Go First planes, slots, bilateral rights at stake; NCLT ruling to be key factor

GoFirst

As Go First suspended operations starting May 3, IndiGo added flights on key sectors and Vistara deployed one of its widebody aircraft on the Delhi-Mumbai- Delhi sector, bringing back memories of early April 2019.

Jet Airways was then shrinking rapidly and grounding planes. Vistara made the first move and upped flights between Mumbai and Bengaluru. Within days, Jet Airways shut down and there was a sudden availability of slots across airports, especially at the most sought after airports at Mumbai and Delhi.

As reports appear of IndiGo and the Tata Group likely to swoop in on aircraft originally meant for Go First, the National Company Law Tribunal order later on May 10 will be most important in the saga that has been unfolding since early this month.

What could happen?

The NCLT could place a moratorium on lessors from taking back their aircraft. This will jeopardise the multiple requests filed with the regulator to deregister their leased aircraft. The lessors could challenge the order or look for ways to amicably take back their aircraft.

If there is no moratorium and the case drags on, the planes will be deregistered after due process.

Either way, the prime question shifts from physical assets to intangible ones like airport slots. Go First had a significant presence at Srinagar, Leh, Mumbai, Chandigarh and Pune. All these airports are highly slot-constrained and controlled, giving a window of opportunity to the competition to add capacity.

Slots at congested airports are prized possessions and while India does not allow trading of slots, a prime slot helps with valuation as well as making money while operating.

Temporary or permanent?

Airport operators make money with additional aircraft movements. With Go First grounded, passenger numbers have dropped and there is uncertainty over the payment of parking fees of grounded planes. In this situation, airport operators would be keen to let other airlines add capacity.

The question that remains then is how? Will the Jet Airways formula be used? The slots held by Jet Airways were distributed to airlines by linking them to the additional capacity being inducted. This led to a chain of events where pilots and crew found work, passengers got flights, and airports saw business again. SpiceJet was the biggest beneficiary and this led to Vistara inducting 737s.

All along, the courts were told that the allocation was temporary, or so it seemed. When it was time to restart Jet Airways, the slots were all gone, without anyone knowing how the temporary allocation became permanent. This took away the most important intangible asset.
Who would benefit?

Supply chains are stretched and getting an airplane at short notice will be difficult. Getting pilots could be easier, even as Go First insists that its employees serve their notice period.

Boeing is battling a challenge with the MAX, which has led to all aircraft at its factory being rechecked. Airbus has caught up partially but without engines, there is little that can be done.

Engines? Well, that’s where the Go First saga began.

Go First operated about 25 aircraft when it went down and if IndiGo manages to operationalise its grounded aircraft to some extent, it should be able to lap up the demand effectively. There is no information on when IndiGo expects Pratt & Whitney to provide its engines.

All eyes on NCLT

Had the Jet Airways relaunch been successful, the expected May 10 judgement would have been looked at differently, but the Jet saga has continued.

This could have been the best time for Jet Airways to start and reclaim its past glory or at least inch towards it because slots are available at key airports.

International, anyone?

Go First completed five years of operations 12 years ago, yet it did not have 20 planes, mandated to fly overseas. When it did satisfy the rule, it went around slowly. This is contradictory to how airlines have wanted to fly international.

The airline holds some very important rights – those to Singapore and Dubai, which are in short supply. As Air India looks to expand, Akasa Air intends to start international flights and IndiGo wants to fortify its fort – these could be the most prized possessions.

What turn would the ministry and regulator take? It will depend on the NCLT judgement.