NCLT admits Go First insolvency application; gets protection against recovery from lessors
The Delhi bench of National Company Law Tribunal (NCLT) on 10 May 2023 admitted the insolvency petition filed by Go Airlines India ltd (Go First) under Section 10 of the Insolvency and Bankruptcy Code (IBC).
With the admission of the insolvency plea, the airline gets automatic protection under a moratorium from recovery by lessors and lenders. It must be recalled that the airline had made urgent plea with the NCLT to give protection against lessors taking back 42 of its planes.
Abhilash Lal of Alvarez and Marsal has been appointed as the interim resolution professional. The NCLT has directed the suspended board of directors of Go First have been directed to cooperate with the interim resolution professional and ensure that there are no layoffs. Furthermore, the airline’s management has been asked to deposit ₹5 crores with the IRP to cover immediate expenses.
Go First’s CEO, Kaushik Khona, stated that NCLT’s decision was a historic judgment in terms of the pace of proceedings, and it would ensure the airline remains viable since it still operates 27 aircraft. According to Khona, the moratorium order from NCLT will prevent lessors from repossessing aircraft. However, due to operational reasons, Go First has announced that its flights will remain cancelled until May 19.
Go First filed for voluntary insolvency proceedings last week, attributing the grounding of about half its 54 Airbus A320neo planes to faulty Pratt & Whitney engines. The order from NCLT is favorable for the Wadia family promoted airline since aircraft lessors are trying to take back their planes. As per the latest figures, various lessors have reached out to aviation regulator DGCA for the deregistration of 42 planes.
Go First owes financial creditors Rs 6,521 crore. The filing lists Central Bank of India Ltd, Bank of Baroda Ltd, IDBI Bank Ltd, Axis Bank Ltd, and Deutsche Bank among its financial creditors. The airline also owes Rs 2,660 crore to lessors. In its filing with NCLT, the airline says that as on date it has a total of 54 Air Crafts, which are its main assets. Out of these, 28 are grounded due to the non-supply of engines by P&W, and the remaining 26 are operational.
The airline claims that its promoters have invested approximately Rs 6,500 crores since its inception, with Rs 3,200 crores in the last three years, Rs 2,400 crores in the last 24 months, and Rs 290 crores in April 2023 alone. The grounding of nearly 50% of its A320neo fleet has resulted in lost revenues and additional expenses of Rs 10,800 crores for the airline.
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