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‘Wait & Watch’ After NCLT: The Future of Go First Airline Yet to Find a Landing

Even as NCLT's verdict of a 'new lease of life' is viewed as positive, the fight for Go First's revival continues.

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On Wednesday, the National Company Law Tribunal (NCLT) admitted Go First’s plea for insolvency and granted it protection under a moratorium from recoveries by lessors and lenders. NCLT also dismantled the airline’s board of directors and set in process a new mechanism for looking at giving Go First a new lease of life.

However, even though some are seeing this as a positive step for the airline’s revival, for others, it is a wait-and-watch situation for the time being as the fight for Go First’s revival actually begins now.

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NCLT Judgment Is a Small Step Amid a Slew of Issues

There are many reasons being attributed to NCLT’s judgment. According to Prantik Hazarika, Aviation Law Expert and Partner at Khaitan & Khaitan, the preservation of the assets, protection for the employees, and running the airline as a going concern was perhaps, NCLT’s main concern.

However, NCLT’s decision to admit an insolvency plea is a very small first step in Go First’s future as the airline is plagued by many problems, chief among which are finding an owner with deep pockets, figuring out how to deal with the faulty Pratt & Whitney engines on its aircraft, addressing staff concerns and figuring out how to retain the slots that it has at various airports for operating its flights.

The need of the hour now is to get either the original promoters, the Wadia group, or a new promoter to get in more funds to clear the dues that are pending against the airline. The Wadia’s who have pumped in close to Rs 6,500 crore in the airline since inception including Rs 3,200 crore in the last three years, of which Rs 2,400 crore was injected in the last 24 months, and Rs 290 crore in April 2023 alone.
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However, these funds were not enough for the airline to keep afloat. In its application to NCLT, Go First said that it started defaulting toward payments to vendors, and aircraft lessors and received notices from the lessors seeking payment, including from DAE (Ireland), SMBC Aviation Capital, and Yamuna Aviation Leasing, and on 28 April this year it was in default of payment of Rs 2,660 crore to aircraft lessors and Rs 1,202 crore to its vendors.

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Go First: The Way Forward

There have been media reports that some lessors have already approached the Directorate General of Civil Aviation (DGCA) to take back the aircraft that they leased to Go First. However, there is a question mark on this now. According to Hazarika as of now, the aircraft lessors will have to now wait with respect to the deregistration of the aircraft from the notation register of DGCA. Others feel that the lessors will "imminently file an appeal” against this ruling and will try their best to get their assets back at the earliest. Then there is Go First’s fleet. The airline has 54 aircraft but 28 of these were grounded due to the non-supply of engines by Pratt &Whitney.

The next major issue that Go First will have to address is how to deal with the faulty P&W engines on its aircraft. The airline had cited these faulty engines as the reason that it had been running losses and had to declare insolvency.

One option that Go First has for dealing with the faulty P&W engines is to go in for CFM engines for its aircraft instead. This is something which Air India and IndiGo have done earlier. However, this will mean spending more money as besides paying the current outstanding new contracts for these engines will also have to be confirmed.

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Ajay Monga, Partner, SNG & Partners says that unless a prospective takeover happens, the lenders may not be willing to increase their exposure in the struggling airline. Even for any interested party to bid as a resolution applicant, the replacement of engines by P&W remains a key factor as the grounded aircraft need to become operational and airborne, for the revival of the company. Therefore, at this stage, there are too many strings that need to be tied to bring the airline back to its feet.

After this comes Go First’s employees. What happens to them after the NCLT order? As per the NCLT order, “The Interim Resolution Professional also shall ensure that the retrenchment of employees is not resorted to as a matter of course.”

However, there have been media reports that many pilots have already approached other airlines like Air India and IndiGo for jobs.

What complicates this problem is that the individual contracts of those who are opting for leaving Go First will need to be seen to ensure that their leaving is as per the law.

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The Uncertain Fate of Go First Revival

DGCA has mandated that any person leaving employment has to serve out a notice period. Opinion on this is divided. While some lawyers maintain that those who resigned before the NCLT decision will be free to leave after serving their notice period, others maintain that this is a grey area which needs to be explored further.

What the other airlines will be watching carefully is the slots that Go First has (permission for taking off and landing at a particular airport) and for how long they will remain protected. If the process of reviving Go First is a long and winding one then the other airlines could very well argue that by not being allowed to operate on slots held by Go First is leading to a shortage of flights and therefore, an increase in demand and this is not fair to the travelling public.
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In the middle of all these problems the only thing that is clear is that solutions have to be found because the more the airline remains grounded more the losses will keep mounting as it is only aircraft which are flying that can generate money to keep the airline afloat.

(Ashwini Phadnis is a senior Delhi based journalist. This is an opinion article and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)

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Topics:  Aviation   Airlines   NCLT 

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