GoFirst, as an airline, has failed. GoFirst is India’s only ULCC, i.e. Ultra Low-Cost Carrier. Recently, go first announced that it is cancelling all its flights and stopping its operations due to its engine failures. Furthermore, GoFirst is claiming that it has issued refunds. Let’s understand what is happening with go first, what is happening with the airline industry, and where is it headed in the future?

Will I get a refund from GoFirst for cancelled flights?

Whenever you have to book a flight in India, the first name that comes to mind is MakeMyTrip, Goibibo, yatra et cetera. Like them, there are thousands of other players who control the sale of airline tickets. Online travel agencies (OTA’s) play a major role in the Indian airline market and they are responsible for almost all the tickets which are sold in the country.

This begs us to ask the question “WHY?” Why don’t people buy tickets directly on the airline website? The reason is simple. The airlines in India sell coupon fares, non-refundable fares, special promo fares etc., only to the travel agents and not in the open market.

The OTA’s keep a certain margin and pass on the remaining discounts directly to the consumers which is beneficial to the travel agents as they are making a margin and is also a benefit to the customer. This is a win-win situation but not always. Now as we can see, go first has failed. In this situation, no one knows if a refund is going to come.

Let’s crunch some numbers.

If we talk about numbers, the percentage of tickets sold by Airlines directly is 8%, whereas the percentage sold by travel agents is 92%. GoFirst is claiming that it is issuing the refund back to its customers, but what is actually happening? They are refunding the amounts to the travel agent’s wallets which loosely translates as you can use the refund to book only my flights.

This would have been considered acceptable if the airline was still issuing new tickets. But that is not the case. The DGCA, which is the regulatory authority of airlines in India, has directed GoFirst to stop the sale of airline tickets until the entire matter is resolved and GoFirst starts its operation once again. That being said, the amount in the wallets of travel agents is lying useless and hence they are unable to issue any refunds back to their customers.

The airlines have not processed any refund back to the bank account of the travel agents and unless that happens know, Agent is going to refund the amount of their customers from its own pockets.

What is the issue with GoFirst?

the problem is pretty simple. The aircraft is manufactured by Airbus, but the engine selection are at the discretion of the operator. The engines which go first was using were being provided by Pratt & Whitney. For the past four years, GoFirst has been facing issues with its engines. The airline has complained to the engine manufacturer multiple times and has requested them to replace the engines ASAP. But Pratt and Whitney seem to be inconsiderate about this.

Let’s understand the whole issue.

In 2019, the percentage of engine failures was about 7% of the total fleet of GoFirst. But with each passing year, the number kept on rising. Post-COVID, in 2022, the number of standing aircraft due to engine failures was at a stunning record of 50%. This is why GoFirst halted its operations.

Who is the culprit? GoFirst or Prat and Whitney?

Whenever an agreement is made between two parties, there is always an arbitration clause. This means that if an issue arises, there will be a neutral third party which will assess the case and give an arbitration award given the circumstances of the case.

After negotiating with the engine manufacturer, I.E.Pratt and Whitney, go first understood that this will lead to no end. GoFirst took matters in its own hands and filed a case and the arbitration council in Singapore in March. The arbitration council studied all the relevant facts of the case and ruled in favour of GoFirst. The council in Singapore recognises that GoFirst is correct and Prat & Whitney should resolve their problems.

The arbitration council gave an order to the engine manufacturer to provide 10 aircraft to GoFirst in a month and to resolve all the engine problems by December this year.

Pratt and Whitney did not respect the decision of the arbitration Council. No engines of GoFirst was replaced, let alone a spare engine was given to them.

What will happen next?

GoFirst has filed an emergency petition in the US Court for the resolution. GoFirst has taken the matter home to make sure that the engine manufacturer is held responsible for their acts. It’s now up to the US court to give the order.

As per GoFirst, it has enough funds available to sustain the operations for the next 10 days. But there’s a catch.

The airlines do not own the aircraft in the majority of the cases. The aircraft is owned by a leasing company that leases the aircraft to the airline. In this case, GoFirst claims that it can very well continue its operations if the aircraft is not seized by the lessors as per the agreement.

The airline has requested DGCA not to cancel its licence as the operational problems are due to its engine supplier.

Conclusion

The important question to address is – “If GoFirst were to return, will people trust the airline once again?”

The answer to this is simple. GoFirst will have to rebrand and reposition itself. It’s about the brand image. GoFirst image is devastated. No flyer trusts it anymore. 8 out of 10 flyers want to pay extra to travel a reliable airline. GoFirst will be need to rebrand and reposition itself in the industry with on-time performance, unmatched fares, quality service, complimentary meals and seats, and unprecedented staff behaviour among other things. The flyers will flock to GoFirst if it can do it. But first, it needs to control the current fire.

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