GoFirst owner, the Wadias, has started discussions with potential strategic partners to sell a sizable portion of the company or completely exit the business.
Go First suffered its largest annual financial loss to date in FY22. Further, it has been dealing with significant operational issues in recent months. Half of its aircraft grounded due to supply chain disruptions involving Pratt & Whitney (P&W) jet engines.
GoFirst owner Wadias to sell stake
For several months, the airline has been losing significant business in an otherwise upbeat domestic aviation market. Go First initially received a loan of Rs 600 crores from the government’s Emergency Credit Line Guarantee Scheme (ECLGS) to fund its operations as air travel demand increased. Separately, the Wadia group injected around 3,000 crores in the last 15 months. But it is unwilling to invest further until the P&W issue is resolved.
“We are dealing with a difficult situation. We’re wasting money by leaving our planes on the ground. In the last 15 months, we have spent 3,000 crores on keeping the airline afloat, All options are being considered, and multiple scenarios are in the works. Unfortunately, the last option will be to exit the airline business,” said an official familiar with discussions between the promoters and potential strategic partners.
According to a Go First spokesperson, despite having a significant number of aircraft grounded. The promoters and Go First have maintained themselves with support from all stakeholders, including the government.
“The promoters have provided the necessary support, and banks’ support has come through ECLGS,” the spokesperson said.
“The airline is constantly evaluating options to improve its value,” a Go First spokesperson said. Due to operational issues, Go First has not had the opportunity to capitalize on domestic aviation tailwinds. Passenger load factors have increased in India as mobility restrictions have been lifted and normalcy has returned to business routines.
“Almost 60% of Go First planes are on the ground due to engine supply issues that have yet to be resolved with P&W, resulting in huge losses for the airline in an otherwise upbeat market,” said another official familiar with the discussions.
The airline has also been unable to raise funds from the primary market due to the pandemic’s postponement of its IPO plans. In May 2021, Go filed a Draught Red Herring Prospectus (DRHP) for an initial public offering (IPO) to raise Rs 3,600 crore. A pre-IPO placement was planned to raise another Rs 1,500 crore. In August 2021, the company received approval from the market regulator.
“The IPO plans, however, were initially postponed due to the Omicron outbreak in November-December 2021. When the company planned to go public in March-April 2022, the Pratt & Whitney engine supply issues caused investors to be concerned. During its roadshows, Go First received a very positive response from investors. However, investors continued to express concerns about the engine supply issue, which hampered the IPO plans,” according to an investment banking source.
Finally, the DRHP approval granted to Go First will expire on August 26, 2022.
The airline intended to use the IPO proceeds to repay a Rs 2,015 crore debt, pay certain aircraft lessors towards securing lease rental payments, and make a cash deposit towards future aircraft maintenance.
Go’s total borrowings increased 92% to Rs 4,184 crore in FY22 from Rs 2,172 crore in FY21. Following the Covid-led lockdown in FY21, tourist traffic rose sharply in FY22.
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