This Article is From May 10, 2023

Go First Gets Insolvency Cover, Lessors' Efforts To Repossess Aircraft Hit

Go First: A two-member bench appointed Abhliash Lal as interim resolution professional (IRP) to run the debt-ridden company.

Go First: The NCLT ordered that the company be kept functioning and no employees be laid off.

New Delhi: In a major relief for the struggling budget airline Go First, the National Company Law Tribunal (NCLT) today admitted its voluntary plea to initiate an insolvency resolution process, which is aimed at restructuring debt and liabilities.

Here's your 10-point cheatsheet to this big story:

  1. Calling the order a "perfect example" in the context of reviving a viable business before it becomes unviable, Go First CEO Kaushik Khona told news agency PTI that it was "historic". The crucial decision comes at a time when foreign lessors, including major global names such as Jackson Square Aviation, SMBC Aviation Capital, and CDB Aviation's GY Aviation Leasing, are trying to repossess 40 Go First planes over missed rental payments. Any such recoveries are prohibited once bankruptcy proceedings are initiated for a company.

  2. A two-member bench appointed Abhliash Lal of Alvarez & Marsal as interim resolution professional, who will take over management of the airline with immediate effect. This is the first time an Indian airline has voluntarily sought bankruptcy protection to renegotiate its contracts and debts.

  3. The NCLT ordered that the company be kept functioning and none of its 7,000 employees be laid off.

  4. It has also put the company under the protection of a moratorium and directed the suspended board of directors to assist the IRP in running the company during insolvency proceedings.

  5. The low-cost carrier, which until recently was India's fourth-largest airline by passengers flown, filed for bankruptcy protection, blaming "faulty" Pratt & Whitney engines for the grounding of about half its 54 Airbus A320neos. The US engine maker, part of Raytheon Technologies, has called the claims without evidence.

  6. On May 4, the NCLT reserved its order after hearing the Wadia group-owned carrier and its aircraft lessors who have opposed the petition seeking interim protection, contending that it would have "harmful and serious consequences".

  7. Aviation regulator DGCA had on Monday issued a show cause notice to the troubled budget carrier "for their failure to continue the operation of the service in a safe, efficient and reliable manner", and directed it to immediately stop bookings and sale of tickets directly or indirectly till further orders.

  8. The airline operator has been asked to submit their reply within 15 days of the receipt of this notice, based on which a decision on the continuation of their Air Operators Certificate (AOC) will be taken.

  9. Earlier, the airline had suspended the sale of tickets till May 15, and has cancelled flights till May 19.

  10. The crisis underlines the fierce competition in a sector dominated by IndiGo and the recent merger of Air India and Vistara under the Tata conglomerate. If Go First collapses, it would follow other carriers Jet Airways, which went under in 2019 and Kingfisher, which failed in 2012.

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