Go First or Go Last...

Established in 2005, Go First Airlines embarked on its journey with a vision to revolutionise air travel in India by offering affordable, yet reliable, modern flying experiences to passengers across the country. However, in May 2023 the whole operation ceased with debt and operational challenges, largely laid in the direction of Pratt & Whitney and the ongoing issues with the engines on the operator’s fleet of 54 Airbus A320’s (49 x A320Neo).

What then followed was an extended series of legal proceeding and court battles based on a claim that the airline could be relaunched and as such retaining all the leased aircraft asset. In recent weeks this has been concluded and the aircraft have been deregistered. But what is the implications with these aircraft now and what are the key considerations?

Challenges in Asset Recovery in 2024

There are a few technical considerations and issues in play following the bankruptcy of Go First, particularly as owners and lessors scramble to retrieve and to onward place their asset into a new customer. Let’s explore some of the key issues:

1.      Uncertain Aircraft Condition - The first steps for any owner will be to establish the technical maintenance status and condition of the aircraft assets. There have been reports in the media of these aircraft were having parts robbed and equally lessors have reported they are not able to access the aircraft so understanding the physical condition, maintenance status and assembled state of each aircraft is going to prove challenging. This may lead to the need of the use of a foreign jurisdiction in order to move the asset, avoiding the local authority that has abided by the court decisions and also any potential liens associated with the extended period of parking and debt of the airline, in order to get the aircraft ready for its next life.

2 .      Return to Service (RTS) Hurdles - With 54 aircraft spread across various cities in India to get these aircraft ready for service will prove a challenge just for Return To Service (RTS) Maintenance.  While some tasks for reactivation after extended parking would be possible outside, in a line environment it is likely that many will need some time in the hangar to ensure serviceability for flight, as such hangar availability will be at a premium to support as availability will be limited at all sites where these fleet is parked.  After the RTS is complete there will be a need to conduct additional maintenance activities to prep the aircraft ensuring all maintenance is up to date or to reconfigure and prepare each aircraft to a future operator. Given the constrained capacity mentioned above is likely much of this will be done at another location as short notice maintenance slots will be hard to find in the region for all these additional aircraft.

3.      Engine Availability Woes - Given the operation ended so abruptly in 2023 it is likely the engines are installed on other aircraft around the fleet, not on the head lease aircraft. In an aircraft lease agreement, the engines are titled to a specific aircraft, so they need to be returned to the respective owners.  Aviation Mover has been in this situation many times before and has led the establishment of an engine swap agreement. This works by all parties signing up to agree to pay for a removal and an installation of each engine and depending on the agreement some transport costs. That way the costs are shared equally between lessors to get them all back to the right aircraft. This works well when the aircraft are in the same airport or region but can be difficult when they are spread internationally, as it becomes difficult to coordinate. Such agreements require collaborative working between parties and someone to organise things, but it can be efficient and save money for all parties if it can be agreed upon.

4.      Redeployment and Market Impact - Engine availability to support the return to service of these aircraft is likely to be an issue. We understand that more than 50% of the fleet is missing engines so these will need to be located in order to provide sufficient thrust for the fleet. Equally, the remaining engines are likely to have been stored with little to no preservation, some even appear to be missing blanks so may have further issues of extended windmilling and inadequate preservation. These engines will also likely need a shop visit to ensure serviceability. As the engine challenges for Pratt & Whitney and its flagship engine the PW1100 continues to worsen with around 350 aircraft already grounded awaiting engines, adding another 98 engines to this requirement is going to take some time to sort. There is little or no availability in the marketplace as this has already been taken by other active operators. Finally, shop visits are also taking extended times, with reports suggesting between 250 and 300 days so there is no quick fix. While some Go First engines maybe in the shop they are unlikely to be getting work as their will be an invoice outstanding from the previous operator, so this will pose financial challenges for the owner.

5.      Aircraft Availability Opportunities and Challenges - As these aircraft are repatriated by the respective lessor, they will become available to remarket. There will be likely airlines looking to take advantage of this situation by either ‘cherry picking’ aircraft that are in a better condition or take an aggressive position in terms of making an offer to take on a specific aircraft. As there is a global shortage of aircraft availability, particularly aircraft such as modern aircraft like these Airbus A320Neo, combine this with the ongoing engine issues the need for additional fleet capacity will likely absorb these assets as they become available. Aviation Mover believe there continues to be a demand and we many see a number of these aircraft move to competing airlines in the same region with similar route and cabin offerings, but this may be at reduced lease rates compared to current improved conditions. Excluding the engine problems if these aircraft were remarketed this in turn may depress the Airbus A320 market lease rates as it would effectively flood the market, albeit for a small window of time.

6.      Long-Term Implications - All of the events mentioned above has been a result of the continuing reshaping of the Indian aviation market as well as leasing considerations within the region. There is huge aviation growth bubble across this populous country but that does come with challenges as it evolves, as does the law and regulation around this. With 13 of the world’s largest lessors having assets tied up at Go First for around 12 months due to legal wranglings, a lot has been learnt by those who lease a finance aircraft in this region. There will likely to be a level of caution applied to any future deals given the impact of this airline and may also cause lessors to think twice on further investment due to risk,  without further protections. If it is found that this is the new normal for any aircraft tied up there is a possibility that aircraft being registered under a ‘flag of legal convenience’ to ensure rights to the assets are easier to achieve. We have seen this over many years with countries registries such as Bermuda, Cayman Islands and Ireland being used for airlines in Russia, and some former states as, well as Italy which are known to have challenging legal regions for aircraft assets.

Conclusion

The events following the demise of Go First Airlines has provide ongoing media fodder over the last 12 months. With ongoing legal costs to recover the assets for the owners and lessors this is just the beginning as they now have access to recover their aircraft. We have highlighted some of the challenges and costs that will continue to mount. The events have created new issues to understand and resolve but also going forward has the potential to reshape the aviation and leasing market in the region for years to come, that has the potential ability to constrain the market growth that we have seen over recent years.

With growth comes opportunism… but what this market needs is stable, managed growth to prevent further airline failures and in today’s market it appears this will take the form of consolidation of the Indian aviation market.

This specific insight article highlights potential new opportunities for individuals wanting to get more involved in transitioning of aircraft should you want to learn more and formalised training about this exciting market head to https://www.aviationmover.com/courses