Lenders to the insolvent Go First will likely meet Monday to assess an earlier fund-infusion plan into the grounded carrier saddled with about INR 6,500 crore of overdue payments, with regulatory approval to lessors to repossess leased aircraft making it unviable for bankers to commit fresh money to the first case of voluntary bankruptcy in Indian aviation.
The Directorate General of Civil Aviation (DGCA) told the Dehi High in an affidavit that the recent order exempting aviation leases from bankruptcy moratorium should apply even to companies undergoing insolvency proceedings. That drastically reduces the chances of the airline’s revival, resulting in a potential loss of INR 6,500 crore to creditors.
Bankers said permission to lessors to take back the aircraft, if executed, will make it impossible to revive the airline that shut operations early May.
“It looks like it is all over for Go First,” said a person involved in its resolution. “It has been too long and now with this stand taken by DGCA, it will be very difficult to restart operations since the planes will most likely be flown away. Although lenders will stick to their stand that this new law cannot be applied retrospectively, the sheer time wasted in court hearings will make a resolution almost impossible” the person said.
Central Bank of India and Bank of Baroda are the top two creditors for the airline with INR 1,987 crore and INR 1,430 crore of dues, respectively.
Although DGCA’s affidavit says the notification exempting aviation leases from moratorium should apply to Go First, it has put the onus on the High Court to decide on how to deal with the case.
Banks have been opposing aircraft and engine lessors of the defunct airline on grounds that a bankruptcy moratorium does not allow lessors from taking charge of any assets undergoing resolution.
“The call taken by DGCA is in line with international law and the Cape Town convention. But for banks, it looks like a lost cause,” said Bishwajit Dubey, counsel Supreme Court of India and an expert on bankruptcy laws. “They can indeed challenge it in the High Court and may also be favoured in the NCLT, which is also hearing this case but there is no doubt that this is a major setback for this resolution.”Last month ET reported that Jindal Steel and Power promoter Naveen Jindal is the only expression of interest (EoI) to qualify as a bidder for Go First. Two other likely bidders could not meet the financial parameters set by lenders.
Bankers said if the planes do not remain with the airline, there is no way the company can survive as potential bidders have nothing to build on.
“Lending to an aviation company is risky because the main assets of any airline are mostly leased and not owned by the company. This risk has manifested previously with Kingfisher and Jet Airways and now Go First. It looks like Go First is headed to liquidation,” said a second person involved in the resolution.