Turbulent times: Cash-strapped Go First cancels flights till May 9; aircraft lessors oppose airline's insolvency plea

DGCA had issued a show cause notice to the airline

Crisis-hit Go First's urgent plea seeking voluntary insolvency resolution proceedings faced vehement opposition from aircraft lessors on Thursday, while the National Company Law Tribunal (NCLT) reserved its order on a day when the carrier extended cancellation of all flights till May 9.

Amid passengers' concerns over their booked tickets, aviation regulator DGCA ordered the airline to process refunds under the prevailing regulations.

Go First, which has been flying for more than 17 years, has suspended the sale of tickets till May 15 and has told the watchdog it is working to refund or reschedule existing bookings for future dates.

In a reflection of turbulent times, lessors have sought the deregistration of 20 aircraft operated by Go First, as per the latest data from the Directorate General of Civil Aviation (DGCA).

As many as 28 planes or more than half of the airline's fleet are grounded due to the non-supply of engines by Pratt & Whitney (P&W).

With liabilities worth Rs 11,463 crore and a financial crunch, the Wadia group-owned airline has sought voluntary insolvency resolution proceedings as well as an interim moratorium on financial obligations.

On Thursday, a two-member NCLT bench comprising President Justice Ramalingam Sudhakar and Member L N Gupta heard the arguments for and against the petition for nearly four hours.

As aircraft lessors opposed the plea, the counsels for Go First said the petition was not a malicious one to avoid payment of dues to its creditors but to save the company.

The carrier has total liabilities of Rs 11,463 crore to all creditors, including a default of Rs 3,856 crore towards operational creditors. The dues towards aircraft lessors are Rs 2,600 crore.

During the hearing before the NCLT, the lessors submitted that the admission of the petition would have "harmful and serious consequences" as this is not the case for the "first-day first show relief to be granted".

The DGCA, on Tuesday, issued a show cause notice to the carrier for the sudden cancellation of flights, which was initially for May 3 and 4, and was later extended by another day to May 5. Now, flights have been cancelled till May 9.

After examining the reply filed by Go First to the show cause notice, the DGCA on Thursday said it has issued an order "under the prevailing regulations directing them to process the refunds to passengers as per the timelines specifically stipulated in the relevant regulation".

The regulator also said it is committed to minimising passenger inconvenience in view of the abrupt decision by Go First to suspend their scheduled operations without any prior intimation.

"We regret to inform that due to operational reasons, Go First flights scheduled till 9th May 2023 have been cancelled... A full refund will be issued to the original mode of payment shortly," the airline said in an update on its website.

In its petition filed before the NCLT, the budget airline has sought directions to restrain aircraft lessors from taking any recovery action as well as restrain the DGCA and suppliers of essential goods and services from initiating adverse actions.

Another request is that the DGCA, Airports Authority of India (AAI) and private airport operators should not cancel any departure and parking slots allotted to the company.

The airline also wants fuel suppliers to continue supply for aircraft operations and not terminate the present contractual arrangements.

The airline's net loss rose to Rs 3,600 crore last fiscal from Rs 1,807.8 crore in 2021-22. The net loss was Rs 1,346.72 crore in 2020-21.

Further, Go First in its petition has cited the example of Jet Airways, saying that lessors took swift re-possession of the planes leading to serious depletion of its asset value.

Jet Airways was pushed into Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code (IBC) in 2019. Jalan Kalrock Consortium emerged as the winning bidder under the process but the ownership transfer is yet to happen amid differences between the lenders and the consortium.