Go First-lessors row: Aviation Working Group downgrades India’s compliance outlook to ‘negative’ again

The aviation watchdog has reduced India's score on CTC compliance index from 63.5 to 50. Due to the low score, the country would continue to remain under the "watchlist" of AWG

Aviation Working Group (AWG) has reversed India's aircraft leasing compliance outlook to "negative" amid the ongoing row between the insolvency-hit Go First and its lessors, as per a notice issued by the UK-based global aviation watchdog on December 6.

The development comes around a month-and-a-half after AWG had upgraded India's rating to "positive" over the Centre's decision to exclude agreements inked under the Cape Town Convention (CTC) from the provisions of Insolvency and Bankruptcy Code (IBC).

"While the Moratorium Exclusion is a positive step, the continued lack

of clarity as to its applicability to the GoFirst insolvency proceedings and the lack of general CTC primacy leads to low confidence that CTC will be enforced in accordance with its terms without the adoption and implementation of express general CTC primacy legislation," AWG stated, adding that India's compliance outlook is being categorised as "negative".

The aviation body has further reduced India's score on CTC compliance index from 63.5 to 50. Due to the low score, the country would continue to remain under the "watchlist" of AWG.

Go First, reeling under acute financial distress, filed for insolvency on May 2 this year. The aircraft's lessors, who sought to terminate their agreement with the airline before it filed for insolvency, have moved the court seeking re-possession of their aircraft.

According to AWG, such lessors should have been returned the aircraft within 60 days after the insolvency plea was admitted. The notice stated that India's rating was being downgraded due to the failure to provide CTC remedies to the lessors after the CTC-mandated deadline for the re-possession of aircraft expired on July 10.

The prolonged failure to make remedies, including repossession and deregistration, available to creditors upon the expiry of the 60-day waiting period "negatively impact scoring" in the compliance index, AWG said, adding that "further reductions are possible, given ongoing events".