Delay in Go First’s revival plan calls for a change in strategy

The fact that valuation of an operational airline is always more than a grounded airline and thus agreed to provide interim funding to make Go First fly again.

It was on May 10, 2023, exactly three months ago, that the National Company Law Tribunal (NCLT) admitted the voluntary insolvency petition of Go First thus triggering a moratorium on assets and liabilities. In its order, it also barred the company from retrenching employees so that the airline was maintained as a going concern to make the revival possible.

Even though the Resolution Professional (RP) has been at work with the active support of the Committee of Creditors (CoC) and the Directorate General of Civil Aviation (DGCA), the airline continues to remain grounded. The RP’s optimism on revival, even as most industry observers found it to be misplaced, was reflected in the public notice issued to invite expressions of interest from potential buyers with August 9, 2023 as the deadline. Developments such as the CoC agreeing to provide interim funding of
Rs 425 crore and the DGCA according approval to the revival plan, with riders, after scaling down the number of aircraft that were likely available and could be deployed, lent some hope. This was all during the month of July.

Two developments of this week — the refusal of the Supreme Court of India to overrule or interfere in the proceedings on the petition of aircraft lessors in the Delhi High Court and the extension of the deadline for submission of expression of interest by a month to September 8, 2023 are enough indications that revival of Go First is not on the horizon any time soon.

Aircraft Hold The Key

What is it that is proving to be a hindrance? Availability of aircraft. Though we all know that no airline can be operationalised without aircraft, it is here that the RP has gone horribly wrong. If the RP felt that aircraft lessors can be bulldozed into submission through a moratorium imposed by NCLT — allow Go First to use aircraft pending the final NCLT verdict — it hasn’t happened that way. The lessors, who had leased aircraft to the airline earlier, have not only sought deregistration of aircraft to repossess them but have also denied use of them by taking up the matter with equal vigour in the NCLT, the Delhi High Court and the Supreme Court.

Any hope for an out-of-court resolution — if it was at all being looked at — was nipped in the bud when the RP decided on challenging the ruling of a single-member bench of the Delhi High Court, which had permitted the lessors of Go First to access and inspect the leased planes. The order was upheld by the division bench of the high court, following which Go First moved the apex court.

This was preceded by the NCLT, having earlier rejected pleas of the lessors to restrain the airline from commercial flying, stating that aircraft were available for flights since the aviation regulator DGCA had not deregistered the carrier. This was a purely technical argument but was enough to provide a flicker of hope. It should have logically been apparent to the NCLT judges hearing the case that since it was just not fair to aircraft lessors, they would challenge it and make the resolution even more time-consuming.

With no compromise solution in sight, one wonders if the lenders, the DGCA and the employees can be made to wait indefinitely. Considering that three months have passed and the airline has been unable to fly again, the lenders and the DGCA need to ponder on whether they have to remain passive observers as the RP struggles to find a solution or if they should take a proactive approach. One is not sure if the lenders have been on the same page as the RP in this legal tussle with the aircraft lessors.

Pragmatic Approach Needed

While the CoC has recognised the fact that valuation of an operational airline is always more than a grounded airline and thus agreed to provide interim funding to make Go First fly again, it has overlooked another critical factor — revival becomes more and more difficult, if not impossible, if the time elapsed since the suspension of operations goes beyond a point.

It will therefore be in the fitness of things that the CoC and the DGCA adopt a proactive approach; consider wresting the initiative from the RP as lenders have more at stake than other stakeholders with the risk of losing Rs 6,521 crore lent to the beleaguered airline. The CoC had, while intervening in the court proceedings at an earlier stage, averred that they should be treated as the ultimate decision-making authority and that aircraft lessors' rights should not receive priority over theirs.

It was a valid point but what they, quite like the RP, missed out was on whether the airline can be made operational without the cooperation of aircraft lessors. The CoC thus currently has two options. One, wait indefinitely for the RP to determine the destiny. Two, wrest the initiative from the RP or guide him with active participation since developments thus far haven’t been very assuring for revival.

The CoC should no longer remain a mute bystander but play a proactive role since time is of the essence. That the CoC hasn’t been playing an effective role was evident when it agreed to extend interim funding based on a plan submitted by the RP without questioning the availability of aircraft. It had required proper due diligence but they failed in it. Merely hoping for the airline to be airborne without everything in place is fraught with the involved banks sinking even the money they are proposing to invest for recovering the initial loans extended to the airline.

The DGCA has also unfortunately played a passive role thus far. It has kept its action on applications for aircraft deregistration in abeyance by taking shelter under the NCLT’s moratorium. Considering that revival is impossible without the aircraft, the DGCA can also play a meaningful role. It can summon the lessors and informally check the conditions on which they would be willing to make the aircraft available. This will shorten the period of resolution if indeed there is any hope for it.

Time Is Of The Essence

What do aircraft lessors want? It shouldn’t be very difficult to guess if one was to think as an aircraft lessor — repossession of aircraft or payment of lease rentals. Can the CoC make that commitment? If not, why prolong the hope which wouldn’t eventually fructify? To believe that aircraft can be deployed for commercial operations without settling the payment issues on the strength of NCLT’s order will be nothing short of misleading oneself.

Someone has therefore to rethink the strategy, which is not only pragmatic and fair to all stakeholders but also less time-consuming. In the three months that have gone by, the agony of the employees has gone completely unnoticed. Those who haven’t found another job and continue to be on the rolls of Go First in the hope that their airline will be airborne soon haven’t been paid their salaries since May. A holistic view thus needs to be taken to avoid a situation of somehow managing aircraft through compromises but later finding that there aren’t adequate employees, particularly pilots left in the airline to fly the aircraft.

The revival ought to have been wrapped up in a much shorter time because liabilities are only zooming with every passing day, making the prospects of revival that much more difficult, and costly.

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.