NCLT Accepts Go First’s Voluntary Insolvency Petition

On Wednesday, Go First’s voluntary insolvency application was accepted by India’s bankruptcy court, which appointed Abhilash Lal as the interim resolution professional responsible for managing Go First. In addition, the National Company Law Tribunal (NCLT) instructed the interim resolution professional to ensure Go First continues its operations and not to terminate any employees.

Go First made an announcement stating the cancellation of all flights until May 19 due to ‘operational reasons’.

The budget airline had filed for insolvency resolution on May 2, with outstanding debts amounting to Rs 6,521 crore owed to financial creditors, including several Indian banks.

While this step aims to revive the fourth-largest carrier in the country, it complicates matters for foreign lessors attempting to reclaim their aircraft.

On May 2, Go First, owned by the Wadia group, disclosed its filing for insolvency resolution, citing an inability to fulfill financial obligations. The airline attributed the grounding of 50% of its fleet to the “faulty engines” from the US-based company Pratt & Whitney.

Seeking urgent resolution, the troubled airline approached the National Company Law Tribunal earlier in the week, requesting a temporary moratorium. During an oral application on Monday, the company’s legal representative argued that aircraft lessors were taking steps to repossess planes in the absence of a court order.

Go Airlines

According to a report in ET, aircraft leasing companies that have previously leased planes to Go Airlines are now approaching its competitors IndiGo, Air India, and Vistara, offering attractive rates for the aircraft. Bloomberg, citing unnamed sources, also reported that Tata Group and IndiGo are separately engaged in negotiations with Go First’s lessors. They are also discussing landing and parking slots with airport operators. The lessors, as indicated in filings with India’s aviation regulator, are seeking to repossess 36 aircraft.

Last week, during the tribunal hearing, the low-cost airline requested the imposition of an interim moratorium, pending the final order. Go First argued that losing possession of the aircraft and the legal right to operate them would jeopardize the continuation of their business. They emphasized that their intention is to undergo a comprehensive debt restructuring and not to maliciously evade payment of dues.

However, the aircraft lessors opposed this move, expressing serious objections to the request for a moratorium. They argued that such an action would have harmful and far-reaching consequences.

Go First, in its bankruptcy filing, disclosed that it has a total debt of Rs 11,463 crore owed to various creditors, including banks, financial institutions, vendors, and aircraft lessors. Among Go First’s financial creditors are the Bank of Baroda, IDBI Bank, Central Bank of India, and Deutsche Bank.

As part of a consortium loan, the Central Bank of India and Bank of Baroda have a combined exposure of Rs 1,300 crore, as stated in the filing. IDBI Bank has a smaller exposure of Rs 50 crore. A spokesperson from the Central Bank of India confirmed that the bank’s overall exposure to the airline amounts to Rs 2,000 crore.

However, Axis Bank issued a statement to the stock exchanges clarifying that it has no outstanding exposure to Go First.

Go First and DGCA

In the meantime, Deputy Aviation Minister VK Singh stated on Tuesday that the Indian government is unlikely to provide a bailout to Go First unless the issue of engine supply is resolved.

The collapse of Go First represents the first major airline failure in India since Jet Airways filed for bankruptcy in 2019. The Directorate General of Civil Aviation (DGCA), the Indian aviation regulator, has instructed the airline to cease ticket sales until further notice.

Go First, an airline that has been operating for over 17 years, previously halted ticket sales until May 15.

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