In a big relief for embattled Go First, the beleaguered airline's lenders have granted approval for an interim funding of approximately Rs 400 crore, marking a key step in the ongoing efforts to keep the struggling airline afloat, at least three persons familiar with the development told Moneycontrol.
The Committee of Creditors (CoC) that include Central Bank of India , Bank of Baroda, Deutsche Bank and IDBI Bank on Saturday night approved the request for additional funding, the people quoted above said. Go First had knocked the lenders’ door for survival capital recently promising to get back to normalcy in operations at the earliest.
A top banker whose bank is part of the consortium told Moneycontrol that the lenders have approved around Rs 400 crore to Go First based on the business plan and to support revival of operations.
Also Read | MC Exclusive: Wadia Group approaches lenders for funds to restart Go First operations
“(Lenders have agreed for fresh funding) based on the business plan and to revive operations. The amount is around Rs 400 crore,” said the banker on strict condition of anonymity.
A second person aware of the development too confirmed this development.
" Yes, the committee of creditors have given the go ahead to the interim finance request following a voting process which took place on Saturday," the person said. He too declined to be named.
A third person, who too spoke on condition of anonymity, told Moneycontrol , " For now, the amount approved is around Rs 400 crore to 450 crore, and lenders may be open to additional contingency funding as and when required later for specific events."
Go First owes Rs 6,521 crores to its lenders. Central Bank of India had the highest exposure of Rs 1,987 crore, followed by Bank of Baroda at Rs 1,430 crore, Deutsche Bank at Rs 1,320 crore and IDBI Bank at Rs 58 crore, Acuite Ratings and Research said in a January 19 report.
Ball now in DGCA’s court
With lenders extending a helping hand, all eyes are now on the Director General of Civil Aviation or DGCA which is currently examining an application submitted by the airline to get back in business. "All eyes are now on DGCA which is likely to take a call on clearance following inspection of fleet and other checks. The hope is to start flying as soon as possible," the second person said.
Go First needs the aviation regulator's nod to kickstart operations and sell tickets. The former plans to start operations on July 1 across 78 routes using around 22 aircraft, sources added. Moneycontrol could not elicit an immediate comment from Go First's resolution professional Shailendra Ajmera of EY and the committee of creditors. This article will be updated as soon as we hear from all the parties.
Also Read | How did IndiGo grab the market share left by Go First
Earlier this week, Ajmera backed by EY had submitted a business plan with a request for over Rs 400 crores to restart operations.
How the crisis unfolded
On May 2, Go First announced that it has filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT), Delhi.
The announcement was made by the airline’s CEO Kaushik Khona shortly after the Wadia Group-owned carrier said it will temporarily suspend flight operations on May 3 and 4 due to a "severe fund crunch".
The low-cost carrier had said its financial crisis was sparked by "faulty" Pratt & Whitney engines that grounded about half its 54 Airbus A320neos. The US engine maker, a part of Raytheon Technologies, has called the claims without evidence.
Explaining why it is facing a fund crunch, Khona told news agency PTI that the airline has grounded 28 planes, which is more than half of its fleet, due to the non supply of engines by Pratt and Whitney.(P&W).
Also Read | 'Severe fund crunch': Go First files for voluntary insolvency resolution before NCLT
GoFirst is the latest Indian airline that is facing a crisis-situation in the highly competitive airline business. In the last decade, lenders had faced challenges with recovering money lent to airlines like Vijay Mallya-promoted Kingfisher and Jet Airways following operational failures.
While in the case of Kingfisher, lenders have recovered a significant part of the money by attaching the assets of promoter Mallya, bid to save Jet Airways is currently on at the bankruptcy court. Recently, the NCLT permitted more time to bidders of Jet airways to pay their dues.
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