There has been one airline dominating aviation news in the media for the past two months. Ironically, it’s Go First, an airline which isn’t flying, but remains grounded. Most of the aviation news has therefore been revolving around developments associated with efforts to make Go First fly again — interim funding agreed to by the Committee of Creditors (CoC), DGCA’s audit of Go First’s preparedness for reviving operations, the legal tussle between the airline and the aircraft lessors, and finally the seeking of expression of interest from prospective buyers.
Even though the country has in the past witnessed instances of several airlines first gradually reducing the number of flights due to multiple constraints and then eventually shutting down operations, the case of Go First is appearing to be both unique and intriguing. The measures initiated thus far by Go First through the Insolvency Resolution Professional (IRP) are making it increasingly evident that it expects the concerned stakeholders to give all possible concessions to enable it to resume operations because they apparently believe that Go First’s revival is a national priority and all must unconditionally cooperate.
Bizarre Moves
The Go First management first took the unprecedented decision on May 2, 2023 to file a plea in the National Company Law Tribunal (NCLT) and suspended operations. It was Go First’s call, no one had pressured the management to suddenly ground the airline. They cited the unavailability of 50 percent of the fleet due to faulty servicing/supply of engines by Pratt & Whitney but offered no explanation as to why truncated operations with the remaining 50 percent fleet could not have been maintained. It sought from the NCLT a moratorium on all payments to lenders, aircraft lessors and other creditors. With almost ten weeks having elapsed since its action of suspending flights and approaching the NCLT, the whole issue is becoming curiouser and curiouser. First was the bizarre extension of cancellations every 3-4 days. One fails to fathom the rationale behind announcing an extension of cancellations for 3-4 days at a time, a day or two before the deadline of the previous cancellation order is due to expire. Has the airline really been believing that it can recommence operations with just 3-4 days’ notice?
Considering that it knew at the time of filing the plea with NCLT that the arbitration tribunal in Singapore had ordered P&W to supply ten engines a month, now reduced to five per month, the airline ought to have known that it cannot operationalise all grounded aircraft in its fleet in one go. But it took shelter under NCLT’s order and retained control of all aircraft, forgetting that aircraft lessors are as much in business as Go First is. It was privy to terms and conditions on which aircraft were leased — pay lease rental for use. Why did it not feel prudent to release some aircraft in the fleet to reduce liabilities considering that even if it manages to resume operations it would take time to scale up operations in a highly competitive environment?
Go First faltered on another count. It did not feel the desirability of entering into an understanding with aircraft lessors by taking them into confidence and seeking their cooperation. It could have shared its financial status, how it planned to overcome the current crisis and sought approval of aircraft lessors for delay in lease rental payments to tide over the financial crisis rather than bulldoze its way by getting a moratorium on all payments through NCLT. This unilateral action on the part of Go First naturally forced aircraft lessors to approach the courts. Now that the Delhi High Court has in its order not only prohibited the airline from removing any component from an aircraft it intends to use but not deployed for flying, without written permission of aircraft lessors, besides allowing them to inspect aircraft periodically to check if the aircraft are being maintained properly, Go First’s resolution professional has challenged the order. Go First apparently believes that it must have its way with all stakeholders.
Seek Answers
Why can’t someone be blunt and ask Go First: Do you own the aircraft? No! Have you taken the aircraft on a lease? Yes! Is Go First required to pay the lease rental for the use of aircraft? Yes! Is Go First in a position to pay the lease rentals? No! Then why does it want to exercise control on aircraft even when not using them?
Considering that CoC has decided on interim funding of Rs 425 crore because lenders realise that the valuation of a grounded airline is infinitely less than an operational airline, having learnt their lesson the hard way from the Jet Airways experience, Go First may be regretting its decision of not treating other stakeholders, particularly aircraft lessors, in a fair manner rather than engage them in a court battle. In a friendly environment, aircraft lessors would have possibly offered some concessions and been on the same page as the airline on its revival plan since it is in their interest too to see Go First airborne again. Go First’s handling of aircraft lessors and other stakeholders hasn’t simply been professional.
The DGCA’s audit of the airline’s preparedness in Mumbai and Delhi, which concluded last week, is bound to seek clarity on the availability of aircraft. Will aircraft lessors give their consent for use without being assured of payments? If the aircraft lessors in the current hostile environment refuse to extend cooperation, the revival plan may be derailed.
Those in the airline business would vouch for the necessity of temporarily removing components from an aircraft not in use for the smooth operation of flights, pending replacement. This is an established practice across all airlines as inventory of all spare parts and components running into thousands cannot be maintained. While Go First has rightly allowed lessors to inspect aircraft under a moratorium imposed by NCLT, the restriction on removal of parts from other aircraft can really hurt but aircraft lessors cannot really be expected to relent because of the events of the past ten weeks and in the absence of firm assurances.
It may, therefore, just be worthwhile for the IRP to review the past actions since May 2, 2023, and seek the cooperation of aircraft lessors outside the ambit of NCLT and Delhi High Court by giving them necessary assurances so that the revival plan can become a reality, particularly since it has sought expression of interest from prospective buyers. As time is of the essence, the delay, for whatever reason, will only make the chances of Go First flying again bleaker.
Jitender Bhargava is a former executive director of Air India and author of the book, The Descent of Air India. Views are personal, and do not represent the stand of this publication.
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