Wadia group-owned Go First on Tuesday said it has filed for insolvency resolution and can no longer continue to meet financial obligations, blaming US company Pratt & Whitney’s “faulty engines” for grounding of 50% of its fleet.
The airline has filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT), CEO Kaushik Khona had said.
With the cash-strapped budget carrier filing for bankruptcy, major lenders including Bank of Baroda, Axis Bank, IDBI Bank were trading with deep cuts on Dalal Street as experts said that the recovery may not be exceeding anywhere about 25-30% that the Wadia Group company owes.
Go First, which filed for bankruptcy on Tuesday, owes financial creditors Rs 6,521 crore ($798 million), its bankruptcy filing showed. The filing lists Central Bank of India Ltd, Bank of Baroda Ltd, IDBI Bank Ltd, Axis Bank Ltd and Deutsche Bank among Go First’s financial creditors.
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The Central Bank of India and Bank of Baroda have an exposure of Rs 1,300 crore, respectively under a consortium loan, while IDBI Bank has a smaller exposure of Rs 50 crore, the filing showed.An official at Central Bank of India said the bank’s total exposure to the airline is Rs 2,000 crore. In the case of Axis Bank, the airline has a letter of sanction of credit, the filing said, without specifying whether this credit has been availed.The airline has indicated the insolvency plea is not to sell the airline and there is no question of promoter Wadia group exiting the airline. Along with fears of banks taking a hit, thousands of jobs are also on the line.
“We are doing everything possible to navigate the situation with utmost care, concern for all employees, Khona told Reuters.
Khona today informed employees the airline has been crippled by recurring Pratt & Whitney engine troubles and with depleted fleet size, Go First is unable to generate revenue for payment of lessors, PTI reported. Khona also said lessors are taking coercive steps.