NEW DELHI: Low-cost carrier Go First’s decision to suspend flights and file for bankruptcy may prove to be a big boom for rival airlines even though the development has once proved the country’s aviation sector to be the graveyard for airlines.
Not only rival airlines are expected to benefit from a sharp jump in airfares since Go First has cancelled all its flight operations from May 3, but they may also see improvement in market share and attracts seasoned ‘ready-to-go’ pilots who are in high demand following the record number of aircraft order by Tata Group’s Air India and entry of Akasa Air.
The Wadia Family-promoted Go First (formerly known as Go Air) on Tuesday announced that they are filing for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT), Delhi. The company said that a severe financial crunch due to the non-supply of engines by Pratt & Whitney (P&W) forced the airline to take this extreme step.
Go First had first suspended all operations till May 5, but later extended it till May 9. Legal experts believe that it will months for the insolvency proceedings to reach a conclusion as there is a clear dispute between the owners and other parties.
Up for grab: Market share at better price
Go First commanded a market share of 8.9% in the calendar year 2022 and sudden disruption in operations is likely to benefit other players, especially IndiGo. In recent months, however, Go First market share has seen a slump.“Go First accounted for 8% of domestic traffic and 5% of international traffic (among Indian carriers). If this capacity goes out of the system, industry-level load factor and pricing environment can improve substantially,” said analysts at IIFL Securities.
Credit Suisse analysts in a recent note said aircraft lessors could be more inclined to allocate some of the grounded Go First aircraft to rival player IndiGo. This, according to them, will benefit IndiGo in terms of market share and stronger yields in a capacity-strained environment. Aircraft lessors have already applied to the DGCA to seek deregistration and repossession of 20 planes leased to Go First. India’s leading carrier, IndiGo, increased its domestic market to 56.8% in March, according to DGCA data.
Analyst at Jefferies said if the exit of GoFirst does happen, this would be at the margin positive for sector consolidation as this would mean one less player in the market. Prateek Kumar of Jefferies, said, “While the revival path isn’t clear for Go First, the market disruption caused by the shutdown of operation is likely to reduce the competitive intensity, and could benefit airfares, especially amid the recent strong traffic trends seen in the Indian aviation sector.”
The suspension has already led to a sharp rise in airfares across Go First’s routes. According to tour operators, airfare on key metro routes has shot up to 50% while in select leisure routes such as Delhi-Leh airfares are up by up to 5 times. The high airfare, according to experts, is likely to stay on the back of strong demand. Seeking an opportunity from the void left by Go First, SpiceJet is mobilizing Rs 400 crore credit taken from the government to bring back 25 grounded aircraft to the skies.
Advantage for Air India as it gets seasoned talents
Concern about their future with Go First, a large section of pilots and cabin crew have started applying at other airlines, especially Air India. The timing wouldn’t have been better given the incumbents have an aggressive expansion plan and a strong order book.
Air India on Thursday said it has received an overwhelming response for its recruitment drive for pilots and has got more than 700 applications in the past week. The airline, which currently has more than 1,800 pilots, has placed orders for 470 aircraft with Boeing and Airbus, including for wide-body planes.
As per industry sources, many pilots of cash-strapped Go First have applied to work with the Tata Group Airline. The record number of applications comes as Air India is facing unrest from its existing pilots over the revised salary structure that came out last month. Air India recently issued an advertisement for more than 1,000 pilots. It is looking for captains, first officers, and trainers across A320, B777, B787 and B737 fleets.
“The recruitment of pilots is in preparation for the augmented large fleet of 470 aircraft. We have already received over 700 applications in the last few days in response to the advertisement which is under process. As a continuation of this recruitment process we are conducting walk-in interviews in Mumbai, Delhi, and Bengaluru,” Air India said.