No-frills carrier Go First stopped fresh bookings for its flights till May 15, even as it pressed on Wednesday for an urgent hearing of its insolvency application. The National Company Law Tribunal (NCLT) will hear the plea on Thursday.
The airline’s decision to voluntarily declare insolvency caught its lenders off guard and senior bankers got into a huddle on Wednesday to plan the next course of action. A lender on condition of anonymity said that the meeting was inconclusive and would continue on Thursday.
The lenders on Wednesday discussed the issue of limited communication from the airline on “such a crucial decision (going for insolvency resolution)”. It is premature, the source said, to decide on invoking collaterals and guarantees provided by the promoters/company for the loans taken from banks.
In its insolvency plea, accessed by Reuters, Go First said it owed its financial creditors Rs 6,521 crore ($798 million). It said it had not defaulted on any of these dues. However, considering the present situation of the airline, defaults to banks would be imminent, it said.
Go First Chief Executive Officer Kaushik Khona told CNBC earlier in the day that “for the flights scheduled between (May) 6 and (May) 15, we have stopped further bookings. We are ready to start operations as soon as a moratorium is available and as soon as the matter is admitted in the National Company Law Tribunal (NCLT).”
The move to limit possible passenger inconvenience came as lessors initiated steps to secure their planes. At least two US-based lessors have applied to the Directorate General of Civil Aviation (DGCA) to deregister three Airbus A320 aircraft leased to Go First.
Lessors are also issuing notices terminating the leases because the airline has been struggling to pay them. On Wednesday, Go First’s lawyers asked the NCLT Bench to admit its application, appoint a resolution professional, and declare a moratorium with a view to protecting the company’s assets.
The airline was served show-cause notice by the civil aviation regulator for cancelling flights without intimation. Till late evening there was no update from the DGCA on the airline’s response and its regulatory action.
The airline’s liabilities to all creditors stand at Rs 11,463 crore. These include its dues to banks, other financial institutions, vendors, aircraft lessors.
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The company has defaulted on payments to operational creditors, including Rs 1,202 crore to vendors and Rs 2,660 crore to aircraft lessors. Lessors have also served notices on terminating lease agreements and six of them have invoked letters of credit issued to them by the airline’s lenders, the application said.
The company has defaulted on payments to operational creditors, including Rs 1,202 crore to vendors and Rs 2,660 crore to aircraft lessors. Lessors have also served notices on terminating lease agreements and six of them have invoked letters of credit issued to them by the airline’s lenders, the application said.
Khona told mediapersons the promoters, the Wadia group, remained committed to the airline, having pumped into it Rs 3,200 crore in the past three years.
Following the sudden cancellation of flights by the airline, spot airfares on Go First’s top routes, which include Delhi-Srinagar, Mumbai-Goa and Delhi-Leh, have increased by up to 43 per cent.
Meanwhile, employees are hoping that the airline will fly out of the crisis with government support. Some, however, are already scouting for work. For instance, some Go First pilots have joined airlines in West Asia in recent weeks and others have approached IndiGo and Air India.
The airline has squarely blamed engine maker Pratt & Whitney for forcing it to take the drastic step and accused it of not honouring the arbitral award to supply engines. The order had directed the engine maker to immediately release 10 serviceable spare leased engines by April 27 and 10 such engines every month till December, Go First had said on Tuesday.
The engine maker in turn said Go First had a lengthy history of missing its financial obligations to it.
“Pratt & Whitney is committed to the success of our airline customers, and we continue to prioritize delivery schedules for all customers. P&W is complying with the March 2023 arbitration ruling related to Go First. As this is now a matter of litigation, we will not comment further,” it said in a statement.
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