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Bombay Burmah Trading Corporation has said it has made a provision of Rs 1,865.66 crore in respect of its investments made in Go First and other related financial obligations.
In a statement shared with stock exchanges, Bombay Burmah Trading Corporation (BBTCL) reported a consolidated total income of Rs 17,079 crore and net loss of Rs 533 crore for the year ended March 31, 2023. The reported loss is after making the provision, it added.
The Bombay Burmah Trading Corporation (BBTCL) is an Indian trading company based in Mumbai owned by the Wadia Group. It was formed in 1863 by the Wallace Brothers of Scotland.
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BBTCL, as an investment Company, has over the years made several investments across diverse businesses and geographies, to further its shareholders' value.
During fiscal 2022-23, the investment value of BBTCL grew by approximately Rs 13,000 crore. BBTCL said it identified airline business as a potential growth area particularly in the low-cost segment, given the rising personal income and the preference for time-saving airline travel in a large country like India and therefore has been making investments in GoAir Airlines, which operates Go First, since 2005.
The airline performance was at par with its competitors for several years till the onset of Covid, according to the statement from BBTCL. Even in FY 2021-22, the financial performance indicators of GoAir were better than that of its peers.
As part of its growth and expansion, GoAir said it opted to purchase 72 Airbus aircraft powered by Pratt and Whitney (P&W) New Engine which promised substantial fuel saving and reliability.
"Unfortunately, the engines supplied were not up to the required standards, warranting substantial maintenance and leading to grounding of aircraft," BBTCL said, adding, "Recognising this, P and W (subsidiary of the well-known Raytheon Corporation of US), provided the required services including compensation for the grounded aircraft up to March 2020."
BBTCL said, "However, they failed to provide spare engines and wrongly demanded substantial payments for the repair of the defective engines, thereafter."
It added, "This resulted in 31 per cent to 57 per cent of GOAir fleet being grounded between 2020 and 2023, adversely impacting the financial position of GoAir. As a consequence of this, the revenue of Go Air shrank to 50 pc levels while the costs of the company remained at 100 pc levels."
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