National Company Law Tribunal’s principal bench has recently reserved its decision on Go First’s petition to commence voluntary insolvency proceedings and an interim moratorium, preventing the seizure of 26 aircraft with serviceable engines. Go First, the brand name of Go Airlines Ltd, voluntarily filed for insolvency at the NCLT on 2 May after suspending flights from 3-4 May. Following this, the airline extended the suspension of flights until 9 May and stopped bookings until 15 May.
During the three-hour hearing, the NCLT bench heard arguments from the airline’s counsel that the company suffered significant losses due to persistent issues with Pratt & Whitney’s engines, which power over 90% of Go First’s fleet. The airline sought an interim moratorium to prevent creditors from demanding money. However, the bench stated that there is no provision for an interim moratorium and that the moratorium is a consequential effect of admission.
The court will make the final decision in the case, and it may initiate the corporate insolvency resolution process. However, Go Airlines’ recent arbitration win, support from land assets, and government guarantees may work in its favor, according to Sonam Chandwani, Managing Partner of KS Legal & Associates.
If the court approves Go Airlines’ request for voluntary insolvency, the lenders may collaborate with the airline to restructure their debts and operations in a financially feasible manner, including debt rescheduling and equity swaps.
The airline’s financial position has been affected by the outbreak of the COVID pandemic and the grounding of 30-50% of its fleet due to unserviceable engines by Pratt & Whitney. As a result, it reported a net loss of ₹1,346.72 crore in 2020-21 and a net loss of ₹1,807.8 crore in 2021-22. The airline predicts a provisional loss of ₹3,600 crore in 2022-23, according to its filing before the court.
About GoFirst:
Go First, previously known as GoAir, was a Mumbai-based Indian ultra-low-cost airline that was under the ownership of the Wadia Group, a prominent Indian business conglomerate. At the time of October 2017, the airline held an 8.4% passenger market share, making it the fifth-largest airline in India.
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