Go First Vs Pratt & Whitney Dispute: Singapore To Delaware To India

Low-cost airline Go First had said on Tuesday that it was forced to file for insolvency proceedings due to the enormous damage caused by Pratt & Whitney's "defective and failing engines".

The dispute between Go First and Pratt & Whitney pertains to the breach of certain agreements relating to supply of engines that were to be undertaken by the latter. The airline alleged that 50% of its fleet is grounded due to the ever-increasing number of failing engines. 

The low-cost carrier has said that it could no longer continue to meet its financial obligations, blaming the U.S. engine-maker for the grounding of half of its fleet, which has impacted operations. 

On an urgent mention before the National Company Law Tribunal on Wednesday, the tribunal has agreed to hear the cash-strapped air carrier's voluntary insolvency resolution plea on Thursday.

Pratt, which is a leading market player in the design, manufacture and service of aircraft engines is responsible for providing a substantial portion of the total engine capacity of Go First's fleet.

According to the agreement, Pratt is obliged to provide geared turbofan engines, including the contractually agreed number of spares, free from defect and repair the engines as per requirements.

Go First alleged that the U.S.-based engine maker provided defective engines and even failed to repair those engines over the course of years. This had led to grounding of a large number of aircraft and the airline suffered huge losses.

Subsequently, the parties entered into an emergency arbitration at the Singapore International Arbitration Centre on March 13 because the airline was seeking an interim relief requiring Pratt to provide and repair certain engines under the contracts.

On March 30, the arbitration award was rendered in favour of Go First. The arbitrator said Go First urgently required the engines to reduce the number of aircrafts on ground. If emergency relief wasn't given, there was a risk of irreparable harm. 

The arbitrator ordered Pratt to dispatch at least 10 serviceable spare engines within 28 days and a further 10 every month until the end of the year.

However, Go First alleged that a week after the order was rendered, Pratt made a claim that it committed to making only three engines available to Go First by the end of May 2023 since no other spare engines were available.

This prompted the airline to approach the emergency arbitrator, asking that the directions issued to Pratt on March 30 be complied with. The arbitrator confirmed his earlier order on April 15, asking the engine maker to comply with its order.

But to no avail, the airline said Pratt acted in continued defiance as it has provided no spare leased engines at all or any certainty with respect to the time frame for the provision of spare leased engines in the future. It has also failed to induct faulty engines for repair.

This forced Go First to file an application before the District Court of Delaware in the United States, seeking an enforcement of the awards, a copy of which has been reviewed by BQ Prime.

Additionally, the main arbitration wherein Go First is seeking an amount to the tune of Rs 8,000 crore from Pratt is set to begin shortly.

The airline has pleaded that the awards rendered in its favour are binding and warrant immediate recognition.

It said an interim emergency award is considered final and ripe for confirmation under the Federal Arbitration Act and the New York Convention if the award resolves the rights and obligations of the parties definitively enough, which is the case in the present matter.

Pratt must perform its supply obligations, without which Go First's business may fold, it said.

The application added that the court should recognise the awards due to Go First's dire need for immediate confirmation and enforcement, without which Go First faces irreparable harm.

The plea also said non-availability of engines from Pratt led to a profound decline in the operating revenue per aircraft per month. "Yet, even though a significant portion of its fleet is grounded and unable to generate revenue, Go First has still been obliged to pay 100% of its fixed costs, including lease rental payments to its lessors of over $200 million, aircraft maintenance charges, parking charges, and employee costs," it said.

On a query raised by BQ Prime to Pratt & Whitney, they have stated that Go First has a lengthy history of missing its financial obligations to Pratt, but refused to add any other comment, saying that since this is now a matter of litigation, they would not comment further.