to subsidise the travel
Please confirm about refund.
In the slide showing market share, Indigo has 56%, Tata Group has 26%, and a few other small players. If Tata Group acquires Go first also and rebrands the entire Group to Tata Airlines. Will Indian Aviation become another oligopoly like Telecom? Just like how telecom companies are increasing their ARPU ( Avg Revenue per User) from the last 1 year, Even Aviation can increase their Average fares. Your thoughts on this.
How do Airlines buy Planes from manufacturers like Airbus or Boeing? Is it on the lease? Any articles to dig deep into the Aviation sector. Thanks.