MC Exclusive: Go First lenders closer to agreeing on liquidation; eye up to Rs 3,000 crore from asset sales

The Wadia Group airline stopped flying on May 2, 2023, and the National Company Law Tribunal (NCLT) had admitted its plea for voluntary insolvency eight days later.

Lenders to troubled domestic carrier Go First, founded by billionaire Nusli Wadia, may soon clear a proposal to liquidate the company, which has failed to meet multiple deadlines to resolve its ongoing debt crisis, people familiar with the development told Moneycontrol.

Go First is likely to see its lenders vote on a proposal to liquidate the insolvent airline as early as this week, the people quoted above told Moneycontrol.

They include bankers and airline officials. None of them wanted to be named, citing the sensitivity of the matter.

GoFirst owes Rs 6,521 crore to lenders, including Bank of Baroda, Central Bank of India, Deutsche Bank and IDBI Bank, according to the information provided by the airline. 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.

Also read: Go First asked to submit flight schedule after signing new agreements with aircraft lessors

Bankers ring the death knell

A top banker from one of the lenders said that the liquidation of Go First Airlines is not far. “The resolution for not extending the timeline for submission of the resolution plan is approved. Now, liquidation could be a measure following this,” the banker said.

Emails sent to Go First remained unanswered at the time of publishing. A separate email sent to lenders also remained unanswered till the time of filing the copy.

Similarly, officials working with the airline who were aware of the ongoing discussions between Go First Resolution Professional Shailendra Ajmera, and the Committee of Creditors (CoC) said that the CoC values the assets of Go First at around Rs 3,000 crore.

“We are nearing the end of the 270 days prescribed deadline for completing cases under IBC and the CoC is likely to vote for liquidation this week. The CoC values Go First's assets at Rs 3,000 crore, which will be divided between customers, travel agents, banks and other lenders once auctioned off,” an official aware of the ongoing discussions said.

Another official said that Go First's strategy of not owning any of its aircraft and instead opting for a sale and leaseback model for operating all its planes made the airline very unattractive to potential buyers.

Also read: Banks' lending to aviation, commercial real estate jumps sharply: RBI data

“Most parties that had shown interest during the EOI discussions were looking for aircraft to be a part of the takeover process. However, since Go First does not own its aircraft, reviving the brand and the airline became an uphill task,” a second official aware of the ongoing discussions said.

Go First assets

Go First’s key remaining asset is a 94-acre parcel of land in Thane that the Wadia Group had given as collateral to the banks. The land is valued at approximately Rs 3,000 crore. Apart from the land, the airline’s assets also include an Airbus training facility in Mumbai and its headquarters.

Several entities had participated in the Expression of Interest (EOI) process run by Go First's resolution professional and overseen by the committee of creditors. However, Jindal Power was the only one the committee deemed suitable.

Other creditors

Apart from money owed to banks, the airline owes around Rs 2,000 crore to various aircraft lessors, around Rs 1,000 crore to its vendors, around Rs 600 crore to travel agents, and Rs 500 crore to customers with pending refunds.

Go First has also borrowed Rs 1,292 crore under the Centre’s emergency credit scheme, introduced during the covid crisis. The ultra-low-cost airline’s total liabilities amount to around Rs 11,000 crore, including its obligation to lessors.

The Wadia Group airline stopped flying on May 2, 2023, and the National Company Law Tribunal (NCLT) had admitted its plea for voluntary insolvency eight days later.

Go First had around 7,000 employees at the time it declared voluntary bankruptcy on May 2. The Wadia Group-owned airline halted operations and applied for insolvency resolution citing a financial crunch due to the absence of engines and spares, which had grounded half of its fleet.

GoAir had 56 leased aircraft when it suspended operations. Lessors of both engines and aircraft are fighting to take them back.

On 6 October, the ministry of civil aviation said the legal entities dealing in aircraft financing and leasing have estimated that the impediment being caused by the IBC, which was hampering repossession of the aircraft by the lessors, was costing Indian airlines an extra $1.2-1.3 billion than before in lease costs.

Also read: Exclusive | 150 more Go First staff resign in 2 weeks, exodus to continue if salaries delayed: Sources

As a consequence, there could be a reduction in the supply of aircraft on favourable terms to India’s airline companies, which would adversely affect the entire aviation industry, the ministry said.

Top-level exits

Earlier this week, Go First Chief Executive Officer Kaushik Khona announced his exit from the airline. Khona had in May 2023 told Moneycontrol that Go First was burning through about Rs 200 crore every month since November 2022, could no longer afford to do so and had to file for insolvency before the National Company Law Tribunal.

The airline hopes to resume operations as soon as possible, Khona had said then. Go First needs at least 20 aircraft to return to service and break even on daily operations. The airline blamed Pratt & Whitney for supplying faulty engines and failing to replace them in a timely manner, resulting in half of its 54-aircraft fleet being grounded.

In May, the airline had moved a plea before a court in Delaware, United States, seeking enforcement of an order issued by the Singapore International Arbitration Centre (SIAC) against American aerospace manufacturer Pratt & Whitney.

Go First, in the emergency petition moved before the Delaware Federal Court on April 28, called for a legal order to force Pratt & Whitney to comply with SIAC's two arbitral awards, issued on March 30 and April 15. The SIAC had, on March 30, ordered Pratt & Whitney to provide Go First with at least 10 serviceable engines by April 27, 2023, and the remainder by the year-end.

At the time, Khona had said that Go First would be able to return to full-scale operations by September if Pratt & Whitney provided the airline with the engines, as stipulated in the arbitration order.