AVIATION BUZZ

THE GO AIR CRISIS - PART 2

Over the last twenty-four months, Avialaz Consultants has tracked the story of the goings on in Go Air, not out of any premonition, but as we were approached by clients, who had their own concerns with the airline.

?This article is part two of a three-part series where we will take you through the litany of events that rocked Go Airways. In many ways, it was no less sensational than the Jet Airways saga, that rocked our aviation world and no doubt, it will not be the last case we hear about in Indian aviation.

We have already covered an analysis of the judgement of the Honourable High Court and how this could mark the recasting of the law. In this part, we take you through the journey of Go Air (later christened Go First Airways) and how we began tracking their path. (most of the client’s names have been changed to protect their identities.)

?In early 2022, Capt Rajan* realized there was some salary arrears pending from his employers and began writing to them. At the same time, there were some pilots whose incentives and bonuses had been unpaid, and there was a certain delay in the credit of salaries.

These employees were already reeling under the COVID cuts of 50% that were imposed during the pandemic, and the cuts had not been revoked. To make it worse, a large number of pilots cabin crew and ground staff had been sent on LWP during COVID; some had returned and some had not. Some of them approached us to find ways for recovery and a solution to restore their pay.

At that time, there were already whispers in the corridors of power of Go Air's precarious financial conditions and a rumour about a complaint that alleged, inter-alia, that some of Go’s contracts were related parties (a-la Jet). However, there was never any investigation into this allegation, it may just have been complete speculation, so we did not give much credence to it.

In hindsight, the rumours that there was a grave financial crunch at Go Airways, appear to have been true, but at that time, they were brushed aside by the management of Go Air.

In Chennai, a retired air hostess whose family had decided to make her child a pilot and were struggling with delays at flying schools overseas despite her CPL, they opted for the Go Air Pilot programme at a phenomenal cost of almost Rupees seventy lakhs. Go Air seemed like a secure place for Rebecca* to become a pilot, and they promised to impart the requisite training and a job guarantee for her.

In the other end of Pune, a Maharashtrian airline staffer and family, had saved all their money to make their son a pilot. Neeraj* also joined the Go Air Pilot Programme at a cost of Rupees Seventy lakhs to become a trainee first officer.

?In Mumbai, Ajay*, who had been flying with another airline as cabin crew, had done his CPL and tried for years to join an airline as an airline pilot. Finally, he took leave and went abroad and did his A320 type rating, and returned. He was still asked to pay Rupees thirty lakhs to get the requisite hours to become a first officer directly on the Airbus 320. He paid and waited for his day in the sun.

One morning in March 2023 , Shubham’s* WhatsApp pinged, he was part of a WhatsApp group of unemployed CPL pilots, all looking for jobs. Suddenly his eyes lit up, and the message said, “Go Air to conduct tests for CPL Pilots batch in April.” Like the hundreds of other unemployed pilots, he applied and so did Chetan.

He rushed to join up and give the exam & interview. In mid-April 2023 he heard back from the Go management that he had been selected, but he had to pay rupees seventy lakhs to join up. The earlier amount of Rs. 50 lakhs had been suddenly upped to ?70 lakhs. He agreed hesitatingly, but his parents could not manage the funds, as they were mortgaging their house in Chembur to rustle up the 50 lakhs, they had nothing else to give up.

Chetan*, on the other hand, managed to rustle up the ?70 lakhs, and they agreed to take him, but he had to pay up by April 25th. Shubham was not so lucky, as the mortgage disbursal would only be on April 30. He met some people at Go and was offered a discount to pay only ?50 lakhs, provided the money was paid soon.

He came back and expressed helplessness, they went as low as ?40 lakhs, but he was heartbroken. Some others bargained and brought the amount down from ?70 lakhs to ?40-45 lakhs and paid up.

A week later, on May 5, 2023, the world learned that Go Air went belly up! They had filed for voluntary bankruptcy under the Indian Bankruptcy Code.

In all the hullabaloo about aircraft, banks, debts, and lessors, no one spared a thought for the 40–50-odd young pilots who had joined the airline in the year prior. Go Air had collected more than 20 aspirants' money in just the previous months and weeks, and had not yet begun training any of them. These student pilots were distraught, and their families went bankrupt, as Go went into receivership under the IBC code.?

It is unthinkable that any of the finance or corporate heads who were recruiting these young pilots were in the dark about the financial situation. It is also unthinkable that any of the bosses were unaware that they would declare bankruptcy and thus had no moral, ethical, or legal right to collect training costs from young pilots. It now appears, that all these funds were being collected as seed money for the daily operations of an airline where the fund tap had run dry.

The Big Sham was, that GO AIR never officially had a Cadet Pilot program, duly approved by the DGCA. They were recruiting these youngsters as trainee first officers and taking the money from them.

All of them had done their own CPL, and some of them had even done their own Type rating flying, despite this, GO took their money and then bonded them for 5 years and Rs. 50 lakhs on a non-reducing basis.

The fact of the matter is that Go Air had sought permission for a TRTO program from the DGCA, before its closure, and was planning to start a cadet training programme priced at Rs.1.2 to Rs.1.4 crores. They had also increased the command bonds from 3 years and 15 lakhs to 5 years and 50 lakhs, and sucked in money from senior First officers to convert them as commanders. This was done to ensure readiness, as many of their commanders were leaving for other carriers.

Eventually, the Go Air pilot database and packages got leaked to rival carriers, and they all got offers and walked away, killing the airline.

To understand how this situation unfolded, one must go back to the very beginning of Go Air in 2005.

?Go Air was founded in 2005 by Jehangir (Jeh) Wadia, as a part of the 280-year-old Wadia group, which was founded by Loveji Nusserwanjee Wadia, as a pioneer of Indian shipbuilding who contracted with the East India Company. In the following decades, the group had spread to Oils, real estate, trading, clothing, fabrics, and of course the biscuit brands and was one of India’s largest groups, with the Wadia family trusts being one of the largest landholders in Mumbai if not India.

?In that background of personal opulence from one of Independent India’s most prominent families, the young Jeh launched his airline, with fanfare and the concept of being a low-cost carrier for the middle class to reach difficult-to-reach places. It was one of the pioneers of the Low-Cost model after Air Deccan.

Strikingly, it was an LCC that launched a full year before Indigo even launched in the Indian skies, and had big dreams, of hitting 100 aircraft before 2020 and going international too. Go Air's initial flights hit the high notes, with praise from all.

Kaushik Khona who was an experienced Industry hand from Gujarat Ambuja had come into the Wadia group in 2008 as CFO and VP of the group. he looked into Brittania, Bombay Burmah and was soon thrust into a leadership role, as the CEO to turn around the loss-making GO Air Airlines, a post which he held between 2009 and 2011 until relations began to sour with some in the management. It was during Khona's time at the helm that Go Air placed its order for 72 aircraft.

?Before and after his exit, Go Air went through a series of CEOs and bosses, totaling almost 9, who could not see eye to eye with the junior Wadia. Some like Wolfgang Prock Schaeur, Vinay Dube, and others. Eventually, it was Mr.Jeh Wadia who assumed complete charge of the airline.

Go had in 2016/17 planned to strategize for an IPO, but that was stillborn. The airline began stuttering and started showing larger losses in 2019 and 2020. Nevertheless, for all his temperament, it has to be said, that the airline did not do badly, and Jeh Wadia seemed to show operating profits until 2019/2020.

?Then COVID broke out, airlines and industry began laying off staff, and COVID broke the backs of all sectors, but most of all aviation. All hell broke loose at Go. The senior Wadia, though tired of pumping in money into Go Air, had decided that the Wadia’s would try and pay everyone during the lockdown. Hence, they decided on a 50% salary formula for all.

The task of deciding the pay cut and contours of was left to a Vice President of Operations, who made his formula and chose not to cut a penny of the TRI – TREs- DE’s salaries (Pilot trainers) and then sent some Pilots & staff on LWP and Paid some of them 50% of the full emoluments. That bred the seeds of the winter of discontent of Go Air, which would eventually erupt in 2023, when pilots and cabin crew walked off en masse to ravage the last hopes of saving the airline. Ironically, as per fellow pilots, Go Air management is rumoured to have rewarded him with a Mercedes for having saved money during the Covid-19 pandemic, without even realising the long-term damage he had done to the company.

At that time, SpiceJet had abolished the fixed minimum guaranteed payment for pilots, but Go Air went one step ahead. Even on the day of the eventual closure of operations, in May 2023, the pilots and staff had faced a wage cut of 25% to pre-covid levels.

?Go Air was one of the leading airlines that operated flights to Leh Ladakh, and had recruited a lot of military personnel as well. All pilots in the industry are paid special landing allowances for landings into LEH and THOISE, at Go that payment was Rs.7000/- per landing. That was brought down to Rs.1500 and that brought about a lot of resentment, Post-Covid, most surprisingly, the entire allowance was abolished, while all other airlines retained it.

During the COVID crisis, when the then government officials held an online meeting of all airlines to discuss their roles in joining the Vande Bharat mission. It is alleged that on one such instance, a Go Air rep spoke rudely in a raised voice and that alleged incident, apparently soured things with the government.

?Though sources in the ministry flatly denied any such thing even happening, it may be a mere coincidence that after that day, GO barely got any cargo flights done for medical uplifts.

?Go Air had prepared its fleet for medical cargo and COVID material, preparing the interiors of its aircraft, with all the wherewithal stipulated by the DGCA, like nets, harnesses, etc for onboard cargo carriage in the passenger cabin.

?Go Air had even won the award from the then Minister, for hygiene and safety, and the installation of HEPA filters. The situation between some powers that be and Go Air management appeared to have been strained.

In the meantime, at the height of the Covid crisis in August 2020, Nusli Wadia brought back Kaushik Khona as CEO – Go Air, who was with Talati and Talati as a turnaround and restructuring specialist by then. It is learned that Khona returned only on the condition that he would report directly to Mr.Nusli Wadia, group Chairman and non-executive Chairman of Go Air. The Wadia family raised funds through their assets and took loans against properties to pump into Go Air. The comfort level for them was that once the IPO was launched, they would pay off the debts from the Rs.3600 Cr issue they had planned.

?Khona dove right into his operational duties, and there were many feathers ruffled in the other camp. This led to a widening rift between the father and son, and when Go Air had set up for the IPO all over again, representatives of the junior Wadia raised the issue of IPR and domains belonging to his company and refused to relinquish them to the company.

That created a flux overnight, and trouble broke out in the family. The rumours of a rift between the father and son, and a dispute over the trademark of Go Air and its digital domains, were no longer merely rumours and had found their way to the draft Red Herring prospectus filed by Go Airlines with SEBI. The matter threatened to spin out of control as the Wadia group threatened legal action.

The situation within Go Air had become highly charged and unhappy, and employees (other than the Vice President Ops Operations and secretarial staff) were not even allowed to visit the fourth floor of WIC without explicit permission. So more than a mismanagement situation, it was a poor HR issue. In aviation, pilots and crew form the backbone of your airline, once they decide to leave, it's curtains for even the best airline in the world.

In 2021 Jeh Wadia resigned from Go Air, and the Wadia doyen, Mr.Nusli Wadia, had to step into the picture to try and revive Go Air. Go had earlier announced the appointment of Ben Baldanza, former CEO of Spirit Airlines, as the Go Air Vice Chairman of the Board some years earlier. Khona took a completely hands-on active role in reviving the flagging airline and taking it to IPO.

Nusli Wadia was the famous grandson of Mohammed Ali Jinnah and one of the leading lights of the Indian Corporate world, a group that had seen close to three centuries of business in Mumbai and India. He had himself fought battles with the great Dhirubhai Ambani, and handled the Congress regime. There was also a tussle with the Tata group when he supported the late Cyrus Mistry in his fight to regain the chairmanship of Tata Sons. He was removed from his posts on the Tata boards, which also travelled up to the Supreme Court. It is said that corporate boardroom battles have long memories, and this battle would crop up to haunt the Go Air group some years later on.

It must be pointed out that approximately 34% of Go Airs fleet had been grounded in 2022, up from the previous year and the company had conducted more than 289 engine changes in the previous 5 years. Hence the alleged Pratt and Whitney engine problem was not a new phenomenon at GO Air.

The Go Air battle with Pratt and Whitney was also before the arbitrators in Singapore, but P & W were not budging.

?The Pratt and Whitney problem became larger, and the attrition at Go began to show when pilots began leaving in early 2023, with the delay in payments to staff. There were also concerns of total default by Go Air, amongst many lessors, as the airline began delaying payments to others and word spread around the market.

The warning signs were first seen by the ex-Jet Airways pilots, who had seen this scene before in their earlier airline. The story was being repeated at Go Air, and they immediately began putting in their notices, to move on. Then came the hotel problems, Hyatt Manesar stopped keeping Go Air Pilots and sent a legal notice for Rs. 1 crore against outstanding. Radisson Blu Manipal, kept the Mumbai-based pilots in their premises until their bills were cleared. Cab vendors in Bengaluru stopped giving cabs to Go Air. Pilots were asked to take their own Uber from the hotels to simulators, many did not oblige and that cost Go Air even more, as the 4-5 hours of SIM slots got wasted, costing 40k–50k an hour. S.S.Cabs their main transport vendor, stopped providing transportation services in Delhi, when the outstandings crossed Rs. 7 crore, and they released only Rs. 80–90 lakhs to S.S.Cabs. Go Air then gave the contract to Bajaj Travels, all this transpired in the six months leading up to the closure, yet barring the Ex-Jet pilots no one could see the writing on the wall.

By mid-2023, the war clouds loomed large, and there were some cut-back in-flight operations, and talk of the impact of the Pratt and Whitney groundings on the Airline. The Go Air pilot and crew database was also compromised, going into the possession of at least three or four of India's leading airlines by insiders, who themselves joined a leading LCC.

In the following week, Indigo took in some walk in pilots and Air India Ltd placed an advertisement for pilots and crew, and there was an exodus of pilots and cabin crew from Go First Airlines as hundreds lined up outside the Taj Mahal Hotel, in New Delhi. It is rumoured that the queues were over one kilometre long. This included TRIs/ TREs/ and even DE’s who had decided to leave the airline and move on – even if they did not get positions as instructors, training captains or examiners.

Sensing the rush, there were pilots and crew who showed up for jobs in Mumbai and Bengaluru, and in the end, over a period of 3-4 days, there were more than 200 pilots and 600 cabin crew who had joined other Indian airlines, with the majority of them joining the services of the Tata group. Air India had dispensed with the requirement of an NOC, personal records, etc, preferring to examine all the new inductees on their own. At that time, Air India was also having issues with its pilots, and the Go Air exodus worked to the airline's advantage. Some observers and media men felt that this was the backlash of a previous fight that the two groups had in the past.

?This was a repeat of the 2015 problem after the resignation of CEO Georgia De Roni, when 35 pilots left Go Air to join Vistara and Indigo.

Go First began making noises about pilots leaving without serving their notice periods, and without NOCs, but the DGCA did not pay heed. The next round of hullabaloo was about how Pratt and Whitney had destroyed the airline and had caused the virtual shutdown of the airline. There was some truth to the fact that Go Air was losing a significant number of PW-powered aircraft, and more than 50% of the fleet would be grounded, but there was not much that could be done.

?The news headlines were clear, “Go First Airways had died, without even reaching the ICU.”. Whether they had aircraft or not, they no longer had the pilots and cabin crew to operate it. There was some hope to operate a truncated schedule, with a few executive pilots left, however, the financial situation did not permit a full schedule. Hundreds and thousands of passengers had booked international and domestic trips on their flights and had paid advances for tickets. All that stood cancelled. Eventually, in the next few weeks, Go Air began putting up a semblance of bravado, first suspending and delaying flights, then putting their schedules and bookings on hold first for a few days, then a fortnight, then a month, and finally until August.

In the meantime, the Go First board, headed by Nusli Wadia, had decided to seek protection from the IBC and file for voluntary bankruptcy, They approached the NCLT on May 5, 2023, for protection and the imposition of a moratorium, in what was a well thought out and deeply planned move.

With that, the sordid first chapter of Go First Airlines ended, and the matter moved to the NCLT.

This left the lessors at a loss, and the employees at a total loss. The young pilots were rudderless and had lost crores of rupees, which were stuck in the Go Air coffers, and there was no protection or training to be given to these young pilots, Before the NCLT, there was no protection for them as employees, nor does the DGCA India provide any protection.

In the next part of this article, we will deal with the situations that began in May of 2023 and ended in April of 2024.

#aviation #Airbus #boeing #Gofirst #GoAirlines #IBC #Bankruptcy

?This article was written for Avialaz Consultants an aviation consultancy and research organisation, founded by Sanjay Lazar, an author and Harvard Law Professional with 37 years’ experience in aviation, law, public speaking, and leadership coaching.

He is available at @lazar1 on Linked-In & @sjlazars on X (formerly Twitter)

His book ‘On Angels’ Wings — Beyond the Bombing of Air India 182' is a number 1 #Bestseller available on Amazon.in

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