Why is the Aviation Industry Struggling? – Beragampengetahuan

Go First, formerly known as Go Air, filed for bankruptcy, despite launching its IPO a year prior. Initially, Go Air had been engaged in activities aimed at expanding its organization by increasing operations and acquiring more aircraft. The organization was optimizing its operational costs and had a good market share. However, the story isn’t limited to this company alone. It has been observed that around 13 airline companies have shut down in the last 20 years, with Jet Airways, Kingfisher, and many others on the list.

The question that arises is: what is wrong with the industry? To understand this, let us delve into the mechanism of the aircraft industry. To start a company, airline companies need to purchase or lease aircraft. There are two prominent companies in the industry for this purpose: Boeing and Airbus. Additionally, companies are supposed to purchase engines for their aircraft from companies such as Pratt and Whitney, CFM, and Rolls Royce. In the case of Go First, the company was owned by the Wadia family and was started by Jehangir Wadia, a former Director, in 2005. Several engine failures were witnessed, and the company blamed Pratt and Whitney for these failures. Due to multiple engine failures, the company had to ground 10% of its aircraft in 2018. This number significantly rose to 30% in 2021 and reached 50% in May 2023.

Despite using only 50% of the aircraft, the prices and charges for the other 50% were still paid. Indigo faced similar issues with Pratt and Whitney. In 2016, Indigo sensed issues with the engines and decided to change the supplier to CFM. In 2019, they signed a $20 billion deal with CFM International and sought compensation from Pratt and Whitney. On the other hand, Go First claimed that they were swayed by Pratt and Whitney’s presentations, which promised fuel savings, and trusted the company. However, Go First couldn’t even request spare engines. According to Morning context, last year, Go First had payment issues with Pratt and Whitney, which led to the company giving spare engines to Indigo. Go First later denied this statement and claimed that it made payments on time.

Engines were not the only issue; rather, it was a management issue faced by the company. It was found that the company faced internal clashes over who would run the management. In 2021, Go First’s head, Jai Wadia, resigned as the airline’s MD.

Last year, the Chief Financial Officer, Airport Services Head, and several senior executives from the revenue management and network planning departments also resigned. By September 2022, half of the revenue management team had left their jobs. Pilots and cabin crew even took other job offers due to no salary hikes. Eventually, this led to customer complaints, eroding trust in the company and resulting in significant losses. The failure of the company can be summarized into three major reasons: engine failures, poor management, and internal conflicts.