India’s airline turbulence will be felt abroad

Clouds are gathering over the world’s third largest aviation market. India’s Go First has gone into bankruptcy – the country’s second airline to do so since 2019. Its subsequent public and messy spat with engine suppliers and lessors will have ripple effects across the industry and abroad. A bonanza of cheap fuel between 2014 and 2018 helped Go, as well as competitors like $11b InterGlobe Aviation’s IndiGo and SpiceJet, to expand aggressively. Daily passenger traffic is soaring but financial stress is rising because of cutthroat competition, high taxes and airport charges, and other issues. Rebounding crude prices is hurting too. In 2019, one-time giant Jet Airways shut up shop, following a price war. Aircraft emblazoned with both defunct companies’ logos are now grounded on Indian airstrips. Go, the country’s third largest airline with a 7% market share, blames Raytheon Technologies-backed Pratt & Whitney’s “faulty” engines. But the ultra-low cost carrier has posted three consecutive years of heavy losses and delayed listing plans. It owes some 65b rupees ($798m) to financial creditors including the Central Bank of India and Deutsche Bank, and more to vendors and lessors. The sector’s debt including lease costs stood at $12b in the year to March 2023 – at par with overall revenue, per estimates by rating agency Icra. Unhappy lessors are fighting back. A New Delhi tribunal has barred them from repossessing planes parked with Go, triggering a legal battle between the carrier and companies including Sumitomo-backed SMBC Aviation Capital. A global industry association, Aviation Working Group, has put India on a watchlist for violating global conventions on repossession of airplanes. That might raise lease premiums for other airlines to account for uncertainties around clawing back aircraft in the country.<br/>