Broken trust at 30,000 feet: The impact of the Go First-P&W case has ramifications for international business – Opinion News

By Vijay Kelkar

In a recent address to the Lok Sabha during the winter session of Parliament, the Union minister of civil aviation Jyotiraditya Scindia highlighted a concerning issue, stating, “Ninety-five per cent of the aircraft on ground in India today is because of engine supplier Pratt & Whitney”.  He also added, “We have been in direct touch with Pratt & Whitney and conveyed to them that this situation is unacceptable because air traffic in India is growing exponentially.” Scindia’s revelation underscores the gravity of the situation, as aircraft on ground (AOG) points to deep-seated problem impacting the Indian aviation sector.  

In Scindia’s parliamentary address, the intricate landscape of international business was highlighted, signaling the larger problem that the enforcement of contracts serves as the foundation for building trust, reliability, and prosperity. The unfortunate case of Go First, formerly known as GoAir, stands as a poignant reminder of the pivotal role that contractual enforcement plays in the global economy. The failure to uphold contractual obligations and blatant disregard for international laws/emergency international arbitrator, as exemplified by P&W’s conduct, has not only shaken the foundations of a once-thriving airline but has also reverberated across the aviation industry and beyond, underscoring the critical need for stringent enforcement of contractual agreements.

At the heart of the Go First-P&W case lays a compelling narrative of broken promises, unfulfilled commitments, and the harrowing aftermath that ensues when contractual obligations are disregarded. P&W’s faulty engines and their subsequent failure to adhere to ethical and contractual responsibilities to replace the engines within 48 hours and repair the failed engines free of cost led to substantial grounding of Go First’s aircraft, ultimately inflicting irreparable damage on the airline’s operations, its employees, and the broader economic ecosystem. It is shocking that P&W, allegedly an ethical company owned by the Raytheon Group, morally & ethically bound to abide by the emergency international arbitration at Singapore International Arbitration Centre (SIAC) as per the signed contract, chose not to abide by the orders of the emergency international arbitrator (not once, but twice). The repercussions of this breach of trust extend far beyond the confines of a single business relationship; they resonate as a cautionary tale for international commerce at large and Indian aviation in particular. 

Between FY17 and FY22, Go First’s profitability was at par or better than the industry leader. More importantly, Go First also had the best “on time performance” for fifteen straight months between September 2018 and November 2019. Hence, it is quite evident that the unfortunate situation at Go First is not due to the lack of operational ability or management capability, but it is solely due to P&W’s defective engines. They retracted on their contractual obligations of replacing the failed engines at no cost and were defiant against emergency international arbitrator orders at Singapore International Arbitration Centre (SIAC). 

Left with no other option, Go First moved to NCLT as a last resort to protect its assets and keep in mind employee interest. Had P&W complied with the orders of the emergency international arbitrator, Go First would have scaled its operations to its peak level very soon. If the engines had come as per the emergency international arbitrator orders, lessors would have been at ease and would have supported the resumption of operations. It is really tragic that despite significant fund infusion from the promoters (to the tune of `3,200 crore in last 3 years) and full support from the government, MoCA, DGCA, and the banks, the airline operations could not be sustained because of P&W’s faulty engines and immoral conduct. 

The Go First-P&W case vividly illustrates the human toll exacted by the disregard for contractual sanctity. Consider the plight of Go First’s employees, who, once numbering around 7,000 direct and 10,000 indirect staff, found their livelihoods imperiled due to the airline’s abrupt grounding. 

Imagine the ripple effect on the millions of passengers who relied on Go First for their travel needs, only to be left stranded and inconvenienced by the airline’s cessation of operations. These are not isolated incidents; they are the tangible consequences of a breach of contractual trust, transcending balance sheets and profit margins to touch the lives of individuals and communities.

The case of Go First and P&W underscores the profound impact that contractual enforcement or lack thereof wields on the fabric of international commerce. Without the assurance that contractual agreements will be honored, the very essence of globalisation and international business becomes imperiled. As the dust settles on the Go First-P&W case, the broader implications of the latter’s engine failure become increasingly apparent, sending shockwaves through the global aviation industry. Scindia’s address in Parliament revealed that India’s aircraft fleet, which stood at 400 in 2014, has surged to 644 in 2023. However, this growth is hampered by a staggering 164 planes grounded across 15 airports in India. 

Interestingly, GoFirst happens to be not only the most severely impacted airline in India but also globally due to Pratt & Whitney faulty engines. Notably, the repercussions extend beyond India’s borders. Pratt & Whitney’s GTF engine problem has triggered a domino effect, impacting airlines globally. Air New Zealand, JetBlue, Cebu Pacific, Viva Aerobus, Volaris, IndiGo, All Nippon Airways, and over 40 other carriers and lessors have grappled with significant disruptions. This has led to the grounding and inspection of Airbus A320 fleets worldwide, with potentially thousands of engines affected globally. 

The collateral damage of P&W’s engine issues stretches far beyond individual airlines, affecting the interconnected web of global aviation. The Go First-P&W case serves as a microcosm, illustrating the wider ramifications of contractual breaches on the industry’s stability and the collective well-being of nations. As the aviation sector grapples with the fallout, it becomes imperative for stakeholders to not only address the immediate challenges but also fortify the foundations of international commerce to prevent similar crises in the future.

Vijay Kelkar, former finance secretary, Government of India and chairman, 13th Finance Commission of India. Views are personal.