GoFirst’s last stand: Understanding airline insolvency in India

Earlier this week, the National Company Law Tribunal (NCLT) extended the moratorium period on Go First’s dues and leased aircraft by another 60 days giving the grounded airline a final chance to get new owners. Go First has two suitors — a consortium of SpiceJet chief Ajay Singh and Busy Bee Airways and Sharjah-based Sky One — who have shown interest in the airline.

Go First was grounded last May due to financial troubles. Shortly before the crisis hit the 18-year-old airline, it was operating a pared-down fleet of 26 aircraft (of the total 54 aircraft it owned), while the remaining 30 were grounded due to Pratt & Whitney (PW) engine issues. The airline had a market share of 6% on March 23 before it was grounded.

Go First’s insolvency set a precedent in India’s Insolvency and Bankruptcy Code (IBC), where the company itself filed for insolvency in May last year saying it was not able to operate due to lack of plane engines. India’s bankruptcy code does not have provisions for a company to file for insolvency but allows lenders and vendors who have not been paid by the company, to file for insolvency. The company had said that a large number of aircraft were grounded due to want of Pratt&Whitney engines, which were not available due to supply chain issues impacting the engine’s availability.

Under the law, Go First was allowed a moratorium extension for 330 days, which the company completed on April 4. Another 60-day extension follows the Resolution Professional’s update to the court that the company has received bids from two interested parties and the plans are under consideration and nearing conclusion. This is likely to be the final chance for the airline to be able to restart the airline.

Go First has received two revival bids so far: one from SpiceJet chairman and managing director Ajay Singh jointly with Busy Bee Aviation Private Limited, which is promoted by Easemytrip.com co-founder Nishant Pitti. The other bid is from the Sharjah-based aviation company Sky One, which specialises in various aviation services, including Cargo Charters, Asset Trading, Pilot Training, Maintenance, Repair, and Overhaul (MRO). The bids are yet to be opened.

Among the two bidders, Singh and Pitti have plans to leverage SpiceJet’s operational expertise to relaunch Go First. The company that makes a better offer in terms of repaying debt and vendor payments and an operational plan to the lenders is likely to get the rights to run the airline.
In case neither is selected, the airline will be liquidated and the assets available will be sold to repay debt and to other vendors. Among the assets, the banks have a parcel of prime land in Thane as collateral against loans, which may be sold to repay lenders.

Go First is the second airline in India that is going through an insolvency process — the first airline was Jet Airways, which is still stuck in various courts despite finding a suitor for the airline. Jet’s insolvency is stuck due to differences in some payments between banks and the selected owners, Jalan Kalrock Consortium.
Experts say insolvencies and buyouts have been far more successful before the NCLT and IBC were formed.
“Airline mergers and buyouts in India have mostly been in the backdrop of an airline going into a distress sale. We have seen that with Deccan being sold to Kingfisher and Sahara moving into Jet Airways. One of the most successful airline buyouts in Indian aviation history was the court-led buyout and takeover of Damania Airways by NEPC-Khemka group back in 1996,” said Mark Martin, CEO at Martin Consulting, an aviation consultancy firm.
I am a principal correspondent with the national political bureau of the Hindustan Times. I track the aviation and railways ministry. I also write on travel trends. I cover the beats at the national level for the newspaper. Before being in Delhi, I have worked as a journalist in Mumbai as well. My hobbies include trekking and travelling. …view detail