AWG’s warning to India is to influence NCLAT ahead of hearing: Wadia Group

Mumbai (Maharashtra) [India], May 15 (ANI): The recent action of issuing a “watch list notice” by AWG (Aviation Working Group) is laced with double standards, a spokesperson with the Wadia Group which owns the struggling airline Go First, said on Sunday.

AWG should focus on ensuring that its own members abide by international arbitration awards rather than issuing threatening watch list notices to India and quoting the Cape Town Convention (CTC) to influence the proceedings currently being heard in the National Company Law Appellate Tribunal (NCLAT), the Wadia Group spokesperson said further.
The Wadia Group spokesperson also advised the AWG to first address the root cause by advising Pratt & Whitney to comply with the law and abide by the award issued by the emergency arbitrator appointed in accordance with the 2016 Arbitration Rules of the Singapore International Arbitration Centre (SIAC) to which, Pratt and Whitney voluntarily submitted themselves.

The membership of AWG constitutes companies like Airbus, Boeing, Pratt & Whitney, SMBC Aviation and other OEMs and lessors.

Two awards issued by the international arbitrator directed Pratt & Whitney to take all reasonable steps to release and dispatch without delay to Go First at least 10 serviceable spare leased engines by 27 April 2023 and a further 10 spare leased engines per month until December 2023, with the objective of Go First returning to full operations and achieving GoFirst’s financial rehabilitation and survival.

Go First received no engines as Pratt & Whitney has chosen to frustrate the execution of the order. Pratt & Whitney, in essence, has abused international conventions and contractual obligations by refusing to comply with the ruling of the international arbitrator to which all reputable companies are bound, including AWG’s members.

“The Airbus NEO (new engine options) with P&W engines, sold on the plank of fuel efficiency failed leading to 100 aircraft currently lying idle in India and many more worldwide. The entire Indian aviation sector is hit due to sub-standard products supplied by the engine makers. P&W cannot wash their hands off their liabilities after supplying sub-standard engines which has led to huge losses for all airlines. 18 per cent of Indian aviation capacity is currently grounded due to non-supply of engines by P&W. The issue is rampant and several airlines across the world are severely affected by the engine failures by P&W and hence the claim by Go First of failure due to P&W engines has huge credence. Go First maintained profitability compared to the industry leader for approximately 5 years until COVID and beyond including in the year 221-22” Varun Berry, who was the chairman of Go First, said.

It is ironic and coincidental that this warning to India comes right after the adjournment of NCLAT hearing on 12th May and ahead of its continuation on Monday, May 15.

Commenting on the recent reports that Aviation Working Group, an association of aircraft lessors, engine makers and plane makers, has put India on the watch list.

Mark D Martin MRAeS, CEO of Martin Consulting, an aviation consulting firm based in Asia said “AWG has to be centered and not ‘lobby-influenced’; and be meticulous with substantiating its claim with facts and be clear. Turkish Airlines, United, Swiss Air, Air Baltic, ANA Japan, Hong Kong Express Airlines, Air Tanzania, Air Senegal and several others too have an A320NEO PW-GTF Lessor exposure and their actions might create a chain reaction with other airlines as the GoAir imbroglio is being watched closely. ‘Shooting from the hip’ on Go Air and the IBC Court order by AWG might turn out to be more damaging to lessors in non-India jurisdictions, than in India.”

“For clauses of the Cape Town to be invoked including article 11, there has to be substantiated evidence of the Lessee/Go Air defaulting on lease rental payments perpetually. The lessors had all the options to invoke the DGCA during the course of the last twelve months, and not wait uptill now. AWG needs to be unbiased, mature up and face facts, India is a tough leasing market, and aircraft leasing in Asia comes with extremely high rewards with risks” Said Mark D Martin MRAeS, CEO of Martin Consulting, an aviation consulting firm based in Asia,” he said further.

Martin Further added, what amazes me is with the Lessor Fraternity being so small and data sharing between them being porous, what stops lessors from cracking a “SpiceJet-ish” deal with Go Air? Nothing stops anyone, besides the market for nearly all A320 PW-GTF NEO’s at the moment is extremely fragile and precarious with airlines the world over opting out of the aircraft type for good; so it’s not as if there’s a piling demand for failing and breaking PW-GTF Airbus A320’s and lessors need to make the AWG their first port of call for lobbying; instead closer relationships need to be established with lessee’s and even more after extremely rough COVID Airline Lockdown.

Martin also said, “Practically and physically, Lessors can’t fly out their aircraft since that action would take another six to twelve months to enforce, or release Go Air aircraft to other airlines as there is already a long waiting list for PW-GTF engines with the priority being Lufthansa, Turkish Airlines, United, Swiss Air, Air Baltic, ANA Japan, Hong Kong Express Airlines, Air Tanzania, Air Senegal and several others before Go Air and IndGo get their turn. This will be a bitter pill to swallow for lessors, under the circumstances, it makes both strategic sense to stay locked with Go Air, till such time, the airline restarts and ensure that long-term storage checks are done on time and maintenance actions continue so as to now let the assets value erode”.

The health of the Indian aviation sector has been deeply affected by P&W’s faulty engines. Globally, 178 aircraft are grounded due to P&W engine issues out of which, an overwhelming 100 aircraft are grounded in India.

The Raytheon Group on the one hand talks about its commitment to making in India and India’s aviation industry. On the other hand, it is clearly treating India like a second-class market where Pratt & Whitney’s actions continue to do irreversible damage to Indian airline companies.

In spite of the Indian Government’s ask to P&W to set up an MRO (Maintenance, Repair and Operations) organization in India for the last 3 years, the engine maker has paid no heed.

At the time of admission into IBC, about 28 aircraft of GoFirst were on the ground as P&W could not supply engines and did not comply with the international arbitrator’s award. Apart from Go First, around 50 aircraft of Indigo and 20 aircraft (turboprop engines) of Spice Jet are also reportedly grounded as of date due to P&W’s faulty engines.