NCLT To Decide On Go First's Bankruptcy Plea Today

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NCLT To Decide On Go First’s Bankruptcy Plea Today

| Updated: May 10, 2023 12:00

Go Airlines (India) Ltd, the country’s fourth-largest carrier and its 7,000 employees is set to be decided on Wednesday, in a bankruptcy plea ruling that will also have major implications for foreign lessors trying to repossess planes.

The low-cost carrier, rebranded as Go First, attributed its financial crisis to faulty Pratt & Whitney engines, which grounded half of its 54 Airbus A320neos. However, the engine maker has denied the claims without evidence.

If the tribunal accepts Go First’s plea, a new resolution professional will oversee the airline’s management to revive the company, run by the Wadia Group. The decision is expected at 10:30 am. (0500 GMT), with Go First widely anticipated to succeed. It is the first time an Indian airline has voluntarily sought bankruptcy protection to renegotiate its contracts and debts.

The unprecedented move may complicate the repossession efforts of lessors who recently requested the return of approximately 40 Go First planes due to missed rental payments. The law prohibits such recoveries once a company initiates bankruptcy proceedings, creating a significant roadblock for the lessors. 

Although India joined the Cape Town Convention to make it easier for lessors to take back planes if airlines default on payments, the lack of legislation to enforce the treaty means the bankruptcy law will supersede lessors’ repossession requests.

Industry sources who are advising some lessors express major concerns that Go First’s bankruptcy could lead to extended litigation to assert their rights to repossess planes. They are also worried about getting their assets stuck in the country without clarity on repossession, which could lead to higher lease rates for airlines in the future. 

The grounding of Go First, with a nearly 8% market share in the world’s third-largest aviation market, comes as Prime Minister Narendra Modi promotes the country’s emergence as an aviation powerhouse.

Some lessors are already in talks with IndiGo and Air India to take over Go First’s planes. 

However, it is uncertain how Wednesday’s tribunal decision will impact such negotiations. If Go First collapses, it will follow carriers like Jet Airways, which went under in 2019 and Kingfisher, which failed in 2012.

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