NCLT's decision to admit Go First's insolvency riles lessors and vendors, leaves employees confused

Go First crisis

The National Company Law Tribunal's (NCLT) decision on May 10 to admit Go First's voluntary plea to initiate an insolvency resolution process has left a bad taste in the mouth for the airline's lenders, lessors and vendors, while its employees are left worried over their future.

Go First's employees are fretting over whether they will receive their salaries with back pay if they stick with the airline through its insolvency resolution process, while its lessors are anxious about their lease payments and have even approached the National Company Law Appellate Tribunal (NCLAT) to contest the NCLT order.

Similarly, vendors, including the airline’s travel agent partners, are concerned about the timeline of the airline's resolution and refunds to customers.

Go First's employees

Employees of Go First have been left in a sea of uncertainty since May 2, when the airline suspended operations and filed for insolvency resolution, saying it could no longer meet its financial obligations.

While there is a new wave of hope and positivity among them regarding the survival of the airline after the NCLT decision on May 10, many are still concerned about their salaries, future opportunities and the ability of the airline to stay afloat in the long run.

Employees are also worried about their ability to find new jobs and negotiate salaries when other airlines and their employees are also at loggerheads over wages salaries and new contracts.

"Salary payments over the last three months have been sporadic and April's salaries have still not been credited. Even though the top management is happy about the NCLT's decision, and is talking about things taking a positive turn, it is hard to be positive with no salaries coming in," a senior employee in the ground-handling section of Go First said.

He added that until Go First's top management presents a restart plan and asks employees to return to work full-time, everyone is likely to remain nervous.

Similarly, a senior pilot working with the airline said that even if Go First manages to restart operations soon, there will be limited work and flying hours for its pilots, which will in turn mean lower payouts as pilot salaries are linked to flying hours.

"If flying hours drop from 80 a month to 60 a month or even lower, many of us pilots will see a 30 percent drop in salaries. It will be like operating during Covid days after two years of limited salaries," the pilot said.

Another pilot with the airline expressed concerns about Go First's long-term strategy and relationships with the aviation community and whether the airline still had a long-term plan with fleet additions in place.

"Stop-gap solutions are all well and good, but what does this mean for Go First's long-term plans?" the second pilot said. He added that many senior pilots had joined Go First to be a part of the airline's expansion plans with the hope of being a part of the management in a few years, "What happens to those expansion plans, how will the airline grow and in turn help its pilots grow?" he asked.

A Go First cabin crew member, whose mother had earlier been a part of Jet Airways at the time of its collapse, said that while Go First's proactive and fast approach to restarting operations is encouraging, a lot is still left to be desired when it comes to the future of employees. "After two years of reduced salaries due to Covid-19, I am not sure many will take a risk on their future," she said.

Lessor of Go First

The world's second-largest aircraft lessor, SMBC Aviation Capital, has warned that NCLT's decision to block leasing firms from reclaiming Go First planes will jolt the market and spark a confidence crisis.

Arguing for SMBC Aviation and a clutch of other lessors, senior advocate Arun Kathpalia stated that the company had terminated its leases with Go First even before NCLT admitted the airline's voluntary insolvency plea.

He submitted that there was no tearing hurry for NCLT to admit the plea as Go First had stated in the plea that it had not defaulted in payments to financial creditors while emphasising that the tribunal had not granted lessors an opportunity to put forth their case.

The lessor said that Go First has no right over aircraft and that the proceedings were initiated only to confuse issues and defeat its rights as a lessor of the aircraft.

SMBC argued that Go First got a resolution professional of their choice appointed and is now trying to take possession of aircraft that they do not own.

Kathpalia argued that the interim moratorium was not an option under insolvency law. He submitted that the airline was asking the tribunal to pass orders that would affect entities whose side of the case had not been heard.

He urged the tribunal to permit the lessors to file a statement of objections to Go First's plea. He argued that a moratorium would only increase the cost for the airline as it would have to pay charges for aircraft without utilising it.

"How will an insolvency resolution professional chase Pratt & Whitney if the Wadia Group can't do it?" he asked.

The Wadia Group is the promoter of the airline. Pratt & Whitney is the supplier of engines to Go First’s Airbus fleet. The airline has filed a suit against P&W for not supplying spares and engines in time, forcing it to ground a large number of its aircraft.

The airline is seeking $1.1 billion in damages from the engine maker, whom it blames for its collapse.

Vendor partners and Lenders to Go First

Vendor partners to Go First including travel agents, hotel partners and transport partners have all raised concerns about the airline's ability to pay them in a timely manner.

The Travel Agents Association of India (TAAI), which has more than 2,500 members, on May 10 said it will consider moving the NCLT against Go First in case the airline does not provide a viable solution to clear its dues estimated to be around Rs 900 crore.

"We are waiting for announcements from the airline. In case, there is no viable solution with respect to clearing our dues, we will consider moving the NCLT," TAAI president Jyoti Mayalhad said.

Similarly, a hotel partner of the airline said that its payments were pending since March, to the tune of Rs 50 crore, and the hotel chain was waiting in good faith for its payments to be resolved.

Moneycontrol had learned that Go First will likely request time from the NCLT and Directorate General of Civil Aviation (DGCA) to raise the necessary funds to issue refunds to its customers.

Sources told Moneycontrol that the airline and its promoters may soon raise around Rs 200 crore to finance the refunds as well as to pay all its employees.

Go First bankruptcy so far

On May 2, the cash-strapped Wadia Group-owned airline announced it had filed an application for voluntary insolvency resolution proceedings before NCLT, Delhi, due to a "severe fund crunch".

The loss-making budget carrier was burning around Rs 200 crore every month since November. No longer able to afford it, it had to resort to filing for insolvency before the NCLT, Chief Executive Officer Kaushik Khona had said last week.

Khona said that Go First needs at least 20 aircraft to return to service and break even on daily operations. For that, it would need Pratt & Whitney to step up.

“We have already crossed 20,000 AOG (aircraft on ground) days in the last three years, losing almost $55,000 each day. This means that my compensation alone, or my loss, which I can claim from Pratt & Whitney alone, will be around $1.1 billion,” Khona had said.

“To ensure this happens, we will tap into many more jurisdictions across the world, some of which are in the US, one in Germany, one in Japan and maybe one or two more in Europe and Singapore,” he added.