NCLT reserves order on Go Air

A National Company Law Tribunal principal bench has reserved its decision on a petition filed by Go First to initiate voluntary insolvency proceedings and an interim moratorium to prevent seizure of 26 aircraft with serviceable engines.

Go First is the brand name of Go Airlines Ltd.

The Wadia Group-backed carrier voluntarily filed for insolvency at the NCLT on 2 May after announcing suspension of flights for 3-4 May. The airline later extended the suspension of flights till 9 May and stopped taking bookings till 15 May.

The matter was heard for more than three hours by the NCLT where counsel for the airline argued that the company faced substantial losses due to persistent issues with the engines supplied by US-based Pratt & Whitney. The Pratt & Whitney engines power over 90% of its total fleet of 54 airplanes.

“Moratorium is a consequential effect of admission. There is no provision of interim moratorium. You are seeking a pre-emptive action to stop creditors from asking for money... some interim relief. Can one insolvency resolution professional run a company when so many professionals could not run it,” the NCLT bench stated while hearing the arguments from the airline’s counsel.

The court will have the final say in the case and may begin corporate insolvency resolution process, but Go Airlines’ recent arbitration win and support from land assets and government guarantees may be in its favour, Sonam Chandwani, managing partner, KS Legal & Associates, said.

“If the court approves Go Airlines’ request for voluntary insolvency, the lenders may collaborate with the airline to restructure their debts and operations in a financially feasible manner. This could involve various forms of debt restructuring, such as debt rescheduling and equity swaps,” Chandwani said.

In addition to grounding of 30-50% fleet due to unserviceable engines by Pratt & Whitney, the airline’s financial position was also accentuated by the outbreak of the covid pandemic.

In effect, this led to a net loss of ₹1,346.72 crore in 2020-21 and a net loss of ₹1,807.8 crore in 2021-22. The provisional loss for 2022-23 is expected at ₹3,600 crore, the airline said in its filing before the court.