Go First Receives Extension in Legal Battle over Aircraft Control

NCLT defers hearing of Go First's insolvency plea to July 11, 2023, amid concerns over the airline's future. Delhi High Court orders deregistration of all 54 aircraft leased by Go First, effectively quashing hopes of revival.

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Aqsa Younas Rana
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Go First Receives Extension in Legal Battle over Aircraft Control

Go First Receives Extension in Legal Battle over Aircraft Control

The National Company Law Tribunal (NCLT) has deferred the hearing of Go First's insolvency plea to July 11, 2023, amid concerns over the airline's future. The decision comes after the Delhi High Court ordered the Directorate General of Civil Aviation (DGCA) to deregister all 54 aircraft leased by Go First in April, effectively quashing any hopes of a revival for the 20-year-old low-cost carrier.

Why this matters: The fate of Go First has significant implications for the Indian aviation industry, which is already facing intense competition and financial struggles. A potential collapse of the airline could lead to job losses, disruptions in air travel, and a ripple effect on the entire industry.

Go First, established in 2005 and formerly supported by the Wadia Group, filed for insolvency on May 2, 2023, and ceased operations the following day, attributing its financial troubles to faulty engines supplied by American aerospace manufacturer Pratt & Whitney. The airline's total liabilities to creditors amount to about ₹11,463 crore, including dues to banks, financial institutions, vendors, and aircraft lessors.

The DGCA deregistered all 54 aircraft in early May, following the Delhi High Court's order. Engine lessors, who had not approached the Delhi High Court for deregistration, urged NCLT to issue an urgent order as their engines are connected to the deregistered aircraft. Anandh Venkatramani, the lawyer for engine lessor Engine Lease and Finance (ELF), argued, "Some of the aircraft have leased engines and not their own and if the aircraft need to leave the country post deregistration, the engines also need to be deregistered."

On April 8, NCLT had granted Go First a 60-day extension to conclude its corporate insolvency resolution process, taking stakeholders' interests into account, which is valid until June 3. However, Go First's resolution professional declined to provide clarity on future steps following the Delhi High Court's ruling that left the airline with no aircraft.

The Ministry of Corporate Affairs issued a notification on October 4, 2023, exempting aircraft, aircraft engines, airframes, and helicopters from the Insolvency and Bankruptcy Code (IBC) moratorium. This exemption comes as a relief to Go First, allowing it to continue operations without being classified as a Non-Performing Asset (NPA) despite defaulting on payments to its lessors.

As the NCLT hearing has been deferred to July 11, 2023, engine lessors are left waiting to repossess their assets. With Go First's total liabilities amounting to approximately ₹11,463 crore and the airline reportedly owing its creditors over ₹6,200 crore, the future of the low-cost carrier remains uncertain. The exemption from the IBC moratorium provides a glimmer of hope for Go First to explore options for debt resolution and continue operations in the challenging Indian aviation industry.

Key Takeaways

  • NCLT defers Go First's insolvency hearing to July 11, 2023.
  • Delhi High Court orders deregistration of all 54 Go First aircraft.
  • Go First's total liabilities amount to ₹11,463 crore.
  • Airline's future uncertain, with exemption from IBC moratorium.
  • Engine lessors await repossession of assets, owed ₹6,200 crore.