BOARDING PASS

GO FIRST
●NAME
PUSHTI SHAH

●APP. NO

The Anatomy of 22151005306

●SR. NO
a Bankruptcy 092

FOR:
OPSIGMA PRE-INDUCTION 2023
 1. What Went Wrong With Go First?

Cost Breakup - Fuel 30% | Lease 16% | Salary 11.8% | Interest 5.2% | Others 37% (Operation Expense, D&A, Airport Charges, etc.)

Indian Penny-Pinching Mentality Pratt & Whitney Engine Trouble Lack of Growth

• Tendency to opt for cheaper flights • Faced multiple engine explosions with • Started in the same year as Indigo (300
• Airlines with massive fleet bear losses to Pratt & Whitney flights) but failed to keep up with 50 flights
snuff out smaller airlines in price- • Did not replace them on time, unlike • Couldn’t accommodate slots opening up in
sensitive market (70% airlines bleed Indigo and Lufthansa place of grounded planes due to limited
thus) • 7%of fleet grounded; rose to 50% in 3 fleet and hence, faced difficulty breaking
• 2021 rebranding from GoAir to GoFirst years in
was futile
Total Grounded Fleet of Go-First Pandemic Induced Losses
Uncontrollable Cost of Fuel • Aggressive expansion plan in 2018 with
40% 50%
26% 34% 144 Airbuses - largest order in Indian
• Price fluctuates with geopolitics, 10% Aviation history – crashed due to Covid-19
economy, demand – no opportunity to pandemic
cut cost (loss x2 in FY22 to ₹1,800 2018 2021 2022 2023 2023 • Ultra Low Cost Carrier airplane plan never
crore); leads to no fixed margin (First 3 (April) materialized – left with no differentiator
o Airlines made small net profit of months) and squashed IPO launch rumors
$4.6 Billion (0.6%) – first profit
since 2019 (3.1% net margin)
• Russia-Ukraine War – prices of fuel Government Regulations
rose from INR 70 per liter in 2021 to INR
141 per liter in July 2022 • Hefty taxes on fuel led to international competitors taking over international routes
• UDAN scheme failed to take-off; regional routes struggled at 50% passenger capacity
2. Remedial Measure – The Bankruptcy Strategy
Go First’s Blueprint for Resolution – Leeway to Negotiation
Filing for Bankruptcy Before National
Company Law Tribunal
• 180 day period granted to defer
payment; extendable up to 270
days
• Immunity ensured against legal
actions
• Breather for cost recovery – pursue
P&W legally for potential INR 9000
crore settlement
• Interim Resolution Professional IRP
steps in to manage state of affairs
• Assets cannot be seized or
repossessed
• Wait period of 270 days plus 1 year
of liquidation for creditors is non-
profitable as planes rust and
decay; and later, sold dirt cheap
with only 1/10th recovery
3. How Competitors
Stayed Afloat
Debt Restructuring • Ordered >100 flights at
discounted price when AirBus
• INR 11,500 crore of loan stands no chance to be faced sales constraints
repaid hence, restructuring is the way out • Replaced Pratt & Whitney
• Banks write-off loans as non-performing asset engines in 2019 with CFM and
• Leverage bank’s position to restructure debt
•
wrangled compensation
and wrangle haircut + tenure extension Larger fleet ensured more
frequent flights, cheaper tickets,
Ex. – Delta Airlines saved $9.3B, Northwest Airlines saved $4.2B,
and reduced average cost of
American Airlines saved $8B
operating
Emergency Relief Operations
• Carry out business as usual during operation
and file for tax
• Pay wages to employees
• Ordered 140 additional aircrafts
• Meet contractual obligations like rent, to emerge as single largest
insurance, invoices
• Bounce back to profitability •
airline fleet globally
Merger of low cost subsidiary,
• Ask creditors for fresh loans to retain planes Air India Express, with Air Asia
India
without paying lessor, obtain loans without EMI, • Combined with Vistara for a full-
pay off important members fledged carrier
 Excel Sheet – Pushti Shah_22151005306_Opsigma
2A. ROUTE
OPTIMIZATION
1. Lay out destinations, revenue, cost, and
calculate Unmet Demand to
accommodate 150 and 300 maximum
capacity for domestic and international
respectively
2. Calculate Unmet Cost (Unmet Demand*10) OUTCOME
3. Feed formula for Operational Profit
[=B:B-C:C-F:F] Total Revenue INR 154,800
4. Select the top 5 profitable destinations
for both, domestic and international Total Cost INR 67,400
destinations in
5. Result obtained is INR 63,200 (north of INR Total Unmet Customer Demand INR 2,420
63,000 limit)
Operational Cost INR 63,200
 BOARDING PASS

THANK YOU
●NAME
PUSHTI SHAH

●APP. NO
221510005306

INFO COVERED
• Breakdown of reasons for GoFirst failing and filing for bankruptcy
●CELL
• Impact on its fleet and financials OPSIGMA
• Firms with similar problems and their way out
• Remedial measures for GoFirst to fly again

RESOURCES
Youth Incorporated, The Mint, The Hindu, ETPrime, Reuters